6September 2009
Part of the stimulus program is a loan program called, America’s Recovery Capital. It is a program designed to help small business owners recover and grow in the current economy. It offers up to $35,000 in an interest free loan that has no fees and is backed by the federal government. The small business owner doesn’t have to make payments for 18 months and can take up to five years to pay the loan off. This sounds like a great idea, so why isn’t is working?
It turns out that many banks are refusing to make the loans because there isn’t enough profit in the loan and they say most loans probably won’t be paid back anyway. Major banks like Bank of American and Citibank are not making the loans. These two banks in particular receive bailout money in the billions so it’s puzzling why they refuse to participate.
An interesting fact is that banks in less populated states such as Minnesota and Wisconsin are far more involved than states like Florida and California. In fact, Iowa has almost as many banks participating than Florida, California and New York combined. So what do you do if your bank doesn’t participate in this program.
The answer is to get to know your banker and find out how they make loan decisions. Start with the small regional banks rather than the larger banks. Regional and community banks as well as credit unions are generally easier to deal with.