Small Business Loans and the SBA: What to Expect from ARC Stabilization Loans

For weeks there have been rumors of a coming Small Business Administration emergency loan program. Though its details are not official, here are some indications of what to expect from the program.

Much of the small business stimulus funded by the American Recovery and Reinvestment Act of 2009 (ARRA) involved expanded SBA backing of loans to small businesses. Details of the expansions to 7(a) loans and the attempt to stimulate small business lending were discussed in this blog entry.

As the Wall Street Journal's Independent Street noted, some critics of the government's small business efforts to date point to the fact that many small business will not benefit from more 7(a) SBA backed loans because they will not be able to obtain them. Many businesses in more immediate peril have waited for details on what if any emergency loan assistance the government may offer.

In addition to the expanded 7(a) loans, ARRA also funded a yet to be formalized SBA program to provide emergency loans to qualifying small businesses. The SBA has released few details, but has temporarily dubbed the program America's Recovery Capital (ARC) loan program.

Here are some details about what we can expect.

ARC loans will offer up to $35,000 to eligible small businesses. Like other SBA backed loans, these loans will come from private lenders. ARC loans, however, will be backed 100% by the SBA. Congress funded the program up to $255 million.

ARC loans will not be available to help pay off existing SBA backed loans, but can be used to pay off non-SBA backed business debt. Repayment of the ARC loans will not begin until one year after the loan is dispersed.

As CNN reported, businesses will also need to be "viable" in order to get an ARC loan. According to  Eric Zarnikow, the SBA's associate administrator for capital access, a "'viable' small business is a business that has a demonstrated earnings history and proven record for success that may just need a little extra help to get through a short-term downturn."

The SBA is reportedly still crafting its exact criteria, and has yet to announce when ARC funds will be available.

• Small-Business Agency Prodded to Spur Lending (Washington Post)
• Prepare Now for an SBA Emergency Loan (bizzia.com)
• Business Finances and Taxes (FindLaw)
• Tips for Financially Troubled Businesses (FindLaw)
• Commercial Bankruptcy (provided by Michael H. Schwartz, P.C.)