Hi All – I volunteer for SCORE, a group of retired execs helping small businesses. We just sent the following in a newsletter to all of our clients. If interested you can contact your local bank. If you want more help from SCORE, look for your local chapter at Score.org.
Bill.
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Real Help for Small Business
SBA Readies Terrific New Loan Program to Help Small Business Survive
If your existing small business is stressed meeting expenses during these economic times, the U.S. Small Business Administration has a new loan program designed just for you.
SBA’s America’s Recovery Capital (ARC) Loan Program can provide up to $35,000 in short-term relief for viable small businesses facing immediate financial hardship to help ride out the current uncertain economic times and return to profitability.
Starting June 15th, ARC loans (100% SBA guarantied, 0% interest, 5 year loan) will be offered by some SBA lenders for as long as funding is available or until September 30, 2010, whichever comes first. Each small business is limited to one ARC loan.
About the ARC Loan Program
ARC loans can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. 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.
ARC loans do not require collateral, 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 are struggling, yet have been making loan payments, or those just beginning to miss loan payments due to financial hardship.
ARC loans are made by commercial lenders who are SBA participants. Businesses interested in applying for an ARC loan should first contact their current lender
ARC Loan Eligibility
ARC loans are available to viable, for-profit small businesses in the U.S. that have qualifying small business loans and are experiencing immediate financial hardship. Your small business must be an established business, have financial statements demonstrating it was profitable in one of the past three years, and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval. If your business does not meet these criteria, you can discuss your eligibility with your lender. ARC loans are not designed 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 (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.
ARC loans are designed to help businesses experiencing immediate financial hardship for reasons such as:
Loss/reduction of customer base
Increase in cost of doing business
Loss/reduction of working capital and/or of short term credit facilities
Inability to restructure existing debts due to credit restrictions
Loss/reduction of employees (intellectual capital)
Loss/reduction of major suppliers (major suppliers out of business)
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.
Applying for an ARC Loan
ARC Loans are provided by commercial lenders and guaranteed by the SBA. Your next step is to contact your lender who will help you determine if you are a candidate for an ARC Loan. Questions they may ask include the following:
Does your small business have an established banking relationship?
Has your small business been in operation for a minimum of two years?
Do you have financial statements (balance sheet, income statement, and cash flow statement) which demonstrate your business had a positive cash flow in one of the past three years (or as long as your business has been operating, if less than three years)?
Does your cash flow projection for the next two years indicate sufficient cash flow to meet your current and future loan payments?
Regarding your debts, is your business no more than 60 days past due on any loan (you can be current on all your debt obligations and still qualify for an ARC Loan)?
Is your business suffering an immediate financial hardship? For example:
Declining sales and revenues;
Difficulty in making loan payments on existing debt;
Difficulty in paying employees;
Difficulty in purchasing materials, supplies, or inventory;
Difficulty in paying rent and/or other operating expenses
Take Action Today
This is a first come – first serve program which is time and funds limited so don’t delay. Talk to your banker today.
Replies
Yet another stupid government loan program destined to rip off taxpayers. Let's see, 100% guarantee for the bank, no collateral from the borrower, no interest, first payment deferred 12 months - this sounds like a perfect setup for lots of folks to take their $35K from Uncle Sam and run for the hills.
Didn't we learn anything from the subprime/liar/ninja mortgage loan fiasco?
That's certainly one (cynical) way to look at this. I work with small business people all day - many are devastated by the current economic conditions. Businesses that were healthy and viable are now approaching bankruptcy (and in most cases, owners are facing personal bankruptcy).
It's not hard to argue that a little helping hand to get people through this period is a smart investment. This program provides $35K to help folks make their payments and stay solvent until (?) the economy turns. The alternative is bankruptcy - defaulting on loans, laying off employees.
Bottom line - I don't like it either but like the alternative less. There may be some on this board who could use it.
I own two small businesses. One has operated since 1987 and the other since '96. The biggest mistake I ever made was signing up for an SBA loan in 1991 to get us through "hard times". Sure the money was helpful, but it only masked some serious problems and allowed us to delay difficult decisions for a couple of years.Our economy is contracting and that means businesses have to contract as well. No government edict or flim-flam loan program can change that simple reality. Businesses with sufficient capital reserves and reasonable expenses will survive the downturn. Those with excess expenses, insufficient capital, and poor management will go belly up. Too bad, so sad.The ARC program may have the best of intentions, but I see only troubles ahead as borrowers receive false hope, and the banks and criminals (did I repeat myself?) see an easy way to scam taxpayers.
Dear BillW, I'm a Chrysler dealer on the short list.
I'm stuck with $1,000,000 worth of new cars I can't return & $350,000 in parts inventory I can't return.
At least a dozen of my employees will probably lose their houses to foreclosure in the next few months, me too maybe. The whole crew of 48 people will be unemployed shortly.
I owe $750,000 on the new dealership facility I was talked into building last year by Chrysler, and will probably lose the $200,000 of my own money I put into it too.
Can you help me BillW?
Already wrote to the Department of Hope & Change, they told me this is the change we've been waiting for.
Help!!!
Joe H
YOu can't call Obama for help. Don't bother calling Gw because he was the reason you are bankrupt.
You might think about calling the last savior of our country, Bill Clinton. Only the Dem presidents have ever done anything right.