Emergency Biz Loans

Emergency Biz Loans Provide Respite To Debt Ridden Businesses

Small Business Administration (SBA) has created guidelines for 'Emergency Biz loans', a $255 million emergency lending initiative sanctioned by Congress. The $255 million emergency loan program is expected to provide relief to small business owners struggling with debts.

The business initiative program also called as SBA’s Emergency biz loans or America's Recovery Capital" (ARC) loan program will offer loans up to $35,000 to small businesses which will be interest free. Congress wants the new loans to be utilized to pay down principal amount and interest payments of existing loans. The ARC funds will help small business owners to temporarily keep up with the payments (for six months) on existing loans, which also includes credit card debt.

The emergency biz loans will be offered by banks and SBA will provide 100% guarantee on the loans. If the business owner defaults on repayment, the SBA will make full repayment of loan to the bank.

Eligibility for Emergency Biz Loans:

1. Businesses that have commenced recently are not eligible for ARC loans. Business entities, which have been functional for last two years out of which one year has been profitable, can avail SBA's emergency biz loan.

2. Applicants for ARC loans are required to prove financial hardship by providing evidence of declining sales (a drop of 200% in comparison to past year). They are also expected to prove difficulty in paying loan payment, paying rent, and payroll.

3. Borrowers of these loans have to prove the viability of their business in terms of future projections. SBA is expecting the borrowers to show cash flow projection for next two years, which demonstrates the business’s capability of paying the ARC loans as well as all the debt obligations.

4. They are also expected to have “good business credit scores”. Businesses availing ARC funds will not be allowed to have 60 days past due on any loan that ARC funds will cover. Lenders will also require some collateral to back up the ARC loan.

Qualifying Debt for Emergency Biz loans:

  1. ARC funds can't be used by businesses to make repayment of loans that were backed by SBA program before Feb. 17, 2009.

  2. The ARC funds can used by borrowers to get relief from any business debt which includes bank loans outside SBA program, commercial lease or mortgage, home equity loans utilized to finance business operations, notes payable to suppliers, and credit card debt.

  3. 3. Borrowers can use the ARC funds to pay credit card debts only if money borrowed was extensively used for business expenses.

Emergency biz loans is a sweet deal for business owners, as there is no interest on the loan and they are not required to make any repayment for one year.

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