Small businesses struggling as a result of the nation’s economic downturn are being thrown a lifeline by the federal government through a new interest-free loan program for small businesses created by the American Recovery and Reinvestment Act. The “America’s Recovery Capital” program allows small businesses to take out loans of $35,000 to pay down existing business debts. To qualify for the loans, small firms must demonstrate they are experiencing immediate financial hardship due to the economic downturn. U.S. Small Business Administration South Carolina District Director Elliott Cooper says repayment of the loans does not begin for one year.”We will issue to the bank a guarantee of a hundred percent and S-B-A will pay all the interest on the life of that loan which would be basically five years or could be as much as six depending on certain factors. After one year the borrower has to start repaying the principle to the bank, but S-B-A pays the interest throughout the life of the loan.”
The loans can be used for payments of business debts like mortgages, lines of credit, credit card bills, and balances due due, vendors, suppliers and utilities. Cooper say a small business owner seeking to obtain an ARC loan should keep in mind that the actual loans will be made by commercial lenders which includes banks.
“He needs to go talk to his bank. S-B-A doesn’t make the loan, we guarantee the loan. So, he needs to talk to his primary bank and see if that bank is actually making those type loans. Most banks are eligible to make those loans, but some people will make a business decision that they don’t won’t to make them are not going to make them.”
Cooper says in order for the nation to pull out of the economic downturn and see the economy pick up, helping struggling small businesses through these interest-free loans is an important step. “I think historically it’s been proven that small businesses basically leads us out of recessions. We don’t create a thousand jobs at a time, but if you get enough of them creating five, six, seven, and ten jobs it helps lead us as they have historically out of these economic downturns.”
South Carolina Congressman James Clyburn is a staunch supporter of the loans. He notes that small businesses are the nation’s most reliable job creators, generating seven out of ten new jobs.