Monthly Archives: June 2009

SBA ARC program DOA. Is Obama for real or are the banks still running the show?

The Small Business Administration announced the ARC program for distressed small businesses. This emergency loan, up to $35,000, is intended for businesses that can’t pay their bills.

Guess what? Since the SBA only guarantees loans and the banks still have to fund them, we have yet to see a single ARC loan made. The recovery efforts, at least as far as main street is concerned, feels like a photo op.

If you’ve had success getting one of these loans, please contact pmehit@wbpllc.com. I’d love to know your secret.

A Tale of Two Depressions

The parallels between the Great Depression of the 1930s and our current Great Recession have been widely remarked upon. Paul Krugman has compared the fall in US industrial production from its mid-1929 and late-2007 peaks, showing that it has been milder this time. On this basis he refers to the current situation, with characteristic black humour, as only “half a Great Depression.” The “Four Bad Bears” graph comparing the Dow in 1929-30 and S&P 500 in 2008-9 has similarly had wide circulation (Short 2009). It shows the US stock market since late 2007 falling just about as fast as in 1929-30.

Comparing the Great Depression to now for the world, not just the US

This and most other commentary contrasting the two episodes compares America then and now. This, however, is a misleading picture. The Great Depression was a global phenomenon. Even if it originated, in some sense, in the US, it was transmitted internationally by trade flows, capital flows and commodity prices. That said, different countries were affected differently. The US is not representative of their experiences.

Our Great Recession is every bit as global, earlier hopes for decoupling in Asia and Europe notwithstanding. Increasingly there is awareness that events have taken an even uglier turn outside the US, with even larger falls in manufacturing production, exports and equity prices.

In fact, when we look globally, as in Figure 1, the decline in industrial production in the last nine months has been at least as severe as in the nine months following the 1929 peak. (All graphs in this column track behaviour after the peaks in world industrial production, which occurred in June 1929 and April 2008.) Here, then, is a first illustration of how the global picture provides a very different and, indeed, more disturbing perspective than the US case considered by Krugman, which as noted earlier shows a smaller decline in manufacturing production now than then. Read More

Advocacy Study Ranks Banks on Small Firm Lending, Hints at Current Financial Trends

The May-June 2009 edition of The Small Business Advocate features the latest Small and Micro Business Lending Study, plus a look at Advocacy’s role in the national strategy to extend broadband access to all Americans. This issue also reports on important regulatory news for small employers.
Read More

SBA Launches New 100-Percent Guarantee ARC Loan Program to Help Struggling Businesses

WBP offering special pricing for business plans for this opportunity. Read more below.

WASHINGTON – Small businesses suffering financial hardship as a result of the slow economy may be eligible to receive temporary relief to keep their doors open and get their cash flow back on track through to a new loan program announced today by SBA Administrator Karen G. Mills.

Beginning on June 15, SBA will start guaranteeing America’s Recovery Capital (ARC) loans. ARC loans are deferred-payment loans of up to $35,000 available to established, viable, for-profit small businesses that need short-term help to make their principal and interest payments on existing qualifying debt. ARC loans are interest-free to the borrower, 100 percent guaranteed by the SBA, and have no SBA fees associated with them.

“These ARC loans can provide the critical capital and support many small businesses need to make it through these tough economic times,” said Administrator Mills. “Together with other provisions of the Recovery Act, ARC loans will free up capital and put more money in the hands of small business owners when they need it the most. This will help viable small businesses continue to grow and thrive and create new jobs in communities across the country.”

“It’s my firm belief that we will soon see better days ahead with these Recovery Act tools including this highly anticipated deferred-payment loan that can now aid small business owners confronting these dynamic conditions,” said Alberto G. Alvarado, Los Angeles SBA District Director.

As part of the Recovery Act, the ARC program was created as a no-interest, deferred payment loan to help small businesses that have a history of good performance, but as a result of the tough economy, are struggling to make debt payments.

ARC loans will be disbursed within a period of up to six months and will provide funds to be used for payments of principal and interest for existing, qualifying small business debt including mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors, suppliers and utilities. Repayment will not begin until 12 months after the final disbursement. Borrowers don’t have to pay interest on ARC loans. After the 12-month deferral period, borrowers will pay back the loan principal over a period of five years.

ARC loans will be made by commercial lenders, not SBA directly. For more information on ARC loans, visit http://www.sba.gov