Help for small businesses came from Washington, D.C. this month in the form of interest-free loans with a one-year grace period before repayment begins. The turnaround time for the loans, which are 100 percent government insured, is typically five to 10 business days, according to the Small Business Administration (SBA) website. Wells Fargo Bank is already administering the loans in Santa Barbara.
Some additional banks in the region, including those that already handle some kinds of SBA loans, are considering the program, but Wells Fargo is the only one that has taken it on, according to bank spokespeople.
The loans go by the moniker America’s Recovery Capital (ARC) and are part of the American Recovery and Reinvesment Act that President Obama signed into law in February. Businesses who show that they are otherwise viable, but in financial trouble due to the nation’s current economic troubles, can get loans of up to $35,000 to pay down existing debt. The loans, disbursed over a period of six months, can be used to pay principal and interest on credit cards, mortgages, balances due to vendors, and other debt. Repayment starts one year from the last disbursement, and businesses have five years to completely repay the principal.
There is $225 million in the ARC fund, and the program is to last until September 15, 2010, or until the money runs out.
Cushman called the forgiveness of interest “a nice stimulus” and predicted that the loans will go very quickly. Neither Cushman nor Kristin Amyx, head of the Goleta Valley Chamber of Commerce, could provide a casualty count of the number of small businesses that have already gone under, but Ayers said, “We are certainly feeling the effect in Chamber membership - we’ve lost some members because they just don’t exist anymore.” However, because Goleta’s economy is driven largely by UCSB and high-tech industry, including defense contractors, it probably did not feel the effect as severely and soon as other regions, Amyx added.
“Small businesses are the heart and soul of our local economy,” said Rep. Lois Capps, in announcing the loans’ availability, “and they have been hard hit by this economic downturn because consumers cut back and because of the lack of access to adequate capital.”
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This story has been amended to correct the information about which banks in Santa Barbara are administering the loans.