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ARC Loans Offer Small Businesses $35,000 For "Immediate Hardship"

Posted by: John Tozzi on June 16, 2009

Small businesses that have been recently profitable but are having trouble meeting debt payments can now apply for Small Business Administration-backed bridge loans to help. These loans are designed to keep otherwise viable companies from sinking because of “immediate financial hardship.”

The ARC Loan program (for America’s Recovery Capital) offers up to $35,000 in interest-free financing that business owners can use to pay short-term debt obligations that they’d otherwise be unable to meet: loan payments, business credit cards, leases, payments to suppliers, etc. The SBA doesn’t make the loans directly — banks and other lenders do. But the SBA pays interest to the lender and guarantees 100% of the loan. Small businesses can use ARC loans to cover up to six months of payments on another debt. After six months, the borrower’s repayment is deferred for a year, and then repayment of the principal will be spread out over as much as five years.

So, you could borrow $30,000 to make your $5,000 commercial mortgage payment for the next six months. You won’t have to start repaying the $30,000 until a year after your last disbursement. Then the repayment would be spread over five years, with monthly payments of $500. The SBA pays the lender prime+2% interest for the life of the loan.

Eligible businesses need to have positive cash flow in at least one of the last two years. Two-year projections should reasonably show that the company can make all its payments, including ARC repayments. And the funds can’t be used to pay any debt that’s more than 60 days past due. Businesses also have to show evidence of immediate hardship, like a drop in sales, trouble meeting payroll, or a credit line cut off.

The SBA will finance up to 10,000 ARC loans, says SBA spokesman David Hall. That doesn’t sound like much, but I’m not sure how many companies fit into the narrow range that these loans target. They’re not intended to be life support for businesses that would fail in two years anyway, nor are they meant to be attractive financing for companies that don’t need it. Hall said there has been lots of interest in the program since it was announced.

There’s some question whether banks will participate, especially because they’re not allowed to charge fees on ARC loans. (Will the banks that took bailout funds themselves really refuse to make these 100% guaranteed loans because they’re not profitable enough?) More from the Wall Street Journal.

The basics are here. To apply for an ARC Loan, the SBA says you should contact your lender directly. To reach an SBA rep to learn more, fill out this form.

The SBA doesn’t have any numbers yet on how many applications are coming in. If you’re trying to get one of these for your business, let us know what your experience is like. Is your bank participating? Is your company eligible? Will the loan really help? And how long will it take to get it? Tell us in comments below.

Reader Comments

Bruce Dobb

June 17, 2009 12:21 AM

Terrific way to assist a business BEFORE it becomes a bank work out - Trouble is that banks are not paying attention because they can't make fee income. Reason the should pay attention are: SBA expects strong participation from banks that normally participate in other SBA programs.
If bank believes customer will become a work-out soon, these funds can help prevent this by providing 'core' funds for debt restructuring
In the event an SBA loan does become delinquent, use of this program demonstrates 'good faith' servicing efforts on the part of the participating bank
Any bank participating in Troubled Asset Relief Program (TARP) now has intensified, quarterly small business reporting requirements - this program is a safe means of demonstrating bank 'goodwill' for regulatory compliance.
You might just be able to save people's jobs by allowing a company breathing room to restructure its debt.

Neal Gordon

June 21, 2009 06:05 PM

One big problem for borrowers is locating a loan from a lender who is not their bank. Many of the banks want to provide loans to current customers only, especially if they hold a loan from that customer. Also, many banks have additional requirements for the loans beyond what the SBA has required. But not one of the banks is happy about having to process and underwrite a loan package for a $35,000 loan that requires nearly as much information as a needed for a regular sized SBA 7(a) loan.

My company, Business Borrowers Alliance, is contacting the large and mid-sized banks to learn if they are participating and what their specific requirements are. We provide direct assistance and help to businesses throughout the complete ARC Loan application process. For more information, contact us at 866-944-3866 or


June 26, 2009 11:37 AM

This (ARC) program is another joke, i contacted all the banks in my area ,this what they told me ,25 pages of applications , u have to have outstanding loans with the bank,(not jus for any small buisness looking for a new loan ) has to be deliquent for more than 30-60 days.There will be only 10,000 given out through the U.S. Also the banks get to make there own guidelines as well... Nobody in the banking or Sba has any clue what small buisness needs!!!!!!

Diego I

July 6, 2009 07:26 PM

We have applied for an ARC Loan true WF for our corporation, we where denied today because their won policy prohibit lending to companies who their owners has minus of 680 credit score (I have 649 right now), my personal credit went down because we use all our money and credit for the business and our business is still suffering the consequences of the slow economy.
Did you hear about these filtering practices with federal money?, do you know, what our options are?
I really will appreciate any help you may provide.
By the way I already spoke with our local SBA representative with almost not success.
Thanks in advance.


July 6, 2009 09:49 PM

how much more do they expect us to take, we place everything on the line everyday for the hope that when our bodies and minds have given all that they can, and when we have borrowed from peter to pay paul, and finagled everything we possibly can, and still managed to maintain the oh so necessary good credit standing that is our life blood...we are thrown under the bus by those who cannot take us for another dime and nobody seems to care that we are on the brink of losing everything.

