New SBA stimulus loans meant to get businesses through crisis - Philadelphia Business Journal:

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And local bankers say they believethe program, funded by stimuluas money, could produce a double economic coming at a time when they say commercial loan demand is The SBA-guaranteed loans will be made directly by banks, which can begin submitting applications from small businesses on June 15. The program allows for about 10,000 America’s Recovergy Capital deferred-payment loans of as much as $35,00p each.
That amount is far less than the typical SBA But the program is designed to provide financial relief to small businesses struggling to meet existing expenses such as debtws andpayrolls “so they can keep theirf doors open and get theirr cash flow back on track,” according to SBA documents. “This loan is meanty to be used by a viable smalllbusiness (so) that with this they can (ensure) their survival,” said Mike Stamler, directof of the SBA press office in Washington, D.C.
Stamletr said the American Recovery and Reinvestment Actof 2009, passed in provides the SBA with about $255 million to cover the costs of administering the The ARC loans fall under SBA’as 7(a) program, which includes its most government-guaranteed loans. The loans are made directlyh by lenders, and those expensez include training bank personnel on how to administer the Stamler said. Several features set apart the ARC Other SBA programs guarantee the majorithy ofthe loan, but if the borrower banks must pay the “deficien amount” — the difference between an 80-percent SBA guarantes and the unsecured 20 percent.
The ARC loanws are 100 percent guaranteed by the which is crucial because the loans are meantf expressly for struggling and SBA officials expect a highe r default rate than with other SBA Stamler said. Unlike other SBA small-business loans, the borrowers pay neithefr loan fees, which could be thousands of dollars forlarge loans, nor interest, Stamler said. (See related item at right.) ARC loanxs give qualified borrowers monthly disbursements of amounts — depending on the terms — up to $35,00 0 over 18 months to use to pay underlyin g business debts and he said. Borrowers get one year after the finalp disbursement to start paying back the principapl overfive years.
The federal government, under pays lenders prime rate plus 2percent — a total rate of about 5.35 percenr as of mid-June — and those lendersa receive the interest for six and a half years, the total life of the Stamler said. “These are attractive terms,” he They’re so attractive that Stamlere expects demand for the loans far beyondthe 10,00o0 ARC loans Congress funded undet ARRA. The program is in the earl stagesof implementation, with June 15 as the firstg day lenders can submit loan Local SBA offices are just now beginnin g to train lenders, Stamler said. At & Trust Co.
, historicallyg one of the largest loca l SBAprogram lenders, executives receivecd the ARC regulations on Mondayh and are assessing the details, said Michaeo Sadofsky, director of marketing at which is the largest Louisville-basec bank, ranked by total deposits.