SBA Finally Launched its ARC Stimulus Loan Program for Struggling Small Businesses

SBA’s $35,000 ARC Loan Program is Here -- Learn whom it is for and where to get it

SCOREing small-business success
By: Jerry Chautin, SCORE volunteer, business columnist

If the recession is making it difficult to meet your business debt, vendor notes, capital lease cost and credit card payments, the U.S. Small Business Administration may have the solution — borrow more and take on additional debt.

Although it seems like bad advice, SBA’s $35,000 bridge loan program was finally launched last week. Struggling small-business owners were anxiously anticipating it for several months. The agency’s approved lenders make the loans and SBA guarantees 100 percent against default. SBA pays all fees and interest. Borrowers only pay the principal and that is deferred for 12 months.

The “America’s Recovery Capital Loan Program,” known as “ARC,” is a temporary fix for small businesses under President Barack Obama’s stimulus program. It is one of several financing enhancements presented by Terri Denison at the Atlanta SCORE meeting last week. She is SBA’s Georgia district director and SCORE is the agency’s resource partner. SCORE, “Counselors to America’s Small Business,” advises entrepreneurs about starting, financing, expanding and managing small businesses. SBA provides SCORE with timely information about its programs.

ARC is not for start-ups. It is for businesses that have demonstrated profitability in the recent past. But when the economy tanked, so did their sales. As a result, they are having difficulty meeting their obligations and ARC can keep them afloat until their sales increase.

“This is not something we will be participating in at this time,” says Terry Crispen senior vice president of Panama City, Fla.-Based Borrego Express Capital Lending. It is one of three lenders making SBA’s community express loans in Georgia.

That is important for you to know because community express lenders are the most likely ones to embrace ARC. They have learned how make small-business loans under $50,000 by streamlining the processing. Other SBA lenders have difficulty lending under $100,000 profitably.

Innovative Bank and Superior Financial Group, both based in California, are the other two community express participants making loans here. They have made tens of thousands of small loans in Georgia. Both lenders are studying the extensive requirements imposed by SBA and have not committed to make ARC loans.

ARC loans require more traditional processing and underwriting than community express loans do. “Underwriting the old fashion way has never been cost effective on $35,000,” says Tim Jochner, CEO of Superior Financial Group. “It’s a great idea but as presented (ARC) has a lot of roadblocks for lenders.”

He says there are accounting issues and software challenges of “split-billing the customer for principal (payments) and SBA for interest electronically.” But the biggest problem is that lenders are prohibited from selling ARC loans to secondary-market investors as they would other SBA loans. “Liquidity is huge,” Jochner says. He needs to sell ARC loans to replenish his lendable cash.

SBA’s Denison says that, “about 40 percent of SBA loans are sold into the secondary market.” And notably, most are sold by small community-banks. The larger regional and national banks are portfolio lenders and their appetite for small business lending has substantially waned because of high defaults.

Some lenders say they will consider ARC loans for their existing borrowers that need a little extra help making loan payments. Consequently, small-business owners should look to their current lenders before going elsewhere.

To learn more online, go to www.sba.gov, scroll to “Spotlight” and click on the “ARC Loans” button. You may also request free guidance about ARC and other small-business issues at www.scoreatlanta.org.

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About SCORE:
Since 1964, SCORE “Counselors to America’s Small Business” has helped more than 8 million aspiring entrepreneurs and small business owners through counseling and business workshops. It is a nonprofit resource partner with the U.S. Small Business Administration. More than 11,200 volunteer business counselors in 370 chapters serve their communities through entrepreneur education dedicated to the formation, growth and success of small businesses. The Atlanta chapter has 100 volunteers in conveniently located branch offices.

Note to media: Photos of the SCORE counselors quoted and interviews are available upon request. For interviews with SCORE business counselors or SCORE small-business clients, contact SCORE’s chairman, Jeff Mesquita: e-mail, scoremarketing@joimail.com, cell: (770) 713-1702. You may use this article in part or in its entirety and distribute copies with credit to SCORE Atlanta www.scoreatlanta.org. The columnist’s CV is online at: tenonline.org/sref/jc1bio.html

SCORE Atlanta | Publish Date: 06.16.09 | Back to home |

SBA Finally Launched its ARC Stimulus Loan Program for Struggling Small Businesses

But You Have to Know How and Where to Get It -- SCORE Can Help

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