Updated SBA's ARC Loan Program Procedural Guide
Effective August 31, 2009

SBA's America's Recovery Capital (ARC) Loan Program was introduced in June 2009. SBA's ARC Loan Program Procedural Guide was issued June 8, 2009, as well as a new set of loan application forms and an authorization specific to SBA's ARC loans. Once the Guide and forms were published, SBA launched extensive training sessions with over 3,000 participants representing over 1,300 lending institutions across the country and has actively sought questions, clarifications and feedback on this program. SBA also published a detailed set of frequently asked questions (FAQs) to address many of the common questions that were raised after the initial roll-out.
In this continued commitment to being responsive to our lending partners, the SBA has now updated SBA's ARC Loan Program Procedural Guide to reflect some of these clarifications and provide even more specific guidance to help our lending partners in making this product accessible to small businesses.
On our website, we have published both a tracked-changes version and "clean" version (with all changes accepted) of this revised program guide to assist lenders in quickly identifying the areas that have been modified. The updated guide is located on SBA's website at www.sba.gov/aboutsba/sbaprograms/elending/RECOVERY_INFO_LENDERS.html The more important changes included in the procedural guide are summarized below:
Qualifying Small Business Loans (QSBLs). Provides additional guidance and information on what loans are QSBLs including notes payable to pay accounts payable and other business obligations that are more than 30 days delinquent; what constitutes a loan; what constitutes an "existing" loan; how to treat SBA loans pre and post February 17, 2009; and how to treat new non-SBA loans.
Credit Cards. For credit cards issued in the name of the business, the Guide replaces the requirement that the borrower submit to the lender supporting documentation for each credit card charge, with a borrower certification that all charges on the business credit card to be paid with the proceeds from an SBA ARC Loan were exclusively for business purposes. For credit cards issued in the name of an individual, the Guide maintains the documentation requirements except that for credit card purchases of $100.00 or less, the documentation requirement is eliminated. The Guide also specifically allows for monthly payments on credit cards in amounts in excess of the minimum monthly payment.
Eligible Passive Companies (EPC)/Operating Companies(OC). Many real estate transactions are structured with an EPC that owns the real estate and is obligated on the associated mortgage. The OC is the operating small business that is located in the real estate and provides the income necessary to amortize the mortgage by paying rent to the EPC. Generally, the two entities are affiliated. Normally, the EPC is the borrower and the OC is the guarantor of the mortgage loan. Under SBA's ARC Loan Program, the proceeds from an SBA ARC loan are not eligible for paying rent or other operational expenses. And, the EPC, by itself, is an ineligible passive business restricted by the regulations governing the program from receiving an SBA ARC Loan for the purpose of paying the mortgage on the property. The guide provides guidance on how to treat the EPC/OC structure for 504 Third Party Loans, 504 loans and 7(a) loans that permits the use of SBA ARC Loan proceeds to make the mortgage payments on those types of SBA loans. EPCs that have a non-SBA loan are still not able to obtain an SBA ARC Loan to make payments on the non-SBA mortgage held by the EPC unless the EPC and OC are co-borrowers on the non-SBA mortgage note (the OC may obtain an SBA ARC Loan to pay other business loan obligations it may have).
Collateral. The Guide is amended to clarify SBA's policy with regard to collateral requirements for SBA's ARC Loans. The Guide originally required lenders to follow the collateral policies they apply to their conventional commercial loans of a similar size. Many lenders require a first lien position for their conventional loans which typically cannot be obtained for an SBA ARC Loan. The Guide is amended to retain the requirement for a lender to follow its existing collateral policies as to whether the loan is secured or not but allows the lender to obtain the best available lien position.
Credit Criteria. The Guide corrects the financial statement requirement to allow for either financial statements or tax returns and reduces the requirement from 3 years of historical financial information to 2 years. The requirement for historical cash flow statements is eliminated. Also guidance on how to prepare the 2-year cash flow projection has been added.
Environmental Reviews. Eliminates any requirement for environmental reviews on collateral taken for SBA's ARC Loans.
Life Insurance. Eliminates any requirement for life insurance related to SBA's ARC Loans.
Interest Payable and 1502 Reporting. Incorporates additional information on the administration of interest payable by SBA to the lender and 1502 Reporting on SBA's ARC Loans that was not available at the time the Guide was initially issued.
Questions on SBA's ARC Loan Program may be directed to the Minnesota District Office at (612) 370-2324 or minneapolis.mn@sba.gov or e-mail SBA headquarters at ARCLoanEQ@SBA.gov.
8/31/2009

What has the SBA done for you lately?

