Well,
this
one
is
interesting.
A
Federal
Agency
tried
to
do
something
right
(or
almost
right),
and
the
private
sector
broadly
torpedoed
it.
If you've followed this thread, I'm referring to the America's Recovery Capital (ARC) loan program, originated by the Small Business Administration (SBA). In my view, this program was flawed only in the fact that it was too small -- limited to $35,000 instead of an amount that really might have helped -- say, $100,000 or more. Here's some detail on the ARC program: http://www.chiefexecutiveblog.com/2009/08/sba-arc-loan-program-interest-free.html
The idea was simple -- help provide some much-needed working capital to small businesses that have been hurt by the 2008-2009 recession. Small businesses, that is, who had been profitable in either 2007 or 2008 -- people who know how to run a business and simply had the bad fortune of being in a recession-impacted industry. Usable to pay down existing debt, such as credit cards, and 100% guaranteed by SBA, so banks had few reasons to be worried about these loans. They're interest-free (interest paid by SBA), with no principal payments at all for a year. So far, so good.
Except that many banks have rejected this program out of hand or made up their own hurdles that prevent this capital from flowing to small businesses. One Chief Executive Boards International member actually filled out the paperwork himself. Guess what his bank's excuse was? "Well, you're really not in bad enough shape that we think you need the money." He thought $35,000 in interest-free money sounded pretty good, but they just didn't care enough to help him get it.
Here are some of the lame excuses CEBI members have heard from bankers rejecting ARC loan applications:
Note the absence of "big brands" on this list -- these tend to be community and sub-regional banks who are apparently interested in $35,000 loans. Most large banks remain paralyzed as far as small-business lending is concerned.
And here's an article you may find helpful in approaching a bank for the first time -- make sure you're "dressed up for the party" when you initially visit a new banker: http://www.chiefexecutiveblog.com/2009/10/your-bank-may-be-your-critical.html
If you've followed this thread, I'm referring to the America's Recovery Capital (ARC) loan program, originated by the Small Business Administration (SBA). In my view, this program was flawed only in the fact that it was too small -- limited to $35,000 instead of an amount that really might have helped -- say, $100,000 or more. Here's some detail on the ARC program: http://www.chiefexecutiveblog.com/2009/08/sba-arc-loan-program-interest-free.html
The idea was simple -- help provide some much-needed working capital to small businesses that have been hurt by the 2008-2009 recession. Small businesses, that is, who had been profitable in either 2007 or 2008 -- people who know how to run a business and simply had the bad fortune of being in a recession-impacted industry. Usable to pay down existing debt, such as credit cards, and 100% guaranteed by SBA, so banks had few reasons to be worried about these loans. They're interest-free (interest paid by SBA), with no principal payments at all for a year. So far, so good.
Except that many banks have rejected this program out of hand or made up their own hurdles that prevent this capital from flowing to small businesses. One Chief Executive Boards International member actually filled out the paperwork himself. Guess what his bank's excuse was? "Well, you're really not in bad enough shape that we think you need the money." He thought $35,000 in interest-free money sounded pretty good, but they just didn't care enough to help him get it.
Here are some of the lame excuses CEBI members have heard from bankers rejecting ARC loan applications:
- It's too much trouble for that small an amount
- We'll do those only to pay down debt already on our own books (Not consistent with the ARC program)
- Your business isn't badly enough impacted (You've prudently managed, and you still have cash)
- Your
current
cash
flow
isn't
sufficient
(Not
a
requirement
of
ARC
eligibility
--
the
reason
it's
100%
guaranteed
to
the
bank,
and
the
reason
there
are
no
payments
for
a
year)
Note the absence of "big brands" on this list -- these tend to be community and sub-regional banks who are apparently interested in $35,000 loans. Most large banks remain paralyzed as far as small-business lending is concerned.
And here's an article you may find helpful in approaching a bank for the first time -- make sure you're "dressed up for the party" when you initially visit a new banker: http://www.chiefexecutiveblog.com/2009/10/your-bank-may-be-your-critical.html
