Posts Tagged ‘ARC Loans’

Will An ARC Loan Help Your Business?

January 11th, 2010 :: Gary Honig

The stimulus plan created for small businesses the America’s Recovery Capital or ARC loan program. With $255 million of funds, it is geared to help businesses who have an existing loan with their loan payments.

1. The business seeking an ARC loan must have outstanding business debt.

The ARC loan program was designed to help “viable” as defined, small businesses who are suffering “immediate financial hardship” also defined. In order to be considered viable, the business must show that at least one of the last two years the company was profitable. It further requires that the outstanding loan(s) from a credit institution may not have any payments more than 60 days past due.

2. The ARC loan is not for start ups or change of ownership scenarios

The requirement of immediate financial hardship would need to be fully documented for these kinds of financial conditions; trouble making personnel payroll, slowdown of sales, bank refuses additional credit on loans, trouble paying debts etc. Evidence of these conditions must be shown in excruciating detail. So it is necessary that the borrower has very good accounting in place in order to run the necessary financial reports.

3. An ARC loan can be made up to $35,000

The Small Business Administration (SBA) is running the ARC program and an SBA preferred Lender, a bank, will be making the actual loan. A borrower needs to find a bank that is offering the ARC loan program. The bank will be looking for the SBA (US Government) to guarantee 100% of the loan. Proceeds of the loan can only be used to make payments on existing loans, like; secured or unsecured lines of credit, business related credit card debt, capital leases, and term debt.

4. This is an interest free loan, guaranteed by the SBA

The loan may be dispersed in up to 6 payments that go directly to paying off loans. After the last disbursement, there are no payments by the borrower due on this loan for 12 months. After the 12 months, the balance of the loan is amortized over 5 years (60 months) for full repayment of the principal. Again, there is no interest due on this loan, but any older existing loans must still have regular payments.

5. Will the bank require additional collateral for the loan?

This requirement is based on the individual SBA 7a Lender. Some will only require a signature from the business owner who is personally guarantying the loan. But in this case the personal credit of the owner will be scrutinized. Because the size of the loan is small enough and the SBA is guarantying 100% of the risk, if the business owner still has fair credit there is a chance no additional collateral will be required.

6. How do I apply?

Find a local bank who is participating in the ARC loan program. There will be a multipage comprehensive loan application. With the application a loan package including 2 years of tax returns, both personal and for the business, historical financial accounting, documentation for the existing loans, 2 years of Performa financial projections to show the business can make the necessary loan payments. The entire loan application will be packaged by the Lender and submitted to the SBA for approval. Once approved, a loan closing will occur and the disbursements commence. Many businesses are finding the application process so onerous they are turning to business consultants and SCORE volunteers for assistance, which is highly recommended. Do not be taken in by individuals who claim to guarantee approval if you pay them an up front fee.

Bottom Line

So in the end, if you have a business that has been around for a few years, and you have meticulous accounting records, and you have a loan with a bank in which you are struggling to make loan payments – the ARC loan is designed to provide interest free funds where for the first year you do not have to make any payments in order to help stimulate your business. For additional details contact the SBA.

Google+

Tags: ARC Loans, business loans, SBA loans, small business administration
Posted in Capital Access, Raising Capital | 15 Comments »

Getting the Lowdown on ARC Loans – Bailout for Small Business

June 12th, 2009 :: Steven Fisher

About two months ago, I wrote about the Congress pushing the SBA to jump start loans again and President Obama allocated $15 billion of the initial TARP money ($700 billion) and it was dubbed the “Business Stabilization Loan Program”. The bill was passed and now we can report to you that it is ready for action.

It is now called the “America’s Recovery Capital (ARC) Loan Program” and the guidelines were released today. Entrepreneur magazine reported “”We are on target to issue the guidance and begin training, and have been reaching out to lenders regarding some of the specifics of that guidance. Guidance and forms are now available through www.sba.gov,” says Eric Zarnikow, associate administrator for Capital Access, the SBA department overseeing the ARC loan program. He added that borrowers can begin applying for these loans beginning June 15 the SBA, will be able to provide about 10,000 ARC loans to small businesses across the country, through its lenders.”

So what are the criteria for getting an ARC loan?

According to the SBA and Entrepreneur.com, “ARC loans will be up to $35,000 and available to established, viable, for-profit small businesses suffering “immediate financial hardship” in order to provide some temporary financial relief so they can keep their doors open and put their cash flow back on track. It is intended for businesses that need short-term help to make their principal and interest payments on existing qualifying debt (including conventional loans, credit card obligations, notes owed to suppliers and utilities).”

Another important element is that you must prove your ability to need it and the ability to repay it:

According to the SBA “businesses must provide three years of financial statements, cash flow projections based on reasonable growth over two years and demonstrated ability to meet current and future debt obligations, including future repayment of the ARC loan. Also, the borrower must certify that they are currently no more than 60 days past due on any loan paid with an ARC loan and they must have an acceptable business credit score as determined by SBA”

How do ARC loans work?
According to Entrepreneur.com “The loans are 100 percent guaranteed by the SBA and made by existing SBA 7(a) lenders. They have no SBA or lender fees associated with them (unless the lender must secure collateral as part of the loan). The disbursement period (up to six months) is followed by a 12- month deferral period with no repayment of principal. After the deferral period, the borrower pays back only the ARC loan principal over a five-year period. ARC loans are available through SBA-approved lenders as long as funding is available or through Sept. 30, 2010, whichever comes first, and cannot be used to make payments on another SBA-guaranteed loan, with the exceptions of loans made with an SBA guaranty after Feb. 17, 2009.”

One small downside – only 10,000 loans for 30 million businesses

Despite there being over 30 million small businesses in the U.S. and only 10,000 loans available, demand is expected to exceed supply. The SBA is limiting participation to 50 loans per week per lender and will accept a total of 1,000 loans per institution over the course of the program. It is understandable because it is not a handout and paperwork must be processed and track properly but only time shall tell if this is enough to get small businesses spending again at a large enough scale to break the cycle.

How could your small business benefit?

With the many billions of dollars being poured in to companies that the government says are “too big to fail”, this program recognizes that small businesses which are, according the Small Business Success Index, the core engine of innovation and job growth in the United States over the last 20 years, that they are just as important and for many small businesses, $35,000 could mean the difference in making it through some very tough times or closing their doors forever. When these small businesses can pay their bills usually to other small businesses, the “ship of capitalism” should start to right itself breaking a vicious cycle that occurs once an economic downturn starts to hit main street.

For more information about the program, visit www.sba.gov

Google+

Tags: ARC Loans, loans, SBA
Posted in Capital Access, Raising Capital, small business | 7 Comments »