SBA announces new ARC loan guidelines

June 8, 2009

Today the U.S. Small Business Administration announced new lender guidelines for the America’s Recovery Capital (ARC) loan program it unveiled last month.

According to the SBA release, the ARC program provides emergency funds, in the forms of deferred loans, of up to $35,000 to “viable small businesses suffering immediate financial hardship.” These loans are not provided directly by the SBA, but through SBA-backed lenders – mostly smaller or community banks – and are 100 percent guaranteed by the government and have no lender fees attached.

The SBA defines a “viable” business as an “established, for-profit business with evidence of profitability or positive cash flow in at least one of the past two years.” The term “immediate financial hardship” is subsequently defined by the SBA as “evidence to show a change in the financial condition such as declining sales, frozen credit lines, difficulty meeting payroll, paying rent, difficulty making loan payments or perhaps something else.”

SBA lenders will start dispensing ARC loans next week,  on June 15.

Eric Zarnikow, associate administrator for Capital Access – the SBA department overseeing the new loans, said he expects 10,000 ARC loans to be doled out over the next 15 months until the September 30, 2010 cutoff date.

In an attempt to make sure all small businesses from across the country benefit from the program, Zarnikow said there will be an ARC loan cap of 50 per week to each SBA-approved lending institution, with no more than 1,000 loans issued from any one lender in total.

If a lender was only able to make 30 loans in any one weekly period, they would be able to catch up the next week by making up to 70 loans, in what Zarnikow referred to as a “rollover” provision.

“We will be evaluating these limitations from time to time,” said Zarnikow, adding the first one will be done in August.

Borrowers will not have to make any payments for the first year and will have an additional 5 years to pay back their loan. Only one loan per applicant is allowed and potential burrowers must not have any existing SBA loans.

Startup businesses are ineligible for ARC loans. For a full list of eligibility criteria, click here.

ARC funds can be used to pay home-equity loans or credit card debt, so long as it was used for business purposes only.

“If somebody has a home-equity line of credit and drew against that and put the money in their business we would allow an ARC loan to help cover that,” said Zarnikow, “but we cannot allow the ARC loans to pay personal expenses, like their personal mortgage.”

In addressing concerns that due to the riskier nature of these loans and the 100-percent guarantee by the SBA, that the ARC program would act more like a grant program, Zarnikow admitted that “losses” or number of defaults were expected to be “higher” under the new program.

“We do expect there are going to be losses and businesses that aren’t going to make it,” said Zarnikow, “but there are going to be a number of businesses that do make it and those are going to save jobs, or extend jobs for a period of time even for those that ultimately fail.”

Zarnikow said that while lenders will still be evaluating potential burrowers by their credit scores, he acknowledged there will be an accomodation for those small businesses whose ratings may have been adversely impacted by the recession. Zarnikow said in these cases SBA lenders will look at what he called a “hybrid” credit score, which is a combination of an owner’s personal credit score and that of his or her business credit score.

“We do recognize that these are businesses that are facing some immediate financial hardships and their credit may not be as strong as it would be if they were coming in for a loan to grow a business.”

For complete information on the ARC loan program, visit the SBA’s website:


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Posted by » Entrepreneurial » Blog Archive » SBA announces new ARC loan … Business Loan Information: | Report as abusive

i have called a couple of the banks listed on the sba website and no one i have talked to is offering this loan. if anyone can give me any guidance i sure would appreciate it….

Posted by shirley kooi | Report as abusive

Yes, I’ve called a few banks as well and they had no idea what program I was referring to. I tried to work with the SBA in the past so I’ve already assumed the process will be challenging.

Posted by Entreprenuer | Report as abusive

Yes, which banks? My bank said they likely wouldn’t participate.

Posted by Gareman | Report as abusive

This program is a farce (as per usual). If you are a responsible business owner, don’t bother applying. SBA has twisted the ARC program so that it primarily benefits banks, and small businesses get NO new money. Here’s how it works in the “real world”:

If I had opened up a SunTrust business credit card, and then proceeded to rack up $35,000 of debt at 20%…then I could now go to SunTrust, get an SBA ARC loan, and replace that $35,000 in credit card debt with an INTEREST FREE loan sponsored by the SBA. SunTrust, meanwhile, completely wipes out it’s very risky unsecured $35,000 loan and replace it with a government guaranteed loan (gov’t will pay SunTrust prime+2% on that loan no matter what).