We do not mind creative financing, or even stealing from our future, but what we are facing right now is our end. Credit card companies raised our rate to a level that was illegal a few years ago and nobody intervened, and then they had the nerve to close the account during the largest financial crisis of a generation. The banks will not even talk to us, and everyday we hold on with what dignity we have left hoping someone is on our side and a recovery program comes along that nobody seems to be offering and everyone feels they will not qualify.

How will we ever have another greatest generation, when we cannot stop using and abusing each other. what happen to our respect for one another, our united hope and support of one another. I swear everyday i look at my country in a new light and it is dim.

jjohn Oliver

July 14, 2009 11:00 AM

I've been in business for ten years
my sales have gone down this year more than half of last years I've laid off half my employees and still can meet all my bills and sometimes even my payroll is late. Will I be wasting my time to apply or is this for real


July 20, 2009 10:27 PM

I read about this program in one of my trade magazines today. I am the poster child for this program ... seem to meet all criteria. Having some experience with SBA loans in the past I am sceptical whether I can get this approved but as a social/financial/political experiment I have to give it a whirl. I was planning on laying off a couple of employees at the end of August, maybe the SBA will save their jobs.

Jose Almodovar

August 15, 2009 04:03 PM

There has been ZERO arc loans closed in the Houston area. There is a huge disparity on the use of these federal funds. Banks are not advertising the Arc loans and will not give potential customers any information on the loans when there is an inquiry. Banks will not deny your loan and will keep it on their books. This is a loop hole for not having to report. Arc loans are a complete failure in the Houston area and I am working with several institutions that will back me up on this, such as Acion Texas and PTAC. There is absolutely no follow through with the Arc loan program. Bank of America is the main lender that is promising the most when getting the federal funds and delivering nothing. It was very embarrassing to be a small business owner who is excited about the stimulus plan efforts to only be turned away. Where is our voice in all this?


September 15, 2009 04:02 PM

We have a couple of companies. They did not qualify as we did not have payments due to the bank of over $1,066 per month. We did not have payments due because the bank called our line of credit due in January, and we had to pay off the $110,000 loan from our personal funds and therefore we do not owe the bank a nickel. In the mean time my home equity line is almost at the limit, and the company does not have the money to repay the money loaned by the owners. According to the representative from National City Bank, only a couple of people have qualified with National City in the state for the loan.


September 16, 2009 10:07 PM

I am in Southern Califonia with 2 retail stores. I met all of the criteria stipulated by CHASE Bank and was still denied. After calling 4 800#'s @ CHASE, I could not get an answer on why? I know of nobody in California or Nevada who have been granted. OH! Wait! To date, 37 companies were approved in Calif. Hmmmmm.........out of the 100,000's of small businesses in Calif. alone. Everything I have read has been very negative about the ARC program. I am writing to KFI AM 640 and contacting The Terminator next to get my story heard. People need to know about this!


September 25, 2009 01:02 PM

Have any of the commentors called the White house comment line? This is probably as much of a waste of time as the loan application . The wall street guys caused this and they got all the money. The poor souls trying to keep themselves and America employed,get nothing but excuses. Unfortunately when the Obamas decide to do something they think is great they forget to consult anyone in touch with reality.

Carol Cross

September 25, 2009 04:51 PM

The ARC loans were intended to help those who could prove that their businesses were profitable BEFORE the Recession, etc.. and who could demonstrate positive cash flow for one of the recent two months, etc..

The banks are probably getting stuck on a lot of the commercial small business loans in the retail sector that were made on home equity credit lines, and are not anxious to get involved with any other unsustainable small businesses, who may ultimately default on their loans, even if they are 100% guaranteed by the SBA.

I'm wondering whether a good share of these loans will go to the Franchise Sector and actually subsidize the big business franchisors. So often, the business monthly statements of cash flow of franchises in the "startup period" do not reflect the costs of the loan for the startup costs.

Hopefully, the SBA will separate out ARC franchise loans from independent small business loans for the view of the taxpayers, who ultimately will pick up the bill.

Is the ARC another subsidy of BIG business under the guise of supporting the small business person?

B G in Oklahoma

October 12, 2009 02:43 PM

I applied for the ARC loan through JP Morgan Chase Bank and was denied for the loan.

I've been in business for 15 years and have never missed a payment; I have impeccable credit. Our business has declined considerably over the last 18 months. We meet all of the criteria that was listed in the information brochure advertised by the government for the ARC loan. I believe hat we are a perfect candidate for this loan. We are the kind of company that the loan was intended for.

However, Chase Bank has denied us on what they say is insufficient historical and future cash flow, lack of established earnings and breach of trust (rules violation that happened 15 years ago).

To respond to their reasons for denial: First, they do not have, and has not asked for our historical cash flow statements, but we have paid our bills, which, seems to me, shows at least enough cash flow to pay our obligations. Second, the only requirement of the ARC loan program was to show a profit in one of the last two years, which we did, and third, concerning the breach of trust, the violation had nothing to do with lending, and I've never been asked for that from a lending institution and I have borrowed millions of dollars.

