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No-interest loan help is here for small businesses
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Small-business men and women, drowning in a sea of red ink thanks to the worst national economy in 70 years, may find themselves searching for an ark. But an element of the stimulus package approved by Congress and signed by President Barack Obama earlier this year is offering an ARC instead, with the potential to bridge the troubled waters between current hard times and economic recovery.
The America's Recovery Capital loan program, or ARC for short. is a potentially critical life preserver for small businesses being administered locally by the Small Business Development Center at Stony Brook. Gloria Glowacki, director of SBDC on the campus of Stony Brook University, explained the program and urged small-business owners to seek out its relief.
Glowacki said up to $35,000 may be borrowed from participating banks for a period of five years with zero interest cost to the small business. "The SBA [Small Business Administration] pays the interest," she said. Glowacki explained that the small business must have been profitable in at least one of the previous two years and "must submit a convincing plan to survive the current recession" in order to qualify for the loan. The program is intended to be utilized by for-profit businesses and, because of the past financial history requirement, start-ups would not qualify.
The program permits the loan proceeds to be used to pay credit card bills, equipment purchases or any other legitimate business expense. One restriction, however, is that the "bills can't have been late by more than 60 days," Glowacki warned. She said that even a home equity loan, if it can be proved that the proceeds were used for business purposes, could be paid back using the ARC funds.
Those seeking ARC loans must contact their bank to verify if it participates or find another if theirs does not. "It is incumbent on the borrower to find participating banks," the SBDC director said. Since banks can make use of another SBA loan program long in effect, a so-called 7(a) loan — under which banks may lend far more and charge higher interest — many banks are not participating in the new ARC program. Glowacki said "a couple local banks" are taking part in the ARC program, but would not name them.
The loan proceeds will come directly from the lender bank, and borrowers must begin to pay back the loan within six months. Glowacki added that some loans may be arranged in which the bank pays out the proceeds in stages that can be extended for half a year, and said the six-month requirement to begin repayment does not start until the final portion of the loan is delivered to the small business. "Theoretically," said Glowacki, the business owner can go "a year and a half without paying back one penny."
"The SBA has final approval on credit scores," Glowacki said, so even after the business owner's bank has approved the loan that hurdle remains. Also, according to Glowacki, "No fees are paid by the borrower" to acquire the ARC loan.
"We help business owners with everything," said Glowacki, "all confidential and free." She said once a small-business person has identified the bank, "We help with everything else." The Small Business Development Center can be reached at 632-9837. Besides the main office on the campus of Stony Brook University, "outreach centers" are staffed at the SBU Incubator site in Calverton, in the H. Lee Dennison Building in Hauppauge and at Briarcliffe College in Patchogue.
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