SunTrust wipes out their risky credit card loans with something that is as solid as a T-Bill.

Irresponsible business owner ends up paying a lot less interest, but now is on the hook for paying back a government backed loan.

Responsible business owner gets nada, nothing, zilch. Businesses can NOT use ARC loan to expand business, hire new employees, buy inventory, advertise, etc..

Memo To Gov’t: New jobs are created by healthy businesses. If you systematically shut them out of your asinine programs, then THERE WILL BE NO NEW JOBS!

Posted by Sean | Report as abusive

As a further point of information…

Most banks participating in ARC are only giving loans to existing customers with existing debt. This is bank speak for: “we want to refinance all of our old risky loan portfolios in such a way that we can swap them out for a portfolio with a 100% gov’t guarantee”.

Posted by Sean | Report as abusive

This is the kind of thing that makes be so mad about our government. Last fall when this thing hit we lost a boatload of customers and had to cut our prices 60% to get new ones.

I drew down a large amount of our capital to finish out contracts that were based on what we had and scrambled to make new ones that worked with the new business model.

AMEX went off and cut our credit line even though we never were late and paid in full almost every month (could be the problem) forcing us to get new cards for our sales staff.

Now i am short on working capital, and could use something like this to rebuild things but can I do it. NO, it is only good for making payments on debt. I don’t have that much in payments to make it worth even thinking about it.

Why in the hell is the government wanting to save failing businesses? The Autos, the Banks, now small businesses that can’t make their credit card payments….

Let the junk die off so that businesses like mine can grow and hire more workers.

If they keep doing this we are only going to be able to hold on because failing firms are using free government money to take market share below the cost of experienced healthy businesses.

Posted by Chris Herzig | Report as abusive

These do not seem to be working for “real” small business owners. Check comments at, very interesting with good suggestions

Posted by Todd | Report as abusive

i am not an iresponsible business. i need help and whatever way i have to hold on i will. i have been around more than 18 years, and i need help, the banks are just going to screw us anyway. no kidding this benefits the big wigs somehow, but im going to try because i need it and so do my employees.

Posted by deb | Report as abusive

I have been trying to get this ARC loan for many months. My senator and congressman could not help me either because as long as the banks are following the rules as put forth by the SBA, then they can’t be forced to write a loan. My own bank told me that I didn’t have enough business debt and declined the loan. They wanted me to have at least $5,000 a month in outstanding business debt and I guess I didn’t have enough debt for them. So after months of contacting bank after bank, it is so clear to me that the banks are making their own criteria, and that small businesses like myself will never reap any benefit from this stimulus money.
The banks should all be ashamed. Especially J.P. Morgan Chase. I have my mortgage, my equity lines and my business and personal accounts with them, and I was still declined.
I’d love to hear if anyone has been successful in getting this loan.

Posted by Amy | Report as abusive

I have applied for the ARC Loan on June 2nd with Wachovia Bank and I am still waiting for a response from the underwriters. Everyone I know that applied through Suntrust has been rejected. Has anyone been approved by Wachoiva? Still trying to find out id this loan is for real.

Posted by John | Report as abusive

I have just received a letter from Wachovia/Wells Fargo informing me that they are unable to approve my A.R.C Loan application at this time. I must say that I am not only disappointed, but frustrated and confused with the reason why I was denied.

I have had a personal banking relationship with Wachovia for the past 10 years and a business relationship for the past 5 years. My business cash flow is sufficient to service existing and proposed debt. My accounts with Wachovia, other financial institutions or trade lines have all been handled satisfactorily and are not delinquent, and my credit history demonstrates reasonable assurance of ability to repay loans, repay other obligations and operate at a rate profitable to repay the loan/other debt.

