Small Businesses Can Apply for ARC Loans Starting Today

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U.S. Small Business Administration

— News Release —

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Release Date: June  15, 2009   

WASHINGTON – Starting today, June 15, SBA will begin accepting loans for a temporary new program called America’s Recovery Capital.  “ARC” loans of up to $35,000 are designed to provide a “bridge” for viable small businesses with immediate financial hardship – to keep their doors open until they get back on track.

“These ARC loans are another tool in the SBA toolkit which will provide critical support to small businesses struggling to make it through these tough economic times,” said Administrator Karen G. Mills. 

ARC 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 and qualifying business debt. ARC loans are 100 percent guaranteed by the SBA and have no SBA fees associated with them.

ARC loans will be disbursed over 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. SBA will pay the interest on ARC loans to the lenders at the variable rate of Prime plus two percent.  

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 more information on ARC loans, visit www.sba.gov

For more information about all of the SBA’s programs for small businesses, call the SBA Answer Desk at 1-800 U ASK SBA or TDD 704-344-6640, or visit the SBA’s Web site at http://www.sba.gov.

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So, Can You Get a Loan – Or Not?

As the nation’s economic difficulties continue to drag on, every so often you start to hear rumors that things are ‘picking up’ and that lenders are opening up the pipeline for small business loans.  Since many of the emails I get from small business owners are related to requests for setting them up with a lender (which, by the way, is NOT a direct service that our firm provides), I thought it would be helpful to put some factual information out for review.

In dealing with my professional contacts and conducting my research for this article, several things have become evident to me about the small business lending situation; they are as follows:

  1. the larger banking chains in the nation were previously the primary source of small business loans – including the high-risk loans.  Those same banks are the ones that over-extended  due to the lending practices they previously had in place, and have been forced to curtail lending.
  2. smaller community banks have always taken a more personalized approach in lending to small businesses including comprehensive reviews of appropriate financial ratios to evaluate the business; a comprehensive review of the person/business requesting the loan; and, insuring they have a strong understanding of the business, its industry, and the owner’s plan to grow the business and thereby insure repayment.  Their loan standards have always been more stringent, but their loan default rate is also signficantly less.
  3. given the low-risk approach taken by smaller banks, today’s economic challenges really haven’t caused them to change much about their lending practices – they’ve always been conservative and are continuing to be so; however, they are also lending money!
  4. some people/businesses are just not credit worthy.  Just as many people bought houses much bigger than they could actually afford  because they were able to obtain 0% down, interest-payment only loans; many businesses also previously received loans they should not have because their business financials did not really justify it.

So to answer the question directly, yes, credit-worthy small businesses with solid financials and a solid plan can get loans.  However, those loans will likely come from sources you would not have previously been aware of – or considered, had you been aware of them.  An example is a lender our firm is currently establishing a relationship with in order that we might provide them with referrals to our small business clients in need of loans; previously these same clients that would now be on our referral list would not have been interested in obtaining a loan from this firm because it is not a U.S. based firm.  However, the firm has an excellent loan program and lots of money available to lend – IF you can meet the criteria to receive the loan.  Another example are the small community banks in your hometowns – again, they have money to lend and are willing to lend it IF you can meet the criteria.

To help you understand what’s necessary to qualify you to receive that loan – or alternately, outside investment (both will look at similar criteria, at least at the early stages) – please review this article from the New York Times and this segment of our BlogTalkRadio show, Strategic Growth Concepts for Small Business, entitled “What are Investors Looking for in a Business Plan and Where Do I Find Them“.  In this segment our expert panelists discuss the criteria you need to meet to obtain both investors and loans.

So to summarize, loans are available IF you qualify for them and IF you are prepared with an effective plan to convince those in charge that your business has what it takes to operate effectively for the long-term and will have the capacity to repay the loan in-full.  You will be required to provide 1) a comprehensive business plan AND 2) you will need to show a strong financial history AND 3) you must be credit-worthy.  Our firm can assist you with #1, but you will need to be responsible for #2 and #3.  Please contact us if you need assistance with your business plan.

Lastly, if you know of a lender that is working effectively with small businesses and would like to make their information available to our readers, please list their information in the COMMENTS section along with your name, company name and email.

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The author, Linda Daichendt, is Founder, CEO and Managing Consultant at Strategic Growth Concepts, a consulting and training firm specializing in start-up, small and mid-sized businesses. She is a recognized small business expert with 20+ years experience in providing Marketing, Operations, HR, and Strategic planning services to start-up, small and mid-sized businesses. Linda can be contacted at linda@strategicgrowthconcepts.com and the company website can be viewed at www.strategicgrowthconcepts.com.

