Help for Small Business

By Hannah Wallace September 30, 2009

›› Small businesses have help from the federal government in weathering the economic storm through a new Small Business Administration loan program called ARC, America’s Recovery Capital.

According to the SBA Web site, ARC loans (up to $35,000) “provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt.” Basically, an ARC loan should allow borrowers to take the cash they would have used to pay off credit card bills and other debts and funnel it back into the business, hopefully retaining jobs and keeping small companies afloat.

These loans can be a sweet deal for small businesses that are starting to falter. They are “interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA,” according to the SBA site. ARC’s best candidates are small businesses that have been profitable in the past but are now at the point where they’re not making loan payments or are just about to miss a payment. The program expires Sept. 30, 2010 unless funding runs out prior to that date.

Navigating ARC

Sally Armendarez, vice president, business banking, at Bradenton’s First Bank, outlines the ARC program.

What businesses are best qualified to apply for ARC loans?

The business must be an established, for-profit business with evidence of profitability or positive cash flow in at least one of the past two years. The borrower must certify that they are currently no more than 60 days past due on any loan being paid with ARC loan proceeds and must have an acceptable business credit score as determined by the SBA. Immediate financial hardship, as a result of changes in the financial condition of the business, will be analyzed along with additional criteria.

Why is it proving to be complicated? 

The application process is a bit laborious based on the eligibility requirements of this loan program and the need to fully document the transaction properly. ARC loans are 100 percent guaranteed by the SBA; however, the bank must underwrite to their guidelines in order to meet the guarantee requirements. It is crucial that a customer works with a lender that is able to communicate effectively with all parties involved in the transaction.

Is First Bank the only local bank honoring them? 

No, it is my understanding that other financial institutions are facilitating this program. At this time, First Bank is offering this product to our existing business loan customers. Small business owners should talk first to their current lender about obtaining an ARC loan.

How many loans have you made so far? Since the program was effective June 15, we have received several inquiries from our local customers, but only a few have chosen to apply. None have closed thus far under this program due to eligibility issues. The types of businesses requesting information run the gamut.

Any advice on applying? 

Gather and prepare a file that contains the last three years of corporate and personal tax returns and interim financial statements including balance sheets, income statement, and profit and loss statements. Along with a cash flow analysis, the borrower will need to provide a written description of the financial hardship they are experiencing. Generally a checklist of required documents is provided along with the application form that is received from the lender.

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