If your small business is struggling to pay debts, you may qualify for a new type of interest-free loan in amounts up to $35,000, guaranteed by the U.S. Small Business Administration. The temporary emergency program, called America’s Recovery Capital, or ARC, was authorized under the economic stimulus law passed earlier in the year and now being launched by the SBA.
For borrowers, ARC loans will be interest-free, and with no SBA fees attached. But as with all SBA financing programs, the ARC loans will be made by private, commercial lenders, not the SBA directly. Lenders, of course, won’t make loans for free, so the SBA will pay lenders monthly interest on the ARC loans on your behalf. And that’s basically free money for you and a good chance to get a little breathing room if you’re facing burdensome debt payments.
ARC loans are deferred-payment loans available to established, viable, for-profit small businesses that are suffering hardship right now and need short-term help to make principal and interest payments on existing debt. These loans are interest-free to the borrower and 100 percent guaranteed by the SBA.
In addition to the loans being zero interest and fully guaranteed by the government, you don’t have to make any payments until a year after you receive the last of the funds, which will be disbursed within a period of up to six months. After the initial 12-month payment-free grace period, you will have five years to pay it off.
Banks and other financial institutions that make small-business loans should have information on the program available soon, and it will be up to them whether or not to participate. Meanwhile, details and updates on the program will be available at the SBA’s special Economic Recovery Act Web site at www.sba.gov/recovery.
Keep in mind that proceeds from an ARC loan must be used specifically to make payments of principal and interest on existing business debt. But that includes a wide range of different types of loans, leases and lines that you might have.
For many business owners, paying down high-interest credit card debt would be the best use of ARC funds. But you will have to prove that the debt was incurred for specific business purposes, and the documentation requirements to use ARC funds for credit card debt could be stringent.
The loan application process, however, is designed to be rather quick. Once lenders submit the application, SBA is promising turnaround within 10 business days. •
Daniel Kehrer can be reached at
editor@business.com.
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