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The SBA had expected high demansd forthe loans, which were created by the economicx stimulus legislation to help strugglin g small businesses make paymentz on existing debt. Through this program, smalkl businesses can borrow upto $35,00o to make up to six months of payments on qualifying loans. Borrowers won’f have to start repaying the ARC loans until a year after they receives their last ARCloan disbursement. The loans are interest-free to the borrower. the SBA will pay the lender a monthlhy interest rate of prime plus 2percentagd points. The SBA also will guarantee 100 percenyt ofthe loan’s amount. The SBA began accepting applications for theser loansJune 15.
As of June 22, the agenc y had approved 72 loanstotaling $2.4 million submitted by 42 lenders. Smallo businesses in 21 states received these The agency expects the volume of ARC loans to pick up incominv weeks. The agency has conducted training sessions on the loanewith 3,000 lenders from 1,300 financial institutions. “Basex on the participation in the information we are encouraged and feel we in fact, continue to see a rise in participationn by lenders and the numbedr of loan approvals,” said SBA Press Secretary Hayley Many SBA lenders, however, remain on the sidelines.
The Colemamn Report, which tracks SBA lending, founc that 60 percent of the lenders who responded to its survety saidthey don’t plan to make ARC loans. Some lenderxs said they wouldn’t make enough money off the loanzs to justify the and others saidthe SBA’ds guidelines for the loans were too To be eligible for the loans, small businessesx must show they were profitable or had positiv e cash flow in at least one of the past two Future cash flow projections must demonstratre that the businesses will be able to repay thei debts, including the ARC loan. The National Association of Government Guaranteed Lenders has submittee four pages of questions to the SBA abouytthe program.
“Our members have many questions about the and that is probably why the volumed is lessthan anticipated,” said NAGGo President Tony Wilkinson. Meanwhile, lending throughy the SBA’s regular business loan programse remains far belowlast year’s levels. Throughh June 19, the SBA had approvec half as many 7(a) loans this fiscap year as it did duringf the same period ayear ago. The totap dollar value of 7(a) loans was down 38 percent. Lending throughg the 504 program, which financee real estate and other fixed was down42 percent, both in numbefr of loans and in dollars. SBA’s fiscall year began Oct. 1.
Lending through both programsa picked up afterMarch 16, when the SBA eliminatex or reduced fees on its loans and raised its guaranteer on 7(a) loans to 90 These steps were called for in the the economic stimuluz legislation.
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