Posted by: Mike Clough | August 11th, 2009

Update on the SBA ARC Loan Program

sbalogoOur monthly SCORE meeting today was quite an event given that our guest speaker was our Governor, Tim Pawlenty. Not only did this celebrity speaker bring out more of our SCORE members, but it also attracted several of our clients and more importantly, several SBA reps. It was a good opportunity to gain insight as to why there is such a disparity in the number of ARC loans awarded in some states over others as previously reported in “How Successful is the SBA ARC Loan Program?” I would like to give you a short update of what information I was able to secure.

According to my source at the local SBA, they credit their success with the ARC Loan Program in Minnesota to the preparation they (the local SBA) put into the program. Prior to the kick-off of the program, our local SBA reps met with the banks and held webinars to answer questions and make sure that everyone was up to speed. As a result, on the opening day of the program one small Minnesota bank processed 19 ARC loans (the same number as processed by all banks in California through the end of July). And this was just one bank in one day.

However, I want to point out that the banks in Minnesota that benefited from this preparation included banks like Wells Fargo, US Bank, and other large national banks that have traditionally made a lot of standard SBA loans. And yet, they are not on the list of participating banks. So there may be something to the size of the bank.

Neither I nor my source knows what happened with the SBA in other states or how they introduced the program to their banks. Therefore I cannot say anything derogatory about other SBA Districts. However, I would like to give a shout-out to our district and thank them for all of the hard work they put into this. The results are evident and there are at least 158 Minnesota small businesses that are hopefully better off because of them!

NOTE: This short post is an update to the recent How Successful is the SBA ARC Loan Program? article.

If you would like to contact me, you can do so by emailing me at mike.clough@bestbizpractices.org or visiting my LinkedIn page.

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Posted by: Mike Clough

Posted in Funding,SBA Loans,Small Business News,Turnarounds | Tags: , , , , , , , ,

Responses

Through conversations today with SCORE counselors in other parts of the country, I have learned a couple additional things:

1. Other geographic areas are slower getting off the start line due to the fact that it has taken longer for potential lenders to have their questions and concerns address by the SBA.

2. Other geographic areas have been financially impacted harder than Minnesota & Wisconsin and the restrictions on ARC loans are getting in the way of some small businesses securing these loans.

The restrictions of which I speak, is the requirement of the applicant to be a “struggling yet viable” business.

“Struggling” means the business must face an “immediate financial hardship,” meaning a 20 percent reduction in a critical operating number, such as revenue.

“Viable” means the applicant must also have shown positive cash flow, if not an actual profit, in one of the last two years. The applicant also must do a two-year cash-flow projection to show it can repay all its obligations.

Needless to say, these two requirements eliminate some of the applicants and other applicants that might otherwise qualify, find it to difficult to provide financial statements and projections.

Although the latter may be very true, it still does not justify the disparity between the top two states and the other states. I believe the biggest is more like to be the first issue and now the banks in the other states will soon catch up.

If I learn anything else, I will be sure to post here.

By: Mike Clough on August 12th, 2009
at 8:18 pm

I’ve learned that in NH, few banks are offering the ARC loans because the paperwork for a $35K loan isn’t worth the bank’s time and effort. Also, the SBA is not tracking or publishing a list of Banks that are processing ARC loans.

By: scorevolunteer on August 19th, 2009
at 1:22 pm

Although your first statement may be true, there is in fact, a published list of participating banks. If you review my article ”How Successful is the SBA ARC Loan Program?”, toward the bottom you will find a link to download the list.

I trust you will find this useful.

By: Mike Clough on August 19th, 2009
at 1:36 pm

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