America's Recovery Capital (ARC) Loans

Bart Adams, CPA, Shareholder - Auditing & Accounting   email | bio
September 2009

Small businesses suffering financial hardship may see some relief from the slow economy.  Beginning June 15, 2009, the Small Business Administration (SBA) began guaranteeing America's Recovery Capital (ARC) loans.  These temporary loans are intended to provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt.  The goal is to help sustain business and retain jobs by allowing borrowers to redirect cash flow from making loan payments to investing in their businesses.

What are the basic loan terms?

ARC loans are deferred-payment loans of up to $35,000 that are disbursed within a six month period and available to established, for-profit small businesses that need short-term help.  These loans are interest free, 100 percent guaranteed by the SBA, and have no SBA fees associated with them.  They are made through commercial lenders, not the SBA directly. 

Who qualifies?

To qualify, the business must be a small business as defined by the Small Business Act and have been in operation for at least two years. In addition, each company must have financial statements demonstrating it was profitable in one of the past three years.  Each company must also be able to project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval. This loan is not designed for start-up businesses. The funds provided are 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, suppliers and utilities. 

When to repay the loan?

Repayment will begin 12 months after the final disbursement.  After the 12 month deferral period, borrowers will have five years to pay back the loan principal.  ARC loans will be available through SBA lenders for as long as funding is available or until September 30, 2010, whichever comes first.

For more information on the SBA ARC Loan Program, visit http://www.sba.gov/recovery/arcloanprogram or contact your Kolb+Co. adviser.