Small Business Loans: Help on the Horizon, Courtesy of Your President

Just when you thought it couldn’t get any worse for small business finance, a ray of sunshine breaks through. The federal government has kicked a new plan into action that will release small business loans to businesses less than 24 months old. Is this the savior we’ve been waiting for? Or is it another string-laden compromise that will leave CEOs clamoring for additional help?

ARC and the Emergency Loans Program
CNN Money’s Small Business site trumpets the efforts of the federal government to make small business loans more accessible. Starting mid-June, America's Recovery Capital (ARC) will back short-term loans of up to $35,000 that business owners can use to cover existing debt. Applicants will deal directly with banks for the loans that are 100 percent backed by the Small Business Administration. Although the loans have been labeled as risky, companies with demonstrable financial hardship and a record of financial success should have no trouble acquiring them.

A Rigorous Application Process
Despite the promise of these new small business loans, the application process is stringent. A host of information will be required, including performance numbers and a thorough credit history examination. A PRLog release reveals some of the requirements:

• 700 credit score on all owners
• Business is under 2 years old
• Have sufficient collateral to pledge
• Current debt-to-income of less than 45%
  

A Final Word: About.com Business Law/Taxes guru Jean Murray has some reservations about the plan. In her view, the apparent “goodwill” of the business funding is hampered by the low cap, an issue that will have to be dealt with as the price to buy a business or get it out of debt increases.