With cooperation from lending banks, small-business owners in Westchester and the region could find temporary relief from mounting debt and dwindled cash flow in the recession through a new program of the U.S. Small Business Administration.
SBA Administrator Karen G. Mills recently announced the start this month of the federal agency”™s America”™s Recovery Capital (ARC) loan program. As of June 15, SBA”™s participating banks will begin taking applications for ARC loans of up to $35,000 for viable small businesses struggling to make debt payments in the current economy. The fully guaranteed loans are interest-free to borrowers and payments are deferred for 12 months. They come with no SBA fees.
“These ARC loans can provide the critical capital and support many small businesses need to make it through these tough economic times,” Mills said in her announcement. “Together with other provisions of the American Recovery and Reinvestment Act, ARC loans will free up capital and put more money in the hands of small-business owners when they need it the most. This will help viable small businesses continue to grow and thrive and create new jobs in communities across the country.”
The ARC loans are designed for businesses with a history of good performance that need short-term help to keep up principal and interest payments. SBA officials said the loans will be disbursed over a period of up to six months to provide funds for qualifying business debt that includes mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors, suppliers and utilities.
After a one-year deferral period following the final loan disbursement, business owners will pay back the principal over five years. The SBA will pay monthly interest to lending banks.
The loans will be made by SBA-approved commercial lenders. The ARC program is authorized through Sept. 30, 2010 or until the appropriated funds run out.
SBA officials said the agency”™s full loan guarantee should provide more security and confidence for commercial lenders to participate in the program. The ARC loans also can be used to repay conventional, commercial business loans as well as SBA-guaranteed loans made on or after the Feb. 17 passage of the federal recovery act.
The SBA expects to begin training bank officers in the ARC loan program by June 8, John J. Miller, the agency”™s regional spokesman in New York City, said last week. At SBA headquarters in Washington, D.C., “They”™re writing the rules and regulations as we speak,” he said.
Louis B. Scamardella, business adviser at the New York State Small Business Development Center in Westchester, said banks are waiting to learn the details of the new program before they decide to lend.
He has advised small-business owners here who could make ready use of and might qualify for the relief loans. “I have people who have not made a rent payment in nine months but they think they are viable,” he said.
In this region, many of the large national banks are not lending at all to small businesses, while smaller regional banks are much more stringent in their lending criteria, Scamardella said. Small-business loans are “taking longer to do. I work many hours on a $25,000 loan, whereas before I used to pop them out at 50 a year.”
In the credit crisis, “I think the SBA has stepped up to the plate,” the small-business adviser said. “I think they are putting themselves out there more as a viable source.”
