ARC Small Business Loan Not Sufficient

The America’s Recovery Capital stimulus package provides small businesses with up to $30,000 in non interest collecting loans. There are strict criteria to qualify for the loan, but merchants have been encouraged to apply for it with their local banks, and so far $100 million out of the allocated $225 million have been distributed to small businesses all over America.

Businesses must show that they are experiencing difficulty in cash flow, that sales are down, and that they are having difficulty paying back vendors. Merchants must also write a business plan of how they plan to use the money so that it benefits the business and how they will be able to turn a profit from the loan. An additional requirement to receive the loan is that businesses must be operational for at least two years, and have been profitable for at least one of those years.

While many national banks have declined to participate in the program, the ARC loan is supposed to expire in September 2010, or until the funds run out.

While the ARC loan is a nice stimulus for a small percentage of businesses that actually do qualify, for the others it is of no help. There are three major problems with the stimulus:
1) Merchants can only qualify up to a maximum of $30,000.
2) The ARC loan will only expire after September 2010 or after the $225 million has been distributed.
3) Not many banks are offering the loan and it is difficult to actually qualify for it.

Merchant cash advances can offer businesses up to $500,000, and the criteria for qualifying for them are extremely reasonable. Most businesses as long as they are current with their landlord can receive at least some sort of funding. Even small businesses with serious delinquent accounts and extremely poor credit can receive funding as long as they are processing Visa or MasterCard credit cards.

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