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SBA launches new loan program to help small businesses

By Staff | Jun 18, 2009

HONOLULU — Small businesses suffering financial hardship as a result of the slow economy may be eligible to receive temporary relief to keep their doors open and get their cash flow back on track through a new SBA loan program.

The America’s Recovery Capital (ARC) program was created as a no-interest loan to help small businesses that have a history of good performance, but as a result of the tough economy are struggling to make debt payments.

Beginning on June 15, 2009, SBA will start guaranteeing the ARC loans through participating SBA lenders. These new, unique loans are deferred-payment loans of up to $35,000 available to established, viable, for-profit small businesses that need short-term help to make their principal and interest payments on existing qualifying debt. ARC loans are interest-free to the borrower, 100 percent guaranteed by the SBA, and have no SBA fees associated with them.

Potential borrowers are viable small businesses in need of financial relief to make payments on existing, qualifying small business debt. A viable business is an existing firm with evidence of profitability or positive cash flow in at least one of the past two years. The loan is not for start up ventures.

The borrower must provide documentation to show immediate hardship, such as declining sales, frozen credit or difficulty in meeting obligations such as rent or payroll. They must also have an acceptable credit score and be no more than 60 days past due on any loan being paid with ARC loan proceeds. Only one ARC loan will be made to an eligible small business.

ARC loans will be disbursed within a period of up to six months and will provide funds 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. Repayment will not begin until 12 months after the final disbursement.

After the 12-month deferral period, borrowers will pay back the loan principal over a period of five years. ARC loans will be made by commercial lenders, not SBA directly. For a list of local lenders or more information on ARC loans, visit www.sba.gov/hi or call the Hawaii District Office at (808) 541-2990.