Next week, small business owners will be able to take advantage of a program that will provide them with up to $35,000 in interest-free financing to pay off debts. The loans, called ARC (American Recovery Capital) loans, will be backed by the Small Business Administration, who will pay banks a variable rate (Prime + 2%) for the loans they extend to small business owners. The only problem for business owners is going to be finding a bank willing to participate in the program.

When the program was first announced, banks were wary because of a lack of details about how the program would work. Now that banks have the details, they still don’t seem committed to participating. Some still aren’t confident that the loan program will run as smoothly as the government has advertised. Others cite the fact that these are small business loans that will take just as much work from the bank than larger, more profitable loans.

Still, these are virtually risk-free loans that banks can make, and some will undoubtedly participate. The Small Business Administration will pay off any loans that business owners fail to repay as part of the program.

One bank owner in North Dakota is eager to participate in the ARC loan program, although not for immediate financial returns. “The more important point is helping businesses survive,” she said. “Those businesses may have $150,000 loans from us in the future. It’s that long-term goal that’s making us want to help them survive in the short run.”

Not all business owners are expected to participate in the ARC loan program. Some have weathered the storm and managed to avoid incurring additional debt as the economy slowed around them. Others have debt, but don’t wish to take on additional loan obligations, even at zero interest. Still, it’s in the best interests of business owners to get their hands on this free financing if they can, even if all they do is pay off loans that are tied to interest rates.

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Tags: ARC Loans, banks, Loans, Small Business

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