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NEW YORK - The Small Business Administration issued guidelines for banks and borrowers on how the new government ARC loans will work as they are rolled out beginning June 15.
Who's Eligible for ARC Loans- 6/12/2009
ARC loans, known as “America’s Recovery Capital," are designed to give up to $35,000 small business owners to temporarily help them keep up with payments on existing loans, including credit card debt. ARC loans were authorized as part of February's Stimulus Bill, the American Recovery and Reinvestment Act.
• ARC loans are only open to businesses that have been in operation for at least two years and have been profitable in at least one of the last two years.
• Borrowers can use ARC loans to make payments for up to six months on their existing debt, with no repayment due on the loan for another year. After that, the business has five years to pay back the loan principal. The government covers the interest payments.
• Applicants must prove they are experiencing financial hardship, as evidenced by declining sales (a drop of at least 20% over the past year), frozen credit lines, rising business costs (again, 20% or more in the past year), or difficulty meeting payroll, paying rent or making loan payments.
• But borrowers also have to be running a "viable" business. The SBA wants to see cash-flow projections for at least the next two years illustrating that the business will be able to repay its ARC loan and other debt obligations. Borrowers must have "acceptable" business credit scores, and they can't be more than 60 days past due on any loan they'd like ARC funds to help cover. Lenders may also require collateral to back up the loan.
Read more at CNNmoney.com.