The SBA received $730 million in the American Recovery and Reinvestment Act (Recovery Act) to help unlock the small business lending market and get capital flowing again to America’s small businesses.

SBA Recovery Efforts Impact to Date:
Loan Volume Has Increased More than 50 Percent: As of August 21, SBA has supported over $9 billion in small business lending1 with the approval of $6.6 billion2 in loans since Feb. 17. Since the signing of ARRA, weekly loan dollar volume has risen more than 50 percent in the 7(a) and 504 programs, compared to the weekly average before passage3.
More Lenders Making Loans: From Feb. 17 to August 21, more than 970 lenders that had not made a loan since Oct. 2008 made 7(a) or ARC loans. Of those, over half had not made a loan since at least 2007.
Broad Support to Small Businesses: A significant share of loans supported by Recovery Act funding has gone to rural (26 percent), minority-owned (20 percent), women-owned (19 percent), and veteran-owned (9 percent) businesses4.
Secondary Markets Uptick with 7(a) Loans: After months of reduced activity and lower premiums, the SBA 7(a) secondary market is picking up and premiums are beginning to recover. Over the past three months, the average monthly loan volume settled from lenders to broker-dealers in the 7(a) secondary market has been $335 million, providing lenders with additional liquidity to increase lending.
ARC Loans Reaching Small Businesses: As of August 21, SBA has approved nearly 1,600 ARC loans totaling over $50 million.

SBA Recovery Programs:
To date, SBA has implemented programs for nearly all of the $730 million in SBA Recovery Act funding, including:
Eliminating and reducing fees for borrowers on 7(a) loans and for borrowers and lenders on 504 loans.5
Raising to 90 percent the guarantee on 7(a) loans from 75 percent and 85 percent depending on the size of loan.5
Doubling the surety bond guarantee from $2 million to $5 million, providing small businesses with another tool to help them compete for federal construction and service contracts.5
Assisting struggling small businesses with the new ARC loan program, which provides no-interest, deferred repayment loans of up to $35,000 to viable businesses to help them make debt payments.5
Providing refinancing opportunities for certain eligible loans into SBA-backed 504 loans for expansion and job creation.
Expanding access to investment capital for small businesses by increasing funding levels for SBA-licensed Small Business Investment Companies.

The SBA has also implemented two new programs that complement the Recovery Act measures and increase access to capital for small businesses by:
Expanding 7(a) loan eligibility to more than 70,000 small businesses through a temporary alternate size standard.
Offering inventory financing for eligible auto, RV, boat and other dealerships under the new Dealer Floor Plan Financing pilot program.
1 Gross loan approval value. Typically, due to cancellations and loan amount reductions, 15–20% of gross approvals are not disbursed.
2 Includes estimate of 504 third-party first mortgages (calculated as 125% of SBA 504 debenture portion due to the typical "50/40" split between the third-party and SBA portions of a 504 loan)
3 Comparison of average weekly gross approvals in the 7 weeks before ARRA signing to average weekly gross approvals since then, normalized for market holidays and the system disruption caused by a Washington, DC water outage (August 7, 2009)
4 Demographic data is self-reported on loan applications; categories are not mutually exclusive.
5 Temporary authorization under the Recovery Act.

What can a client expect from the MnSBDC?

Your business is being pressed by the economy. . . Your banker explains his hands are tied in the current situation. . . You think back over the years it took you to get this far. . .

I sat in the meeting and heard two of our Professional Business Consultants discuss client situations they were currently working on - maintaining confidentiality by NOT mentioning the business name or product/service, only the situation. They bounced ideas and approaches off the Business Development Officer from the SBA who was also in the meeting, and the Regional Director of the MnSBDC center.

While I have consulted with hundreds of client as an SBDC Consultant and in my own consulting business, I was in awe. These two professionals were bringing everything they had to the table to help these businesses suceed despite the tremdous issues they faced.

The Professional Business Consultants that bring their skills to the MnSBDC program, work with small business clients every day to help them succeed. Their clients trust and rely on them for results. Year after year we have tracked our successes by working "with" clients. We achieve our best success with clients who are determined and willing to work in partnership with our Professional Business Consultants in trusting relationships.

Can we help you to succeed?

What does the MnSBDC do????

Quite simply - we help small business owners turn dreams into reality.

We do that by consulting, training and through the specialized services we offer.

