Sometimes it seems as if we’re all walking around like Hans Christian Anderson’s emperor in The Emperor’s New Clothes: naked, and unaware of it. Throughout the course of this economic crisis, policies have been put into effect, things have been changed, and we’ve been told it’s all starting to look up, but do we honestly have anything to wrap around ourselves at the end of the day? With storefront after Main Street storefront closing its doors, mom-and-pop operations in small towns across America seem as if they are fleeing the approaching front of a war.
But first, a little message to all small businesses out there: don’t run just yet. You’ve got an emergency supply of ammo.
Let’s talk stimulus money, people. The stimulus package, as criticized as it is, offers you struggling small business owners quite a deal: interest free loans.
I’ll say that again, just so it’s clear: INTEREST FREE LOANS.
These loans are available though a temporary loan initiative called America’s Recovery Capital Loan Program (ARC), which was started and funded by the Small Business Administration (SBA). The SBA has about $255 million dollars available for ARC loans nationwide, funded by provisions from the stimulus package. Their ARC loan program proposes loans of up to $35,000 for small businesses that are completely guaranteed by the SBA.
You’re still stuck on the interest-free part, I know. Let me proceed.
The SBA allows these loans to be interest-free by paying the interest on your loan to the bank that lends it to you. These loans, however, can only be used towards paying down the principal or interest of existing qualifying loans; they’re essentially debt-reduction loans. The idea is that reducing the debt of small businesses and providing a new interest-free loan will allow for businesses to focus on operating costs to sustain and promote their products or services.
To qualify for an ARC loan, a business must be already established and for-profit, and it must prove that it has been profitable for at least one of the past two years. Sorry, start-ups. As with most loans, the business must also be able to project enough cash flow in the future to pay off the ARC loan within two years of it being approved.
The loans are available through participating SBA lenders (banks) such as JPMorgan Chase and Busey Bank here in the Champaign-Urbana area, but there is a catch (as there usually is with good things). Not all SBA lenders are participating in the ARC loan program, and the majority of the SBA lending banks that have participated in Illinois thus far have made it a requirement that an ARC loan applicant be an existing client of that particular bank.
If this is the first time you’ve heard of this too-good-to-be-true loan program, don’t be surprised. The SBA made a big mistake earlier this year, and they’re still trying to clear the air. Through their Historically Underutilized Business Zone program (often referred to as HUBZone, a program to provide secure federal contracts to small businesses in low-income communities), contracts were given, but a lot of them were found to be included in repeat instances of fraud. A handful of the businesses that were given the contracts didn’t meet the proposed requirements for the program; some were big businesses and some businesses used fake addresses. As a result of repeatedly giving out contracts to fraudulent businesses that tarnished the SBA’s reputation, banks are hesitant to broadcast that they lend these SBA-backed ARC loans.
In any case, ARC loans funded by the stimulus package are out there, and the initial $255 million set aside for them has barely been touched. If you’re a small business owner in need, head over to your bank right away because the loans are only available until September 30, 2010, or until the funds run out.
Below is a list of SBA lenders in IL who have given out ARC loans so far (banks in C-U area on top);
- Heartland Bank and Trust Company
- Marine Bank
- Busey Bank
- First Mid-Illinois Bank & Trust
- JPMorgan Chase
- The Foster Bank
- Peoples National Bank, National Association
- Milledgeville State Bank
- Illini Bank
- First Bankers Trust Company, National Association
- Blackhawk State Bank
- Charter One