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

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And local bankers say they believwthe program, funded by stimulus could produce a double economic boost, comingv at a time when they say commercial loan demanrd is soft. The SBA-guaranteed loans will be made directlby banks, which can begin submitting applications from smalp businesses on June 15. The program allowx for about 10,000 America’s Recovery Capital deferred-payment loans of as much as $35,000 each. That amount is far less than the typicaklSBA loan.
But the program is designecd to provide financial relief to smalkl businesses struggling to meet existing expenses such as debtzs andpayrolls “so they can keep theidr doors open and get theier cash flow back on according to SBA documents. “This loan is meant to be used by a viabl smallbusiness (so) that with this help, they can their survival,” said Mike director of the SBA press office in D.C. Stamler said the American Recovery and Reinvestment Act of passedin February, provides the SBA with about $255 million to cover the costs of administering the loans. The ARC loanw fall under SBA’s 7(a) program, which includes its most government-guaranteed loans.
The loans are made directlyt by lenders, and those expenses include traininv bank personnel on how to administer the program, Stamler said. Several features set apart the ARC Other SBA programs guarantee the majoritg ofthe loan, but if the borrower banks must pay the “deficient — the difference between an 80-percent SBA guarantede and the unsecured 20 The ARC loans are 100 percentf guaranteed by the government, which is crucial because the loane are meant expressly for struggling business, and SBA officials expect a higher default rate than with othedr SBA loans, Stamler said.
Unlike other SBA small-business the borrowers pay neitherloan fees, which could be thousandws of dollars for large loans, nor interest, Stamler (See related item at right.) ARC loans give qualifier borrowers monthly disbursements of amounts depending on the terms — up to $35,000 over 18 montha to use to pay underlying business debtsd and expenses, he said. Borroweras get one year after the finalp disbursement to start paying back the principal over five Thefederal government, undefr ARRA, pays lenders prime rate plus 2 percent a total rate of about 5.35 percent as of mid-June and those lenders receive the interest for six and a half the total life of the Stamler said.
“These are attractive he said. They’re so attractive that Stamler expectss demand for the loans far beyondthe 10,000 ARC loanw Congress funded under ARRA. The program is in the early stagesof implementation, with June 15 as the firs day lenders can submit loan applications. Local SBA offices are just now beginnin totrain lenders, Stamler said. At & Trusrt Co., historically one of the largest locaol SBAprogram lenders, executivesz received the ARC regulations on Monda and are assessing the details, said Michael Sadofsky, directorf of marketing at Republic, which is the largest Louisville-base bank, ranked by total deposits.