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Small Business Administration ARC Loan Program Rules to be published June 8th

On June 8, the SBA will publish regulations for its new ARC loan program. On June 15, 2009, SBA will formally open the new temporary loan program. ARC loans of up to $35,000 can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. According to the SBA, “These loans allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs. For example, making loan payments on existing loans with proceeds from an ARC loan can allow a business to focus more funds on core operations, such as buying inventory or making payroll.” An eligible small business borrower must be an established business, have financial statements demonstrating profitability in one of the past three years, and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval.
Examples of qualifying existing loans for which the ARC loans can be used to provide some short-term relief include credit card obligations for a business, capital leases, notes payable to vendors/suppliers, Development Company Loan Program (504) first lien loans, other loans to small businesses made without an SBA guaranty, and loans made by or with an SBA guaranty on or after February 17, 2009. ARC loans are interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA. Loan proceeds are provided over a six-month period, and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years. ARC loans are made by commercial lenders who are SBA program participants. Non-SBA lenders can become SBA participants by working with their nearest SBA district office. For additional information, click here.
The White House has stated, “It is an unprecedented effort to jump start our economy, create or save millions of jobs, and put a down payment on addressing long-neglected challenges so our country can thrive in the 21st century. This new program is intended to give small businesses some temporary financial relief to keep their doors open and get their cash flow back on track so they can maintain existing jobs and ultimately create new jobs.”
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