Things to Know Before Applying for an ARC Loan

Things to Know Before Applying for an ARC Loan

For struggling small business owners, there may be help with the government’s ARC Loan Program. The interest-free loans are intended to aid small businesses in combating short-term hardship.

“It’s a loan that is meant to help pay off underlying debts that the small business has,” says Mike Stamler, spokesman for Small Business Administration (SBA), which administers the program. The loan is meant to help free up cash flow by allowing businesses to use revenue to pay down existing debt, Stamler explains. Banks make the loans, but the government guarantees the full amount and pays lenders interest on the loan.

While the program looks to add much needed — albeit limited — assistance to businesses, it hasn’t been without controversy. Small businesses owners and a number of agencies have lodged complaints regarding the lack of disbursements. Earlier last month, Sen. Olympia Snowe (R-Maine), who helped create the legislation, introduced a bill to repeal the ARC program due in part to a projected 60% default rate by the Office of Management and Budget, reports Business Week.

From the program’s June inception to Nov. 20, more than 4,200 small business owners have participated, receiving a total of $318 million in loans, more than 12% of the total SBA loan volume, Stamler says. There are 950 lenders making these loans which, according to the SBA are slated to run through September 2010. If you’re looking to apply for a loan, check these quick tips.

Check with your bank first.
If you’re considering applying for an ARC loan, check to see if your bank is part of the program. Most lenders are providing the loans to existing customers only, Stamler says. For a list of lenders providing the loans, visit

Contact your local SBA district office. If you have difficulty securing a loan, contact a regional SBA office for guidance. For a list of SBA offices in your area, visit the SBA’s Website.

Make sure your business is viable. To get a loan businesses must be “viable,” in other words, they have to have a sound business model with revenue projects. “Cash flow projections would have to indicate it would be able to resume payment after the six month disbursement,” says Stamler. The business has to show a profit in at least three of the preceding years, he adds.

For more information on ARC loans, visit

If you’ve received an ARC loan, let us know how you navigated the application process.

Renita Burns is a staff writer at