The Treasury Department has invested about 200 billion in hundreds of banks through the Capital Purchase Program in an effort to prop up capital and support new lending. Wells Fargo was one of those bailed-out banks. With that said, where is the help to small business owners that are experiencing hardship? Why is Wachovia/Wells Fargo not willing to help out my small business as the A.R.C. Loan was designed specifically for businesses like mine?

At this time, I have not found one small business owner in my area that has been approved for the A.R.C. Loan. The ARC Loan is giving small business owners false hope. It is a JOKE!

Posted by John | Report as abusive

I have been trying to get the ARC loan also. I went to my Senator’s local office and have documented everything. They don’t even know how to help me. Every direction that they sent me was a dead end. One of the higher ups at the SBA in Florida told me that across the country, less than 1,000 total loans have been done. He also said the program is NOT working. When your own Senator’s office does not know where to send you for help – where else do you go. I applied to our local Hancock Bank and they said they have decided not to do them – too much paperwork. Then on to Region’s Bank – they told me I had to be an existing customer with an existing loan. We must make this known nationwide – we need to show that this stupid stimulus plan is not working! Get out and protest and write letters and contact your local paper. Get the story told – we must unite in numbers to make a difference.

Posted by melinda | Report as abusive

To john above,
Hope it is not a joke, but…
I applied for an ARC loan six weeks ago. To date I have not heard a thing. Since then I have learned about the stupid restrictions laced into the approval process. It strongly appears that my loan will be rejected. Even SBA did not know what the approval process entailed at the start. When I applied most of the banks had not heard of the ARC loan and the ones that had evidently knew squat about the process. If it is not to be approved, the underwriter should have gotten back to the bank with a negative by now. When I applied I jumped through hoops and even wrote an in depth business plan just to qualify.
Obama better do a better job to support the American manufacturer or we will all be buying more Chinese products and continue to watch our balance of trade and dollar slide to oblivion. max

Posted by max perez | Report as abusive

Jump thru hoops-I did. Had more knowledge about the ARC loan than my Business Banker @ Chase in Studio City, CA-done. Got approved-NO! After calling about 4 different 800#’s @ Chase, I could not get a straight answer why. We submitted everything that was asked for and still denied. Melinda, I totally agree. I am writing to our local AM (KFI 640)station to get my story heard on air as it mirrors all the other postings on this site. I am also contacting our local gov’t agencies and The Terminator.

Posted by J. JOHNSON | Report as abusive

Just got turned down by Wells Fargo for ARC loan. Reason given: not eligible because of policy reasons. What does THAT mean? I spend 20+ hours filling out application and gathering documents, and they refuse me for what reason? I checked my credit report: no negative items on it. Banks don’t want customers to use no-interest money; then they can’t charge us interest on their loan products.

Posted by S. Haulman | Report as abusive

IT IS POSSIBLE!! I closed on my ARC loan yesterday! I too knew more about the loan than my banker. Ours was the first and only ARC loan they have done. If you have an account at a small community bank and a good relationship with your banker, you might be able to get it. The big banks just aren’t doing them. I used the bank that already holds my large SBA loan – they have a vested interest in our company already. AND I am using the money to pay my vendors!! Go to the SBA website and educate yourself completely about the loan to see if you are a candidate. Then print out the list of documentation needed and submit all of it with your application. Also print out the lenders list of what they need to submit to the SBA. If you interpret the rules literally, you can get around them. (The intended purpose of the loan is for the SBA to pay 6 months principal & interest on your qualifying loans so as to free up your money for other things. And it is not supposed to be used to pay anything over 60 days old. Well, I turned my vendor’s invoices that were over 120 days old into a “current” note payable and it got approved!) Ultimately the lender has control of how the money is spent, the SBA is just setting guidelines. I had a closing within 3 1/2 weeks after submitting the documents. It really wasn’t that hard if you are determined and you provide what they want. The hardest part was providing a 2 yr. projected cash flow and P&L, but if you keep good records it shouldn’t be too difficult. Good Luck!
PS – the bank IS getting interest on the loan, from the SBA not the borrower.

Posted by marianne0323 | Report as abusive

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Posted by Telefony | Report as abusive