Even the greatest athlete uses a coach to help them move to higher levels. We are the "business coach" for small business, and our best results are achieved by determined, focused small business owners who are willing to roll-up-their-sleeves and get to work.

Need more information?

Click here for our Service Brochure that lists the nine Regional Centers that blanket the state and describes our services in detail. (PDF file format)

New FAX number for lenders to use to reach the SBA 'Citrus Heights' center.

Reminder that the Citrus Heights center is phasing in a new FAX number and closing out the old one. If your lender calls and can't get through, please alert them to the new number now in use;

New Fax Number: 916-735-1975

"Shine a Light" campaign focuses on local businesses

Here's a great opportunity for local businesses, sponsored by two corporate titans. The winning business will receive $100,000 in grant and marketing support, and the winner will be chosen by a vote of the public with results to be announced on Oct. 19.

The overarching message: The efforts of local entrepreneurs represent a path out of the recession.

Here's a news story - share with your favorite local small businesss.

Obama Administration Announces Efforts to Increase Access to Contracting Opportunities for Minority-Owned, Small Businesses
Release Date: August 18, 2009 - - Contact: Tiffani Clements (202) 401-0035
Release Number: 09-58 - - Internet Address: http://www.sba.gov/news

Secretary Locke, Administrator Mills will lead government-wide initiative; federal officials to participate in more than 200 procurement events across the country

WASHINGTON – The Obama Administration today reaffirmed its commitment to ensuring that minority-owned and small businesses, including women- and veteran-owned businesses, have greater access to federal government contracting opportunities.

Commerce Secretary Gary Locke and Small Business Administrator Karen Mills announced a government-wide plan that includes federal agency procurement officials holding or participating in more than 200 events over the next 90 days to share information on government contracting opportunities, including those available under the American Recovery and Reinvestment Act.

“Small and minority-owned businesses must play a significant role in our efforts to restore economic growth. Small businesses employ half of the nation’s private sector workforce; create a large share of the Nation’s new jobs; and introduce many groundbreaking ideas into the marketplace,” President Barack Obama said. “It is essential that we provide our Nation’s small businesses with maximum practicable opportunity to participate in Federal Government contracting.

“In order for the Federal Government to better meet or exceed the goal of 23 percent of prime contracts for small businesses, Vice President Biden and I have tasked Small Business Administrator Karen Mills and Commerce Secretary Gary Locke with leading a federal government-wide initiative to increase outreach,” Obama continued. “Over the course of the next ninety days agency officials will take an important step forward by holding or participating in more than two-hundred events focused on sharing information on government contracting opportunities.”

“In these tough economic times, the Recovery Act is providing billions of dollars in opportunity and incentives to help businesses grow – and the President and I are committed to ensuring that small and minority-owned businesses are part of our economic recovery every step of the way,” said Vice President Joe Biden. “By taking advantage of the expertise of an array of companies, we are going to be able to build a stronger, more secure foundation for long-term economic growth.”
“It has been a priority from day one of this administration to ensure that small and minority-owned businesses are aware of and have access to federal contracts and funding opportunities,” Locke said. “Over the past 40 years, minority-owned businesses have grown from 300,000 to nearly 4 million today. Their success and the success of small American businesses are vital to our economic recovery.”
“Government contracts can play a key role in helping small businesses turn the corner in terms of expansion and job creation,” Mills said. “But make no mistake, the benefits the government receives are equally as impressive – working with small businesses allows the federal government to work with some of the most innovative companies in America – with direct line to CEO”

As part of the Commerce-SBA initiative, over the next 90 days:

· Federal agency procurement officials will hold or participate in more than 200 events to share information on government contracting opportunities, including those available under the American Recovery and Reinvestment Act.
· SBA and Commerce will expand their outreach to fellow contracting officials across the federal government, passing along best practices for outreach and education to every agency to ensure they have the tools they need to meet their annual contracting goals.
· Locke and Mills will promote small business contracting opportunities in remarks, events and discussions with small business groups across the country, including minority, women and veteran groups.

Beyond the next 90 days, Commerce and SBA will support, monitor and track the impact of these efforts going forward to help ensure the Administration is maximizing opportunities for small businesses.

Small business owners can find out about federal contracting opportunities by visiting www.fedbizopps.gov. Local Commerce and SBA officials are also available in local offices across the country to assist small businesses interested in contracting opportunities. Contact information for local offices can be found www.commerce.gov and www.sba.gov.

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