The federal government has begun an assistance program to connect troubled businesses and others with interest-free, deferred-payment loans of up to $35,000. The program, called America's Recovery Capital (ARC), is a result of the stimulus plan and the government funding that was issued as a result of it. These loans can be used to pay for mortgages, credit card debt and bills, lines of credit, capital leases, utility bills, notes payable to creditors, and to pay vendors and creditors.
The ARC loans are designed to make up to $35,000 available to struggling small business owners and others to help them make payments on existing loans that they have outstanding, even including credit card debt. So the program is flexible in what type of obligations can be paid.
Those who take advantage of the government debt reduction program do not have to start paying the money back for a 12 month period of time. The loans being issued will also have lower interest rates, longer repayment terms and also allow more flexible collateral requirements than standard bank loans. Also, read how the government is putting pressure on banks to offer additional credit card debt relief.
The exact terms of the repayment plan include : borrowers can use the government ARC loans to make payments for up to six months on their existing debt, with absolutely no repayment due on the loan for another year. After that one year timeframe has expired, the business has a total of five years to pay back the loan principal. During this timeframe the government will pay for the interest payments attributed to the financing that was issued..
In addition to the interest free loans, the federal government Recovery Act also will temporarily eliminate SBA charges, such as the loan origination and other fees. This will save borrowers a significant amount of money. The regulations will also create new tax benefits and advantages for businesses that take out SBA-backed loans.
Some related programs that have already been in effect have also been expanded. For example, small businesses that need surety bonds to bid on and compete for service and construction contracts can now also qualify for SBA-backed surety bonds of up to $5 million. There may also be some cases in which a borrower can receive up to $10 million, which is more than twice the previous $2 million maximum that they were able to previously receive.
Still, arguably the number one feature of the government program that is being provided to consumers is that borrowers can use the interest free loans for relief from virtually any other business debt. The money issued to the borrower can be used to pay for such expenses as a home equity loans used to finance business operations or a commercial mortgage or lease. the funds can also be used to pay down other bank or financial institution loans that were made outside the SBA program, notes payable to suppliers, and even such expenses as credit card debt.
This last item is a key feature of the new form of financial aid being offered. As an example of what can be done, borrowers can use the government ARC loans to cover payments on their personal credit cards if the money was borrowed on their cards for business expenses.
It is currently estimated that thousands of deferred-payment loans will be authorized to provide help to qualified applicants. Funding will be available up thru September or until the money in the program runs out. This form of cash assistance is being offered from the America's Recovery Capital on a first come, first serve basis to qualified applicants.
The loans will be originated by traditional banks and lenders, but they will be guaranteed by the SBA. And though the bank or lender must approve the financing that is being originated, securing SBA-backed assistance shouldn't be more any more difficult than getting a loan in more robust economic times. The reason being is that the government will be doing what they can to ensure credit is flowing throughout the economy.
In almost all cases the government interest free loans are getting approval from banks and lenders, because the lenders know how the program works and what the feds are looking for. Another key reason that this form of financing is being approved by banks is that after all, the risk is lower to banks as there are federal guarantees in place. This means that the banks can make money, and both banks and the federal government want to see a good business succeed. Call your local bank or lender, or visit sba.gov for more information. Or dial 1-800-827-5722.
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