Small businesses are far less able to absorb costs or losses than larger corporations. In light of the tough economic market, the Small Business Administration (SBA) has created America’s Recovery Capital Program also known as the ARC Loan Program. This short-term loan is a one-time deal to help small business owners return to profitability.
The ARC Loan Program Ends September 30, 2017
An ARC loan is a temporary program authorized and created by the Recovery Act. The program ends on Sep. 30, 2017 or when funding ceases, whichever comes earlier. If a small business can qualify for an ARC loan, these loans are interest free, short-term infusions of cash up to $35,000 that can be used to pay both principal and interest on existing loans or qualifying debt; freeing up cash flow for other areas.
ARC loans are not made directly by the SBA but by commercial lenders. The SBA does however back the loan 100%; it has no lender fees and after a 12-month deferral period, repayment can be made over a 5-year period for the principal amount only . To be eligible for an ARC loan, small business owners must:
- Have a viable business that has shown a financially documented profit for the previous two years (less if the business is newer).
- Be able to provide future cash flow projections for the coming two years including the ability to repay all debts, including the ARC loan.
- Must not be more than 60 days past due on loans that the ARC loan will be used for
- Have an acceptable business score determined by the SBA.
How to Apply for an Arc Loan
The ARC Loan Program is designed for established businesses facing an immediate and provable financial hardship. The commercial lender will work with the business to document and confirm all reported hardships, according to established SBA categories used for assessment.
Small businesses that wish to apply for an ARC loan need to contact a commercial lender and provide a DUNS number along with the required application and supporting documentation. If a business does not have a DUNS number (Data Universal Numbering System) – used by the SBA to determine a business’s credit score, one can be freely obtained from Dun and Bradstreet.
As with any loan process, applying for an ARC loan is not a simple process and will take some time and effort on the part of the business owner. However, if a small business can qualify for this particular loan, the money can be used for a variety of purposes such as secured or unsecured coventional loan repayments; capital leases; business credit card debt and even home equity lines of credit, provided it is business related.