Are you looking for money in your business?

I’ve talked to several business owners in the last few weeks that are struggling because they can’t get a line of credit from their bank (or their line of credit’s been cut off).  Their wallet is empty and it’s causing all sorts of problems in terms of making payroll, investing in future growth and getting a good night’s sleep.

Unfortunately it’s not just anecdotal data – information from the SBA shows that lending is falling sharply.  How sharply?  There’s 30% fewer loans now than 2008 and 55% fewer than were backed in 2007.  That’s a big drop-off!

However there is some good news – in June the SBA announced upped the ante on their stimulus lending program, America’’s Recovery Capital Loan program (ARC).

These have been slow to take off, but I have started to hear people talking about them.  Could you benefit from an SBA ARC loan?  Read on…

What is the SBA ARC loan program?

As it stands now, an ARC loan is a temporary program for up to $35,000 that’s to be used for payments on existing debt or loans.

The America’s Recovery Capital, or ARC, loan program is designed to give viable small businesses suffering immediate financial hardship some temporary financial relief so they can keep their doors open and get their cash flow back on track.

There’s a lot of really nice features with these loans:

  • 100% backed by the SBA
  • No SBA or lender fees
  • No interest
  • No payments for up to 18 months and then a 5 year window to pay off the principal

Overall it’s a sweet deal…if you can qualify (you knew there was a catch), here’s some of the requirements that have to be met:

  • You must have been in business for at least 2 years (no start-ups)
  • Be profitable (or have positive cash flow) in at least one of the last 3 years
  • Be able to show future cash flows to meet debt obligations
  • Be in immediate financial hardship (i.e. you owe money somewhere

If you’re an established business and you’ve got some outstanding debt or obligations (which is almost everyone) then it’s probably worthwhile to at least check into these loans to see if it might help you out.

Here’s a good discussion on what counts as a viable small business (with additional information resources at the bottom).

Here’s a downloadable PDF of Frequently Asked Questions on the program from the SBA.

If you’re not getting any traction with your bank, I know several good bankers that would be glad to talk to you and take a look at your situation – just give me a call.

Do you have any thoughts on this loan program?  Would an extra $35K interest free be helpful?  Share your thoughts in the comments below.

Shawn Kinkade  Kansas City Business Coach

2 thoughts on “Are you looking for money in your business?”

  1. Nealgordon says:
    August 7, 2009 at 6:21 am

    The SBA ARC Loan program continues to be problematic for many struggling small businesses. The loan amount is too small to help many businesses (Ask Congress why they thought this would be enough). The amount of documentation is nearly the same as is needed for a $1million loan. And the biggest issue that borrowers are facing is finding a lender who will loan to them, which is based on the type of qualifying debt that applicant has. So even if a business is qualified, it is far from automatic that they get a loan. As the article intimates, banks are wary and the debt they “prefer” are the term loans, notes and capital equipment leases, because the borrower can’t draw back on them once the ARC Loan pays off that debt.

    My company, Business Borrowers Alliance, has been contacting the banks nationally that have been named as participants to learn what their specific requirements are and most continue to only want to do ARC Loans to only those with loans at their bank.

    For more information, contact us at 866-944-3866 or mail@businessborrowersalliance.org

    Neal Gordon
    http://www.businessborrowersalliance.org
    We provide direct assistance and help to businesses throughout the complete ARC Loan application process.

  2. skinkade says:
    August 7, 2009 at 2:20 pm

    Neal,

    Thanks for the additional information – that's very helpful.

    I did get some additional feedback from local bankers that they are likely to only enable these loans to existing clients because the risk of failed loans (even if it's backed by a guarantee, there are longer term implications to the lending institution).

    Clearly these aren't the solution for economy – to your point they're not enough money, there are too many restrictions and it's still difficult to close them.

    Shawn

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