ARC loans could buy retailers time

Has anyone applied - or know any furniture retailers who have applied - for up to $35,000 available through the U.S. Small Business Administration’s ARC program? ARC stands for America’s Recovery Capital Loan Program. The program formally launched this month.

The SBA has about $730 million in funds to distribute through the massive economic stimulus program signed into law in February. It is intended to help small businesses make payments on existing debt and buy them a few more months time to turn around.

The America’s Recovery Capital, or ARC Loan Program, was designed to give viable small businesses facing immediate financial hardship temporary financial relief so they can keep their doors open, refocus and get their cash flow back on track.

I’d heard about this program through some friends of mine who own a small business here in Charlotte, North Carolina. Loans through the program are offered over a six month disbursement period with no loan fees and no interest with a 100% guarantee through the lender and one year of deferred payments. Principal payback is expected within five years.

The loans are available through Sept. 30, 2010 or until the appropriated funds run out. You can contact SBA offices or check the SBA website for more information.The loans may be used for payment on mortgages, secured and unsecured loans, lines of credit and credit cards if the debt was used for eligible business purposes under the program.

The ARC loans are also intended to allow borrowers to redirect cash flow from making loan payments to investing in their businesses.

Turnaround on loan applications is expected to be within five to 10 business days, according to the SBA’s Web site.

To get one of the loans, established businesses that demonstrate profitability in one of the past two years and sufficient cash flow sufficient cash flow to meet future loan payments over a two year period from loan approval. The loans are not for start-up businesses.

Examples of qualifying loans may include credit card obligations for your business, capital leases, notes payable to vendors/suppliers, Development Company Loan Program first lien loans, other loans to small businesses made without an SBA guaranty, and loans made by or with an SBA guaranty on or after Feb. 17, 2009, according to the SBA.

The loans are to help businesses that are seeing a diminished customer base, increased cost of doing business, reduction or loss of working capital, inability to restructure debt, reduction of employees or reduction of major suppliers.

“Borrowers whose loans are already severely delinquent or whose past performance or future cash flow indicates that the business is not viable are not good candidates for an ARC loan,” according to the SBA.

I’m interested to see if six months and $35,000 is enough time and money to make a difference.  Stories I’ve read report that some banks that could offer the loans won’t offer them because they can’t make enough to justify the loans’ overhead costs to a bank.

Like I said, if anyone’s using this program and wouldn’t mind me giving them a call, shoot me an e-mail to heath.combs@reedbusiness.