Helping The Nation Recover One Small Business At A Time
Small businesses are expected to play an important part in the nation’s economic recovery. For the past decade, they have generated about 70 percent of net new jobs annually.
To support an economic recovery led by small businesses, the Obama administration has taken several steps to ensure that businesses have access to the credit they need to survive and grow. The American Recovery and Reinvestment Act signed by the president provides for increased guarantees and reduced fees for certain Small Business Administration (SBA) loans.
The Act provides the SBA with program tools that offer new economic incentives to small businesses and lenders alike, all aimed at growing the economy through job creation, restarting lending and investing in small businesses and the entrepreneurial spirit of Americans.
Kerry Shatto of RadioShack in Douglas, Wyoming, took an ARC loan to avoid becoming delinquent on his accounts payable when the slow economy hurt his business. He found out about SBA’s America’s Recovery Capital (ARC) loan of up to $35,000, available to established, viable, for-profit small businesses that need short-term help to make their principal and interest payments on existing and qualifying business debt. Such loans are 100 percent guaranteed by the SBA and have no SBA fees associated with them. 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.
ARC loans are made by commercial lenders who are SBA participants. The SBA will pay these banks a monthly interest rate throughout the term of the loan. The ARC loan fit Shatto’s needs and he believes it will help bridge the gap until the economy starts turning around and his customers begin coming back.
ARC is important because even small-business owners with strong credit histories have seen tighter credit markets and have been struggling to expand their businesses, make payments or even keep workers on their payrolls. As a result, while the SBA typically guarantees about $20 billion in loans annually, new lending is trending below $10 billion this year.
Essentially, the American Recovery and Reinvestment Act:
- Provides entrepreneurs and lenders financial relief from the current economic crisis that will help encourage borrowing and lending to all small businesses, including start-ups;
- Offers businesses access to the capital and the tools they need to drive economic recovery and to create and retain jobs;
- Helps unlock credit markets for small businesses;
- Temporarily eliminates some loan fees for borrowers and lenders.
If you are just starting out with a small business, the SBA can help you with loans and business management skills. If you are already in business, you can use SBA resources to help manage and expand your business, apply for government contracts, recover from disaster or have your voice heard in the federal government. The sooner you apply, the sooner you may be able to get the assistance you need.
For more information about the ARC program, visit www.sba.gov/recovery/arcloanprogram/index.html. For information on SBA’s other programs and services, visit www.sba.gov.
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admin | Oct 16, 2009 | Comments 0
Filed Under: Financing • Government Programs
