Updating this previous post about SBA ARC Loans with more information:

Update from SBA:

The ARC loan is designed for a business that recently experienced financial hardship due to the downturn in the economy–for example, last fall or winter/spring 2009. It is not designed to prolong the life of a business that will eventually close, but to assist businesses that can show they have been profitable and that through reasonable projections, will show continued profitability and positive cash flow.

The applicant needs to show they have been profitable/had positive cash flow in at least one of the two past years. Also, two year projections would show repayment ability on all business expenses and debt payment.

There is a 12 month payment deferment followed by a five year term repayment period. It is hoped that during the 12 month deferment period the business will re-visit their business plan and see where they may trim expenses, increase revenue, etc. – Val Ross, SBA Branch Manager.

Everything you need to know about the SBA’s new loan program., More information about the SBA ARC loan plan: http://tinyurl.com/lxk7e4

Beginning on June 15, SBA will start guaranteeing America’s Recovery Capital (ARC) loans. ARC loans are deferred-payment loans 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 qualifying debt. ARC loans are interest-free to the borrower, 100 percent guaranteed by the SBA, and have no SBA fees associated with them.

These $35,000 guaranteed loans are targeted to businesses suffering financial hardship due to the slow economy.

• The ARC program will provide a deferred-payment, no-interest loan of up to $35,000 for short-term help to make their principal and interest payments on existing, qualifying debt.

• A viable small business is one that has a history of good performance that is beginning to struggle with making loan payments, but can reasonably project that it can get back on track with the infusion of ARC loan funds and the benefit of deferred payments.

• Qualifying loans/debts eligible for assistance with ARC loans include the following:

o Secured & unsecured conventional loans (mortgages, term and revolving lines of credit)
o Capital leases
o Notes payable to vendors/suppliers/utilities
o Development Company Loan Program (504) first mortgage loans
o Credit card obligations
o Loans made with an SBA guaranty after February 17, 2009

• ARC loans will be made by commercial lenders and carry a 100 percent SBA repayment guarantee. The loans will have no SBA fees. Existing SBA lenders are eligible to make ARC loans.

• Approved ARC loans will disburse funds to be used for payments of principal and interest for up to six months for existing, qualifying small business loans.

• The loans will be disbursed over the course of six months, followed by 12 months during which no repayment is required. After a 12-month deferral period, the borrower will pay back only the ARC loan principal over a period of up to five years. No repayment of interest is required.