Jun 13 2009 Posted by

Small law firms in need of some extra financial resources right now may want to consider a new SBA program that launches next Monday: the SBA ARC Loan Program.

The SBA ARC Loan Program is designed to help struggling small businesses who have been profitable in the past but need some additional help right now. 

Who is eligible for an ARC Loan?

According to the SBA, the following businesses are good candidates for an ARC loan;

Your small business must be an established business, have financial statements demonstrating it was profitable in one of the past three years, and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval.  If your business does not meet these criteria, you can discuss your eligibility with your lender.   

For those who qualify, you can take advantage of some very favorable loan terms, which include as follows:

• interest-free to the borrower
• require no fees paid to the SBA
• principal is deferred for 12 months
• five-year repayment period.

Another benefit: the loan terms carry a 100  percent guaranty from the SBA to the lender, so you are hopefully not going to be disqualified for lack of securitable assets.

Unfortunately, in investigating this program, I have uncovered one very big problem with the whole program: no one seems to know who is making the loans.  If you call the local or national SBA offices, they are unable to tell you.  Similarly, if you call SBA lenders listed on the SBA lender list, they cannot tell you who is making the loans either.  Obviously, this is a problem, as it is difficult to apply for an ARC loan if you cannot locate a single lender making them.

Incidentally, in making calls, someone was kind enough to return my call and acknowledge what I had already determined: that there was in fact a problem with the program roll-out.  Apparently, the SBA has been moving so slowly in getting infromation to lenders that no one is quite sure what is going on or whether or not they will be participating.  Moreover, I was told that by the time the program finally comes together, it may be that most small businesses who would have qualified will no longer need the money any more. 

Needless to say, that is not going to be encouraging news to those small businesses in dire need of immediate assistance.  It is not as if there are a lot of other small business loan options right now. 

So, the bottom line is that this loan program should be on your radar screen if you are a small law firm meeting the criteria; however, you should not rely on it to provide you immediate assistance.  The challenge may very well be to find a participating lender.