Small Business Questions & Answers


Filed under Finance

Ask About ARCs

by All at Sea | May 20, 2012

Subject :Finances

Dear Toolkit,

Help! I feel like I'm shoveling sand against the tide trying to make my business loan payments in this slow period. Does anyone make loans to pay off other loans?


All at Sea

Dear All at Sea,

If your small business is drowning in debt payment problems during this recession, you don't need an Ark, you need an ARC! That's the new American Recovery Capital (ARC) loan program. The Small Business Administration (SBA) heard the SOS and is offering this new program guaranteeing interest-free loans of up to $35,000 specifically for making principal and interest payments on existing loans, assuming your business and your loans qualify.

The SBA's purpose is to help small businesses make loan payments with a short-term infusion of cost-free capital so that the business can use its own capital to buy inventory and supplies and pay employees, thus keeping the business going until the recession eases. Cash flow that would otherwise go to loan payments can be better used to save jobs and continue to provide goods and/or services to the community.

There is no collateral requirement and no fees but—sorry—only one loan per customer! Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds and can be extended for up to five years.

Qualifying loans include:

  • credit card obligations for your business,
  • capital leases,
  • notes payable to vendors/suppliers,
  • Development Company Loan Program (504) first lien loans,
  • other loans to small businesses made without an SBA guaranty,
  • and loans made by or with an SBA guaranty on or after Feb. 17, 2009.

Qualifying businesses are those that can prove they were viable, profitable concerns prior to the recession, and that can show sufficient cash flow forecasts to make future repayments of the principal. Your commercial bank can help determine your eligibility. Take your last two years of financial statements, a list of why you're having trouble keeping up with payments (loss of revenue, key employees, higher costs, etc.) and your history and projections of cash flows to your banker and ask about applying for an ARC loan.

The ARC program is a re-launch of the original stimulus package's small business initiative, adding a few embellishments. It's due to kick off June 15th, 2009 but so far few banks have shown a burning interest to participate, so encourage your banker to become enthusiastic about this beneficial opportunity for your business.

Note that this program is for existing, going concerns only . . . no start-ups need apply for this particular initiative! It might be well worth your time to review the American Recovery Capital loan program and to visit your banker if you think you might be eligible.