Law & Order

SBA Launches Program to Help Small Businesses Get Interest-Free Hardship Loans

Beginning on June 15, the U.S. Small Business Administration will provide a 100% guarantee on “America’s Recovery Capital” (ARC) loans, a $255 million program established under the Recovery Act of 2009. The program will provide interest-free, deferred-payment loans of up to $35,000 to established for-profit small businesses that need short-term help to make their principal and interest payments on existing qualifying debt. Repayment of the loan principal begins 12 months after the final disbursement and extends over a 5-year period.

Examples of qualifying loans may include credit card obligations, capital leases and notes payable to vendors/suppliers. Types of financial hardship include:

  • Loss/reduction of customer base
  • Increase in cost of doing business
  • Loss/reduction of working capital and/or loss/reduction of short-term credit facilities
  • Inability to restructure existing debts due to credit restrictions
  • Loss/reduction of employees (intellectual capital)
  • Loss/reduction of major suppliers (major suppliers out of business)

The program will last until September 2010 or until the $255 million has been spent, whichever comes first. Borrowers whose loans are already severely delinquent or whose past performance or future cash flow indicates that the business is not viable are not good candidates for an ARC loan. ARC loans are provided by commercial lenders, not the SBA, so you should contact your lender to apply.

Questions they may ask include the following:

  • Has your small business been in operation for a minimum of two years?
  • Do you have financial statements (balance sheets, income statements, and cash-flow statements) which demonstrate your business had a positive cash flow in one of the past three years (or as long as your business has been operating, if less than three years)?
  • Does your cash-flow projection for the next two years indicate sufficient cash flow to meet your current and future loan payments?

For more information: