SBA starts emergency loan program
Short-term relief is in sight for small businesses that are struggling to survive. Starting this week, the Small Business Administration (SBA) started distributing deferred payment loans that range up to $35,000 to 10,000 businesses facing immediate financial hardship.
The 2009 American Recovery Capital Program or ARC is designed to help these small businesses "ride out the current uncertain economic times and return to profitability," according to sba.gov. The interest-free loans will be offered for as long as funding is available or until September 30th of next year, whichever comes first, and do not carry any fees that need to be paid to the SBA.
ARC loans provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt. A small business is defined as a private, for-profit enterprise with up to 500 employees. The loans are designed to allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs.
Online.wsj.com said businesses that can apply for the loans must be at least two years old and demonstrate an immediate financial hardship, such as a 20-percent decline in sales, revenues, or working capital.
Mark Deo, chief executive officer of a small business consultancy in Torrance, Cal., called the SBA Network, told online.wsj.com that while the speedy injection of cash could help some small businesses, it will only provide relief to a small fraction of those that need help.
The loans are part of the massive, $700-billion-plus economic stimulus bill that Congress passed earlier this year, according to tradingmarkets.com, and of that money, $225 million was reserved for the SBA for small business loans. ARC loans will be made by commercial lenders who are SBA participants. The SBA will pay these banks a monthly interest rate throughout the term of the loan.
President of United Bank of Paso del Norte, Les Parker, told tradingmarkets.com he's not sure his bank, which is El Paso's biggest source of SBA-backed loans, and others can make the loans without losing money.
"It's a program that sounds good, and is done with good intent . . . but it will be difficult for lenders to absorb the costs of these things and really participate in a large manner," tradingmarkets.com quoted Parker as saying. "We'll look at it on a case-by-case basis. If we find a way to economically do this, and not lose money, we will strongly consider it."
Anyone interested in the ARC loans should visit www.sba.gov/recovery/arcloanprogram
or to speak to a customer service representative, call 866.947.8081, Monday through Friday, between 8 a.m. and 9 p.m. EST.