Will America’s Recovery Capital Loan Program Work for Small Business Owners?

Jul 27th, 2009 @ 3:26 PM by Alden Smith

America’s Recovery Capital Loan program (ARC) will provide up to $35,000 in short-term relief for small businesses having problems meeting expenses. Small Business Administration (SBA) lenders are generating these loans, which will be available for small businesses until September 30, 2010. This $255 million loan program has been in effect for approximately one month. Some of the program’s detractors are having doubts about the effectiveness of the program.

The SBA plans to approve $190 million in loans in 2009, and $150 million in 2010. The plan is to bail out 11,000 small businesses and retain 55,000 jobs. An article on the Capital Solutions Bancorp website reports that even though the loans are fully guaranteed by the SBA, lenders will only earn an interest rate of 1.25% below current prime rate. This puts lenders in the position of making loans which have a traditionally high default rate, and gives little return in investment.

Small business owners are not known for having a high credit rating, mainly due to the nature of their business. Under this program, the required credit score of 680 leaves many small business owners out in the cold. Many small businesses are having trouble staying afloat in the current economic environment. Some small business owners have borrowed money to keep the doors open, and may often be behind in honoring invoices for goods received. This not only affects their credit rating, but makes it almost impossible for them to get a loan from the ARC program. This program would be very helpful for small business owners, but does little to relieve small businesses that will suffer due to the requirements of the loan.

One Response to “Will America’s Recovery Capital Loan Program Work for Small Business Owners?”

1. Meggan Arrison says:

   December 9, 2009 at 2:05 pm

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