SBA Launches New 100-Percent Guarantee Loan Program to Help Struggling Businesses

Recently, SBA Administrator, Karen Mills announced that the SBA will start guaranteeing America's Recovery Capital (ARC) loans on June 15, 2009.  ARC loans are deferred-payment loans of up to $35,000 available to established, viable, for-profit businesses that need short-term help to make their principal and interest payments on existing qualifying debt.  ARC loans are interest-free to the borrower, 100 percent guaranteed by the SBA and have no SBA fees associated with them.  The SBA will pay a monthly interest rate to the bank that makes the loan. Repayment of these loans can be deferred up to 12 months and can be paid back over a period not to exceed 5 years.

There are specific types of loans that qualify.  The loans are not for start up businesses or businesses that are no longer economically viable.  Funding is on a first come-first serve basis or until September 30, 2010. You may apply through your local bank if they participate or you can go the SBA web site @www.sba.gov/ARCloanprogram for participating banks.  ARC loans will be disbursed within a period of up to six months and will provide to be used for payments of principal and interest for existing, qualifying small business debt including, mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors and suppliers.  

Under the American Recovery and Reinvestment Act signed February 17, 2009, these loans provide reduced risk to the bank because of the SBA guaranty.   The loans can benefit the business owner by providing interest free, deferred payment loans to redirect cash flow from loan payments to core business needs like jobs.   

The hope is that these loans will help build and retain community businesses, create jobs and stimulate economic activity.