SCHUMER: NEW FEDERAL PROGRAM STARTS TODAY OFFERING LOW-INTEREST GOV'T BACKED LOANS TO SI'S 18,000 SMALL BUSINESSES STRUGGLING TO SECURE CREDIT DURING ECONOMIC DOWNTURN
SBA Will Start Guaranteeing $35k Capital Loans for Small Businesses on SI and Across the Country to Meet Their Payroll and Cover Expenses or Risk Going Out of BusinessBanks Have Tightened Lending Standards and Credit Requirements and Haven't Eased Up Enough To Help Small BusinessesARC Loans Are Interest-Free to the Borrower, 100% Guaranteed By SBA and Have No SBA Loans Associated With Them
Today, U.S. Senator Charles E. Schumer announced that the Small Business Administration (SBA) has begun guaranteeing America's Recovery Capital (ARC) loans to assist Staten Island small businesses and small businesses across the country that are struggling in the current economic climate. ARC loans are deferredpayment loans up to $35,000 available to established, viable, forprofit small businesses that need shortterm help to make their principal and interest payments on existing qualifying debt. ARC loans are interestfree to the borrower, 100 % guaranteed by the SBA, and have no SBA fees associated with them. Small businesses suffering financial hardship as a result of the slow economy may be eligible to receive temporary relief. During these challenging economic times, these new loans will provide assistance for small businesses that continue to struggle. Communities rely heavily on small businesses and without them, the country could face further economic strife.
Schumer said that the economic storm that is gripping the nation could be hardest felt by businesses, big and small, in Staten Island and across the country. Facing an uncertain future, banks are tightening lending standards for small businesses and at times, even cutting off lines of credit entirely making survival difficult.
"These loans will truly help Staten Island businesses as the economy continues to struggle," Schumer said. "Small businesses are essential to any successful community, state, and nation, without them, communities could face further economic problems. These new loans are going to go a long way in ensuring Staten Island and its thousands of small businesses continue to thrive."
"We have many small businesses in Staten Island which are struggling and which could stay afloat with the help of these loans," said Rep. Michael E. McMahon. "It is time we renew our investment in our local businesses - the momandpop stores in our neighborhoods that we all cherish. This new program will help them pay their bills and retain employees. I urge all small businesses in need of assistance to take advantage of it, in addition to the other programs in the recovery package designed to help small businesses."
ARC loans will be disbursed within a period of up to six months and will provide funds to be used for payments of principal and interest for existing, qualifying small business debt including mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors, suppliers and utilities. Repayment will not begin until 12 months after the final disbursement. Borrowers don't have to pay interest on ARC loans. After the 12month deferral period, borrowers will pay back the loan principal over a period of five years.
The nearly 18,000 small businesses on Staten Island generally rely heavily on loans from banks to build inventory, meet their payroll consistently and fuel the growth of the business. Suddenly, those loans are harder to find and they're likely to be more expensive.Making it even worse, creditcard companies are cutting limits and hiking interest rates. They are also shortening grace periods, which can put added pressure on a business owner counting on a few extra days to pay.
In November, the SBA heeded a call by Schumer and Senator John Kerry to allow approved lenders to use a variable interest rate instead of the prime rate, and to allow securities to be formed from SBAbacked loans of varying rates. Then, in the Recovery Act that passed in February, Schumer successfully fought to include $375 million to go towards eliminating fees attached to SBA loans. The Recovery Act also increased the guarantee on most SBA loans to an unprecedented 90%. In March, Schumer proposed lifting the cap on the amount credit unions can loan to small businesses. It is estimated that eliminating this cap would increase lending to small businesses by as much as $10 billion a year. The 2010 budget blueprint, passed by Congress in April, proposed expanding the SBA's largest loan program by 75%, and eliminating capital gains taxes on new equity investments in small businesses.
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