Qualifying for an ARC loan
ARC loans are short term loans that are to help business meet financial obligation during a rough spot. Each business can only ever receive one ARC loan, and the maximum amount is $35,000. The loan can be used to pay the payments on existing business loans, principal and interest, to consolidate debt, and meet financial obligations over a six month period.
In order to qualify for an SBA guaranteed ARC loan, you must meet the following criteria:
1. First, you can't be a start up that is experiencing financial difficulty, but an established business that has been around for at least two years. You also have to meet the small business size standards set by the SBA as ARC loans are for small businesses.
2. You have to show that your business makes money, or has made money, showing positive cash flow in at least one of the following two years. Statements to verify this must be provided, such as balance sheets, income statements, cash flow statements, and more.
3. In addition to showing positive cash flow from the past, you have to be able to show why you predict positive cash flow in your future. You won't be able to get an ARC loan for a dying business, just one suffering some setbacks, so you have to show that you can overcome those setbacks and meet both current and future loan obligations. The SBA wants to know and be shown that you can pay the ARC loan back when the time comes to do so. They also want to see why you predict a positive cash flow.
4. You can't be severely behind on payments, or seriously delinquent on your existing loans. While it is okay to be a little behind, the best candidates for ARC loans are the ones who are facing immediate financial hardship making it difficult to meet financial obligations right now, not ones who have been struggling for months to do so. You have to show why you are struggling, this can be declining sales and revenue, increase cost for raw goods, etc. Show why you are struggling to pay loan debts, pay employees, buy supplies and inventory, pay rent, etc. and why that will change, and you will likely be approved for an ARC loan.
The goal of an ARC loan is to offer temporary relief to companies with potential that just need a little help with a difficult financial situation. The loans are 100% SBA guaranteed, and are disbursed over a six month period. After the disbursement period ends, the borrower has twelve months of deferred interest before they have to start paying back the loan. In other words, eighteen months after they are approved, they have to start paying interest. This is a good time frame to allow them to get their affairs in order, and meet their financial obligations.