Does The SBA’s ARC Loan Program Work For Small Business Owners?

September 5, 2009

Sometimes good intentions don’t always provide the benefits intended. Such is the case with the SBA’s program to help small businesses get short term relief during these economic times. The intent is to give small business owners up to $35,000 to help them make payments on other loans so that they can continue to invest their cash flow into their business. The loans are interest free and are guaranteed by the Small Business Administration. Sounds like a plan right?

The problem is that banks can make a lot more money by encouraging small business owners to take advances on their credit cards. In general banks feel that it takes a lot of effort to make these loans with very little benefit to them. In fact, Bank of America and Citibank won’t even participate in these loans even though they were big recipients of the government bailout program.

Another problem is that the underwriting rules designed by the SBA are so strict that it’s hard for most small business owners to qualify. A business owner has to have been in business for at least two years and one of those years has to have been profitable. Did someone forget that we are in the middle of a recession?

This seems to be another government program that is bogged down because of bureaucratic snafus. Here again, the intentions were good, the execution was poorly thought out.