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Have a Small Business? Access Up to $35,000 Interest-Free from SBA

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January 07, 2010

Since September, the Small Business Administration has been offering the America's Recovery Capital loan program, or ARC, as part of its economic recovery efforts. ARC loans provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt. These loans allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs. For example, making loan payments on existing loans with proceeds from an ARC loan can allow a business to focus more funds on core operations, such as buying inventory or making payroll. Loans for up to $35,000 are available.

ARC loans are interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA. Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.

The best candidates for ARC loans are small businesses that in the past were profitable but are currently struggling, yet have been making loan payments or are just beginning to miss loan payments due to financial hardship.

Your small business must be an established business, have balance sheet & income statements demonstrating it was profitable in one of the past two years, provide finance statements on the principles, list qualified small business loans you to paid, and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval.  

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Examples of qualifying loans may include credit card obligations for your business, capital leases, notes payable to vendors/suppliers, Development Company Loan Program (504) 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.

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. If your business does not meet the criteria, you can discuss your eligibility with your lender. Please note that ARC loans are not designed for start-up businesses.

Businesses interested in applying for an ARC loan should first contact their current lender. ARC loans will be offered by some SBA lenders for as long as funding is available or until September 30, 2010, whichever comes first. 

Dealer Floorplan Loans, Micro Loans and Surety Bonding Also Available

Two other loan programs and increased access to surety bonding are also available. First, the Dealer Floorplan Loans for inventory that is titled and is registered within the state, and creates a line of credit with a minimum loan of $500,000 up to $2 million. The borrower must pay interest on this loan.

The second loan program is Micro Loans, which use non-traditional sources of capital which underwrites the application but can be more flexible than a traditional lender. Micro loans are made through these nontraditional local intermediaries with a maximum amount of $35,000.

The SBA also received $15 million to increase access to surety bonding. The bonding guaranty amount increased from $2 to $5 million to help small businesses compete for federal construction and services contracts. For more information about surety bonding guaranty, call the Ohio SBA office at 614-469-6860.

For additional information, visit sba.gov/recovery/arcloanprogram/.

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