If your small business is hurting and needs help, the free money starts flowing on June 15. And yes, it really is free - as in interest-free and with no SBA fees attached. Starting June 15, the U.S. Small Business Administration (SBA) will guarantee newly-authorized America's Recovery Capital (ARC) small business bridge loans created under the economic stimulus and recovery act.
ARC bridge loans are deferred-payment loans of up to $35,000 available to established, viable, for-profit small businesses that are suffering hardship right now and need short-term help to make principal and interest payments on existing debt. These loans are interest-free to the borrower (you), and 100 percent guaranteed by the SBA. Here's how it works:
In addition to the loans being zero interest and fully guaranteed by the government, you don't have to make any payments until a year after you receive the last of the funds, which will be disbursed within a period of up to six months. After the initial 12-month payment-free grace period, you'll have five years to pay it off. As with all SBA financing programs, the ARC loans will be made by commercial lenders, not SBA directly. Banks and other commercial lenders who make small business loans should have information on the program available soon (although most aren't even aware of it yet), and you can get updates at the SBA Recovery site as well.
Bridge loan funds to be used for payments of principal and interest on your existing business debt, which can include these things:
- Term loans, both secured or unsecured
- Revolving lines of credit
- Capital leases
- Credit card debt
- Notes payable to vendors, suppliers and utilities
The key here, is whether your business will be deemed "viable." It's not a big hurdle. Here's how the SBA defines viable for getting one of these loans:
"A viable small business is one that has been profitable in the past, but is just beginning to struggle with making loan payments, and can reasonably project that it can get back on track with the infusion of ARC loan funds and the benefit of deferred payments."
ARC loans will be available through SBA-approved lenders as long as the money holds out, or through September 30, 2010.