Snowe’s Push to End the ARC Loan Program
The SBA’s ARC program has faced criticism for onerous paperwork, meager bank participation, and high default rates. Maine’s Senator Snowe now wants to repeal it
Senator Olympia Snowe (R-Me.) introduced a bill Nov. 16 to repeal the small business ARC loan program, a stimulus-package initiative she helped create. Too many borrowers are defaulting on the government-backed loans intended to buoy struggling businesses, Snowe says.
As the ranking Republican on the Senate Small Business & Entrepreneurship Committee, Snowe originally supported the ARC loan program along with other small business committee leaders in Congress from both parties. But she reversed course because the loans are projected to default at sky-high rates approaching 60%, according to the Office of Management & Budget.
“When the program was rolled out, Senator Snowe expressed her concerns to the [Small Business Administration] and the Treasury Dept. over the projected default rate, but the Administration has not yet taken sufficient steps to lower those projected rates,” Snowe spokesman John Gentzel said in a statement.
When the House voted earlier this month to extend the program, Snowe decided to introduce the bill
Small Business Owners Among the Critics
Launched by the SBA in June, the $255 million ARC program, for America’s Recovery Capital, got a lukewarm reception from small business owners because of the red tape that applicants face, and lackluster interest from lenders. Snowe’s bill would cut short the ARC program with just over half the funds committed.
The loans are intended to help struggling but viable small businesses survive short-term hardship by freeing up cash flow. Borrowers can apply for interest-free ARC loans of up to $35,000, which they can use to make payments on existing debts for up to six months. They have up to five years to repay the ARC loan, starting one year from when it is fully disbursed. Banks make the loans, but the government guarantees the full amount and pays lenders interest at 2% above prime.
source: businessweek
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