Are You Confused About the SBA ARC Loan?

Wow, you have to agree that being in the financial industry certainly has a lot of confusion! Don't start by explaining why an ARC loan is:

• ARC stands for America & # 39; s Recovery Capital, and loans are designed to be given to actionable small businesses that are in immediate financial difficulty
• This is a temporary program approved by the Recovery Act
• An ARC loan is a deferred loan of up to $ 35,000 used for existing eligibility payments.
• ARC loan is 100% guaranteed by SBA and there is no fee from SBA
• There is no interest on the borrower
• Pay for up to 6 months, or $ 35,000, and get free for 12 months.
• After 12 months, the borrower repays only the principal for five years.

The most confusing part of the loan is that the borrower has the impression that it will receive $ 35,000. This is not necessarily so. The way it works is the institution that processed the SBA ARC loan and pays up to $ 35,000 on an existing term loan [which could be a commercial mortgage or equipment loan]. For example, if the existing monthly payments total $ 4,000, the total loan amount is $ 24,000. If the payment is $ 8,750 per month, the sum of those payments is equal to the maximum ARC loan of $ 35,000, so the payment is paid for 4 months.

Second, many borrowers consider credit or business credit cards eligible for loans. It is very difficult to prove that all credit line or business credit card transactions are business-related unless there is a large purchase, such as equipment or invoices that were provided when the loan request was submitted. Another mess is that the borrower considers the loan to pay for their monthly rent. This is not the case unless it is a commercial mortgage.

After all, this is a great product for borrowers with a qualifying debt that takes advantage of the 0% interest rate and does not use the typical 1 1/2% contract fee! Only a few institutions offer this program and are listed in sba.gov. If this is beneficial to your business, it is definitely worth checking.