SBA gears up lending program to help small firms weather recession

Small Business Administration officials in Nevada were making calls last week to drum up interest among the state's bankers in an interest-free loan program to help struggling small businesses.

With just a few days to go before the loan program becomes available, Nevada State Bank appeared to be the only institution in the state that was leaning strongly toward offering the so-called ARC loans. (The name stands for "America's Recovery Capital.")

Lenders who participate in the program can make loans of up to $35,000 to provide breathing room to small businesses during the downturn. The SBA pays interest on the loans to banks, but small businesses don't pay interest on their borrowing.

Although the loans are 100 percent guaranteed by the SBA, some bankers apparently worry that the program might require a lot of work for a relatively small return.

Only in recent days has enough detail about the loan program been distributed that bankers feel comfortable in gauging their interest.

Robert Hart, a vice president and SBA relationship manager with Nevada State Bank, said last week that his institution is looking at the ARC loans mostly as a way of helping its current small business customers who have been hit hard by the recession.

The ARC loans can be used to repay other debt ranging from mortgages to business credit cards accumulated by a small business. No repayment is required for six months and repayment is scheduled over five years.

Hart said Nevada State Bank like any other lender that chooses to participate will need to study possible borrowers closely to make sure that their problems result from the recession. And borrowers will be encouraged to get assistance from groups such as the Service Corps of Retired Executives.

The ARC loans are part of the federal economic stimulus package approved in February. The measure provides $335 million for the small-business loans.

David Leonard, an SBA senior area manager in Reno, said he expects other banks in the state that are experienced with SBA lending will join the ARC program in coming weeks. Most of them, he said, are interested in providing ARC loans to existing loan customers.