New SBA Loan Program Can Help Construction Industry

A new federal loan program may provide some measure of relief for small businesses whose cash flow has been impaired as a result of the economic downturn. America’s Recovery Capital (ARC) loan program was created by the U.S. Small Business Administration (SBA) to offer no-interest, deferred-payment loans of up to $35,000 to qualified small businesses.

The loans are intended to help small businesses experiencing immediate financial hardship. Eligible contractors that have been making loan payments but are presently struggling can use SBA ARC loans to make payments of principal and interest on existing loans, lines of credit, business credit cards, capital leases, and notes payable to suppliers. By using ARC loans to pay down debt, companies can use their cash flow to invest in and strengthen their businesses.

Loan Details

ARC loans are offered by some commercial lenders who are SBA participants and, if approved, the loans are interest free to the borrower. The loans have a $35,000 maximum limit, and loan proceeds are disbursed to recipients over a six-month period.

Businesses that participate in this program are able to defer repaying the ARC loan principal for 12 months after they receive the last disbursement of the proceeds. Repayment can extend up to five years.

Who Is Eligible?

Your business may qualify for an ARC loan if it:

  • Is an established small business that has been in operation for a minimum of two years
  • Has financial statements that show it was profitable in one of the past two years
  • Can project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval

The SBA says that businesses that have severely delinquent loans or whose past performance or future cash flow indicate a slim chance of survival are unlikely to be approved for ARC loans.

If you think your business might benefit from applying for this SBA program, you should contact an SBA-approved commercial lender. The program will operate until September 30, 2010, or until the funds appropriated to the program run out, whichever comes first.