In my opinion, this ARC loan program is a joke. The banks, obviously, don't want to lend the money through the program. I spent about 30 hours preparing the documentation for the ARC loan, to borrow a small sum of $35,000. Don't waste your time like I did.


October 22, 2009 02:43 PM

It took me 7 weeks to find a bank that would process this loan. The SBA couldn't give me any information about who was actually processing them. Instead they gave me a SCORE volunteer to speak with who knew nothing. I finally found someone at Chase bank who sent in my application and made me open a checking account there. It's been over two months and nothing. I wrote to the White House. No response. I read there have been 139 of these loans given out as of September. I am also at the end of my cash. My 32 year old graphic design business is dead. I'm trying to start over but it's real hard without money to live.


December 3, 2009 05:48 PM

According to the SBA website Bank of America is a participating bank. My husband tried to get an ARC loan from Bank of America. He was told that Bank of America is not participating in the ARC program. He was offered a high interest rate credit card instead. He will be closing his Bank of America account.


December 8, 2009 02:55 PM

I have been approved for an ARC loan through Wells Fargo. I received the initial “good news” back in August. Here we are in mid- December and still no closing date. I was told by the SBA (who called today to congratulate me)that ours was one of only THREE ARC loans for Wells Fargo to approve for the state of Arizona.

I will say that after spending weeks painstakingly putting together all of the application materials, and waiting now over 6 months to actually close this loan, I’m beginning to wonder if it’s all in my imagination! Will this thing ever come to fruition? I have to laugh when I hear that the ARC loan was intended to provide emergency relief to struggling corporations. Good grief, if this were a real emergency, the patient would be DEAD!

I would love to hear from anyone else who has actually seen their ARC loan approved AND actually funded!


December 9, 2009 11:35 AM

I contacted every bank in the Austin area and none will even do the paperwork- it's not worth their time as NONE are being approved. All our manufacturing is going to China, Mexico, etc. All the government has to do is stop manufacturing from leaving the US and the bleeding would start to lessen and eventually we could hire back the 5 people we have had to let go in the last 18 months.

frank raymond

December 14, 2009 02:12 PM

I've been told by my bank that every one of more than 25 applications have been turned down,and in my case rthe money has run out.
it would seem as though this program was a sham,not worth the five months of form filing and additional expense .
any other ideas???????
this could be my end and job losses for my 11 employees.merry christmas..........


December 16, 2009 03:05 PM

I just wanted to say that the ARC program is not a sham, just probably grossly mismanaged. Our loan was finally approved by Wells Fargo and we closed just yesterday. So although it may have been incredibly difficult to get, the program is legitimate and is helping at least some of us-- sadly, just not nearly enough of us.


January 15, 2010 03:49 PM

Its amazing the speed at which the big banks were bailed out to the tune of billions of dollars. The government through the completely ineffective SBA has given us a lifeline. Or have they? My bank Bank of America do not want to know. I simply do not have a week to process paperwork for a measy $35K which is very unlikely to be approved. I am assuming that the big banks were given the funds directly by the goverment. I am not aware of any useless BBA (big business administration) that they had to suffer through to get their money. Why can't our elected repesentatives see that government money going through the banks is not working and set up a process to give it to us directly. I am beyond frustrated. My tax returns for 2009 are about to be completed and I know I will have a tax liability on the misery profits I made all of whihc were used to pay off debt. Can I hold back my taxes in protest until somebody listens to me.


January 18, 2010 01:28 PM

Just another example of the Obama administration's smoke and mirrors solutions to America's problems. Change?
Lies, plain and simple. The only way that small business people, Americans, in fact, will solve the problems that exist here is to go down to DC and Wall Street with pitchforks, like or friends back in the 1798 in France! Maybe it is time for guillotines to get their attention!ARC loans, what a joke!Neither party can deliver anymore!

Affordable Quality Firniturel

January 28, 2010 06:38 PM

WOW' I have been working with Chase bank for 4 months now trying to get the ARC loan we so despertaly need. They are under the impression that the loan program must be paid back in two years.
Thats not how I read it. We have been in business 10 years now and have a good credit score with a credit line with Bank of America over $35,000.00 but they told me they did not particapate. After reading the comments on this site the best thing to do is go bankrupt and let them all take the lost.


February 18, 2010 12:21 PM

I just spent a week putting together my mounds of paperwork to apply for the ARC loan. When I went to Chase to submit it they told me that the funds for the loan have been exhausted as of two days ago!!! He said there was only a certain amount of money in the program and it has all been used up. Is this true?

I called the SBA and the person on the phone there said they had not heard this and couldn't verify if it was true or not.

I called Chase and told them SBA hasn't received word of this and asked him to verify that it is true and he simply said "yes", it is true. Funds have been exhausted and the program is closed.

I have Googled all day trying to see if this is posted somewhere and I cannot find any info on it. Has anyone else heard this?

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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