Struggling Desert Businesses May Benefit from ARC Loan Program
Businesses in the Fourth District who are having a tough time making it through the economic downturn may be able to avail themselves of a federal program tailored for them.
As part of the Federal Stimulus Program, SBA recently implemented a temporary new loan program called America’s Recovery Capital (ARC). “ARC” loans are available up to $35,000. The loan program is designed to provide a “bridge financing” for viable small businesses with immediate financial hardship – to keep their doors open until they get back on track when the economy recovers.
ARC loans are a maximum $35,000 with no interest and no payments for the first year. After the 12-month deferral period, borrowers will pay back the loan principal over a five year period.
“ARC loans are designed to help once profitable businesses that are currently struggling from the current economic downturn,” said Brad Mix, Business Consultant with the Coachella Valley Small Business Development Center (SBDC); a nonprofit organization that provide free, no cost business consulting services to existing businesses and budding entrepreneurs.
“This year, in spite of bank lending to small businesses being nearly frozen, the SBDC has assisted small businesses in obtaining over $5 million in financing with an additional $3 million in the pipeline.”
ARC loans will be made by commercial banks and other lenders, not SBA directly. Not all banks that make SBA loans will participate in the new ARC loan program. Furthermore, many banks will only offer ARC loans to existing account holder. According to Brad Mix,
“It is currently unclear which lenders are going to offer ARC loans,” Mix said. “ Consequently, the SBDC is playing a critical role helping small businesses apply for the ARC loan by tracking which banks will be participating in the loan program as well as guiding businesses through the loan process.”
At this time, many banks have yet to decide if they will offer ARC loans since they have just received and are still reviewing SBA’s loan program guidelines.
“I hope several local lenders decide to participate in the ARC loan program, because ARC will provide tremendous economic impact to the Coachella Valley’s economy. The Coachella Valley residents are largely dependent on small businesses for employment; valley cities are reliant on sales tax revenue. Collectively, Coachella Valley small businesses are a major employer and when the economy starts to recover, small business will create three out of four new jobs.”
Recipients of ARC loans will have up to six months to draw down the funds. Funds can 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, suppliers and utilities. SBA will pay the interest on ARC loans to the lenders at the variable rate of Prime Rate, currently 3.25%, plus two percent or a total of 5.25%. The SBA estimates that these loans will reach over 10,000 businesses nationally by the time the program is slated to end on Sept. 30, 2010.
For more information on ARC loans, visit www.sba.gov or contact the Coachella Valley Small Business Development Center at 760-864-1311 for no cost business consulting and loan assistance. Visit SBDC’s website at www.iesmallbusiness.com.