New SBA program offers (some) small businesses relief
June 18, 2009 by Jared BilskiPosted in: Communication tips, Controller, Government, In this week's e-newsletter, Latest news & views, Management issues
For floundering small businesses, June 15th — the day the SBA started handing out the first of 10,000 deferred-payment loans — couldn’t have come soon enough.
The American Recovery Capital (ARC) program was created to help struggling private, for-profit organizations with up to 500 employees. To be considered by the SBA-approved small-biz lenders, companies must meet the following criteria:
- are at least two years old, and
- can prove an immediate financial hardship including a 20% decline in sales, revenues or working capital.
In addition, companies must use the loans for specific small-biz debts including credit-card debt, capital leases and notes payable to vendors.
While the positive aspects of these loans — no fees, no interest (SBA pays the loan’s interest), 12-month deferral period, extra cash flow, etc. — may help some businesses survive, many industry experts feel it may be too little too late.
Some of the negatives and potential problems experts foresee:
- Not enough loans. 10,000 loans is a drop in the bucket compared to the SBA-estimated 30 million small firms in the country.
- Lenders don’t have to participate. Despite the fact that ARC loans are 100% guaranteed by the SBA, lenders still have to issue the cash without receiving any on the loans capital for a full year. Plus, without fees, lenders will also have to shoulder administrative costs.
- Lack of resources. A large number of lenders may not have the power to handle the high demand for these loans.
- Eligibility issues. Businesses attempting to get a cash-flow boost need to prove profitability (or positive cash flow) in at least one of the past two years, as well as the ability to handle future debs — including the ARC Loan repayment.
Even if your firm isn’t in a position to benefit directly from these loans, maybe some of your customers do — and the extra cash may help them pay your bills.
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Tags: A/R, American Recovery Capital program, Credit-card debt, Loans, Small business administration
June 24th, 2009 at 1:38 pm
One of our customers is extemely bhind on paying us. Some of their debt is over a year. Would they be eligeable for a loan like this from the SBA to pay us up to date? I don’t want to go under because they are late paying us.