SBA Introduces No-interest Loan Program for Struggling Small Businesses

As part of the Small Business Administration’s efforts to make the agency and its’ programs more relevant to small businesses, the organization today announced a new loan program targeting existing small businesses who may be experiencing short-term difficulties as a result of current economic challenges.

Beginning on June 15, SBA will start guaranteeing America’s Recovery Capital (ARC) loans.  ARC 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.

Read details about the program HERE.

Business Bankruptcy – Should You or Shouldn’t You?

In today’s economic climate many small businesses are being faced with the daunting choice of trying to sustain their business thru the adversity, closing up shop, or filing for bankruptcy in an effort to save their company.  While for most, just the thought of the word ‘bankruptcy’ sends their heart into overdrive and causes them to break out in a sweat, there are circumstances where choosing bankruptcy may not only be your last choice – but also your best choice – to save the company you’ve worked so hard to build.  Instead of looking at it as something shameful, you can look at it as the right move to give your firm its best possible chance for full recovery and future productivity and profit.

In order to help facilitate your evaluation of your particular situation and aid you in making a decision that is best for your business, we thought it would be helpful to provide some basic information and some examples for your review.

 

Types of Bankruptcies

There are four types of bankruptcies available to businesses in financial trouble:

Chapter 7

The purpose of Chapter 7 bankruptcy is to immediately liquidate the business debtor’s assets. When a debtor files for Chapter 7, a trustee is appointed to take charge of the business. At that time, the trustee begins the process of liquidating all assets. Once the trustee has recovered and liquidated all assets, then the creditors are able to file claims with the court requesting payment. The assets are then divided among the creditors, allowing also for trustee fees and costs.

Chapter 7 is for businesses that see no viable financial future in their business and are too far in debt to find a way out. At that point, there is no need for a restructuring plan, but just a way to get out of the business with minimal personal damage.

Chapter 11

Chapter 11 bankruptcies are designed to allow a struggling business time to restructure or reorganize in order to revive the business. When a business files for Chapter 11 bankruptcy, it is typically allowed to continue operating — under the supervision of the bankruptcy court and without interference from creditors. The debtor will need to negotiate a reorganization plan with creditors, which usually provides them partial payment. Creditors or other parties can file a competing plan if they feel the proposed plan is not in their best interest.

A Chapter 11 filing is best for a business that is behind in debt payments, but which still has some amount of assets and regular income.

Chapter 13

While businesses cannot technically file for Chapter 13 bankruptcy, an individual can file for themselves and cover all expenses they may personally owe due to a failed business venture. In some cases, sole proprietorships such as private practices are covered.

In a Chapter 13 filing, the court and creditors must approve a repayment plan that allows creditors to collect debt while protecting the property of the debtor. In order to file, a person must be able to show regular income as a means for meeting some of the debt load over a 3- to 5-year period. At the end of the period, and in the terms agreed upon by the court, additional unpaid debt will be discharged. (Exceptions apply for alimony, child support, school loans, and mortgages.)

Chapter 13 is a viable option only for those individuals who, due to a failed business, are overloaded with debt or have personal assets at risk.

Chapter 12

Chapter 12 bankruptcy closely mirrors Chapter 13, except that it applies specifically to family farms. It is designed to allow the family to stay in the business of farming while reorganizing and paying off prior debts. It is preferable for farms over other bankruptcy options because it takes into account the unpredictability and seasonal nature of agriculture.

 

Stories from Those Who Have Been There

How One Small Business Survived a Chapter 11 Filing

Life After Bankruptcy

Shame in Filing Bankruptcy?  Or Opportunity for Recovery?

Well-known Historical Figures Who Have Filed Bankruptcy

 

Nationally Known Persons/Firms Bankruptcies (and recoveries)

Tommy Hilfiger (at age 24)

Henry Ford

Kim Basinger

Continental Airlines

R.H. Macy

Greyhound

 

Where to Find a Bankruptcy Attorney

  • Take advantage of free consultations offered by many bankruptcy attorneys.
  • Contact your county bar association’s referral panel.
  • Another resource for locating a bankruptcy attorney is the National Association of Consumer Bankruptcy Attorneys.  This site includes an attorney finder, although the organization doesn’t certify the attorneys’ skill-level or expertise.

 

Strategies for Surviving Bankruptcy

Knowing When Bankruptcy is Best and How to Survive It

Secrets of Surviving Bankruptcy

Surviving Franchisor Bankruptcy

Surviving Another’s Bankruptcy

Surviving Business Bankruptcy

Surviving Your Company’s Bankruptcy

In closing, while we certainly encourage you to explore every possible option to get your company back on stable ground, we hope that the information provided in this article will help you to recognize that if bankruptcy is the only option left you should view it as a chance to re-build rather than business failure.