ARC Loans: How the States Stack Up

Posted by: John Tozzi on August 24, 2009

As the NY Times noted last week, a big portion of the ARC loans made so far has been concentrated in a handful of Midwestern states: Minnesota, Wisconsin, and Iowa, to name a few. Below is a visualization of the latest data from the SBA through Aug. 18 that I put together with Many Eyes, a very cool data visualization tool from IBM.

I’m curious to hear from those of you in the trenches trying to get these loans: How much support have you had from different SBA district offices, or lenders in different states? What’s going on in Minnesota, Wisconsin, and Utah that’s not going on in New Jersey, Nevada, or California? Does aggressive outreach account for the differences here?

A reader in Houston recently left this comment on an earlier post about ARC loans:

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?

There are substantial regional disparities here, and the reason behind them isn’t clear. If you have any insight from your own experience trying to get an ARC loan, let us know in comments below.

Reader Comments

Evan

August 24, 2009 05:04 PM

Do I need special software to make the fancy image work? When I click to "interact" it does not work.

Neal Gordon

August 24, 2009 05:34 PM

This is really cool. You can really see that the folks in WI, MN and IA get it and the borrowers in the other states are left begging. From conversations with lenders in MN, they basically say it is the right thing to do to help their friends and neighbors, whether it is the most profitable for the bank. I wonder what this map would look like of banks who took government loans, but aren't participating.

The SBA ARC Loan program continues to be problematic for many struggling small businesses as this program has evolved in unexpected ways compared to what was touted when it was launched. The loan amount is too small to help many businesses (Ask Congress why they thought this would be enough). The amount of documentation is nearly the same as is needed for a $1million loan. And, as this map points out, the biggest issue that borrowers are facing is finding a lender who will loan to them, which is based on the type of qualifying debt that applicant has. So even if a business is qualified, it is far from automatic that they get a loan.

Neal Gordon
http://www.businessborrowersalliance.org
We provide direct assistance and help to businesses throughout the complete ARC Loan application process.

Dom Celentano

August 26, 2009 09:06 AM

I have posted comments on several blogs related to the SBA in general... the business model, like the post office does not work under the economic conditions present.

SBA guaranteed loans work look at two items in this order:

1. Collateral
2. Future cash flows

Small business collateral for SBA lenders has primarily been realestate, both your personal, meaning your home, and then business. No need to explain why collateral is no longer as relevant.

Future cash flows are important to insure the payback of any loan, however predicting future cash flows today is very difficult going out much more than 9 to 12 months. SBA usually looks at five year projections, which under normal business conditions is reasonable.

So ARC may have peculiar difficulties due to the cost/benefit ratio to the banks. Lets be real and not delude ourselves that SBA has any means to truly help small businesses at this point. They are like the post office... trying to propogate a business model that is no longer relevant.

What is relevant? I have to leave that to others smarter than I....

dom

sandii

August 26, 2009 07:30 PM

I'm in Florida and I have approached at least 25 banks and I can't get anywhere. First you must have an account at that bank. Second, you must owe them a business debt, like a loan or a credit card. They will only fund their own debt. Third, you personal credit must still be excellent. Wells Fargo says don't bother if your personal credit score has dipped because they are a conservative institution and credit scores count with them. Small institutions say they don't even want to be bothered. It's a catch 22, what are small businesses supposed to do? Everyone seems to be getting aid but us. Welcome to Paradise!

Ren

September 2, 2009 07:02 PM

I applied June 16th at Chase Bank,Have been getting nothing but more paerwork & promises.I wonder if GM had to fill out all that paperwork?I think this is just a hoax for the small business person.

Jim

September 13, 2009 12:29 AM

I have tried numerous locations myself. The sba district office in Houston is of no help whatsoever. I have called several times, get a different person, they say tryu this bank or that and admitted that they do not know any banks making ARC loans. Why Does Obama say on the one hand that he wants to help small business while on the other hand does absolutely to nothing th assure that it happens? I agrre with Ren, this is just a big political hoax designed to publicity.

Thompson Casinader

September 22, 2009 01:29 AM

The local bank officer from Wachovia Bank, who reviewed my initial ARC loan criteria, assured me that I was the ideal candidate for this program. I was asked to open an account first, which I did. “My savior O!Bank of America wasn’t any help at all”. It took me almost three days of preparation to get all the supporting documents together. Not to mention the help I got from my accountant. After one month of waiting to my utter disappointment and surprise my ARC Loan application was declined. Don’t they take business property as collateral anymore? I have ten times of equity to cover this lousy loan. Where is the real help for struggling Small Business Owners like us? “Need simplification for loan application". Congress and Senate need to look into this SBA programs, very carefully and to bring immediate relief for Small Businesses.
Over to you Mr. President!.

Chuck Blakeman

September 25, 2009 11:43 PM

I was lucky enough to have an existing business account with Wells Fargo, who has not been the least bit helpful and only grudgingly accepted my application.

The original submission was 301 pages! Haven't hear back yet, but I'm guess there is another 50-100 pages of nonsense they will want.

The banks aren't doing this for due diligence - it's a 100% SBA backed loan - they have zero exposure. They also aren't doing it to make sure they don't have defaults. The SBA has already told the banks they expect a 56% default rate. I could visit 10 small biz shops and drop $35,000 cash off via a one-page promissory note and get better than a 44% repayment rate.

They're making it this difficult because they a) don't see they can make money on it, but more importantly b) they don't want capital tied up at such low interest rates when such high ones are on the way. They're stockpiling.

The SBA and the politicians have, as usual, come up blank again, treating small business owners like aborigines with whom they want a bwana-picture so they can appear to have been helpful. It's just another photo op at the expense of small business owners.

Danon Garrett

October 4, 2009 02:20 PM

I am small business owner who applied for the arc loan with Regions Bank, who holds my existing business loan, and I was still declined. I can't get an official explanation as to why? Something is seriously broken in this country.

Henry

February 5, 2010 05:41 PM

We have done all our business with Regions bank in Ala for over 30 years. you would think that the bank would at least take our application for the Arc loan. We were told that the bank we did not have a large enough business loan with regions. of course, this was not a requirement for the ARC loan. If we had a business loan with regions, the loan proceeds would be used by Regions to pay down on any loan we had. Our business needs funds for operating expenses and retaining our employees. After all small businneses in the usa hire 41 % of all employees. We have lost over 75% of ours. WE dont see any help fast enough to save us. Mr President give us some cash or force banks to.

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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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