I recently wrote about the Stimulus Funds and the USDA loan programs. That post created a large amount of feedback and questions, so I thought I would follow up with some changes happening to the SBA (Small Business Administration) program.
In May, the SBA announced a new program called America’s Recovery Capital (ARC) Loan. This interest free loan program is for “Viable Small Businesses” with an “Immediate Financial Hardship.” These loans are funded by banks and are guaranteed by the SBA. The purpose of this loan is to help businesses make periodic principal and interest payments for a 6-month term on outstanding debt that is not past due. The terms include a maximum loan amount of $35,000, 0% interest, a 12-month payment deferment, and a 5-year amortization.
The viability of the small business is documented during the application process. Each business must be able to project for a reasonable time frame beyond the six-month period of payment assistance that is has the ability to meet all of its obligations. Two years of quarterly cash flow projections must show that the small business has the necessary cash flow to meet the future debt service requirements of the new loan and any existing loans.
Financial hardships include: loss of customer base, increased costs, deteriorating gross margins, credit restrictions, loss of employees, loss of major supplier, or other circumstances exacerbated by the current economic conditions. There are thresholds to be met when developing the extent of the hardship, but expect to prove a 20% or greater change for the worse. A change in condition or loss of availability must be documented.
Most businesses are eligible, however they do have a list of ineligible businesses. Those include any with a religious component or that engage in prurient sexual behavior, casinos, golf courses, or non-profits. If your business has ever defaulted on federally assisted financing you need not apply. The program is not intended for start-ups or expansion.
There is a character test. Convicted felons and delinquent child support payers are also ineligible.
If you would like more information on this program, please contact me.
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Posted by: Payday Loans | February 16, 2010 at 07:23 PM