Business Credit News

The SBA’s New ARC Loan

Next week the federal government is going to begin its new SBA backed loan program. As part of the stimulus bill, this new program, called the “America’s Recovery Capital” (ARC) program is aimed at businesses 2 or more years old that are currently struggling to make payments on existing debt.

The loans range in amount up to $35,000. HOWEVER, you will have no payments in the first year. After that, you have up to 5 years to pay back the loan. There are no fees and no payments for at least a year. The interest payments will be fully subsidized by the government.

What can the ARC loan be used for?

This loan can be used to make payments on existing loans, credit card debt, and business operations. It can be used for personal credit card payments as long as the debt on those cards is the result of business related expenses.

Am I eligible?

To qualify, your business must be at least 2 years old and show at least 1 year of profitability. You must have an “acceptable” personal credit score, as all SBA loans are personally guaranteed (but may report to your business credit score). You’ll have to prove that you are no more than 60 days past due on any loan you’d like to use the ARC funds to cover.

You must prove you have a viable business. The SBA will want to see 2 years of cash-flow projections. If you don’t have projections now, you should. It’s vital to your success.
You must show that your business is suffering financial hardship. You’ll have to show that you had declining sales (20% or more) or rising business expenses (again 20% or more), or that your business is having difficulty meeting payroll, paying rent, or making loan payments.

How do I apply?

There is a pool of $255 million dollars to lend. The SBA expects around 10,000 businesses to get this loan. It should be available through your local SBA lenders by the end of next week. Of course, here at BCS, we’re working with a national lender to make the application easy for you. We should have something finalized early next week. You’ll be able to see it at www.earn.com.

Should I do this?

This loan isn’t for everyone. It’s not aimed at new start-ups, but if you have an existing business and can prove your business is viable, it’s a good option to stay afloat in a tough time.

Joel Blakley
Director of Operations
www.earn.com

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