Help for hurting business: Loan program offers no-interest loans to pay down old debts

By Kristin Palpini

06/16/2009- Daily Hampshire Gazette

ucked in to the $787 billion federal stimulus are initiatives aimed at helping small businesses - including those here in the Valley.

But you may need to take a class to figure out what they are.

In the next few weeks, the Valley Community Development Corp. will hold two free sessions to guide small businesses - entities with 20 or fewer employees - on ways to thrive, or at least survive, in this recession.

The second session, slated for June 30 at 6 p.m. in the Jones Library in Amherst, will address small business perks available through the stimulus, the most significant of which, according to the state, just became available.

The American Recovery Capital, or ARC, loan program is providing viable small businesses with $35,000 interest-free loans to pay the interest and principal on already incurred business debt.

"This happens to be one of the, if not the only, real benefit to small businesses in general that came out of the federal stimulus," said Andre Porter, executive director of the Massachusetts Office of Small Business and Entrepreneurship.

Area bankers said the ARC loans could be useful to area businesses, but lenders have to make sure the money they give will aid in supporting businesses through a rough patch - and not just forestalling an inevitable collapse.

Businesses will have to prove they were profitable before the recession and are suffering a short-term, economy-inspired hardship.

"I see it as it's always good to have a few arrows in your quiver," said Becky Caplice, president and CEO of Greenfield Savings Bank. "You just have to be careful that you're using it to help a business survive and not just to make payments on something they can't afford to make payments on."

Loan program

An ARC loan is a deferred-payment loan of up to $35,000 allocated over six months. No repayment is needed for the next 12 months. After that, the borrower has five years to repay the loan.

The U.S. Small Business Administration pays the interest on the loan to lenders, which is prime plus 2 percent. Applications for the loans became available Monday and will continue to be offered until the $255 million available nationwide for the loans runs out or in September 2010, whichever is sooner.

However, Porter estimated that funding for the loans may quickly expire, possibly within four to six weeks.

"I do believe this will be easily, fully subscribed in a blink of an eye," he said.

Most Massachusetts banks are Small Business Administration-approved lenders. In the area, Greenfield, Florence and Easthampton savings banks, as well as Greenfield Co-operative Bank, can offer the loans.

A complete list of lenders can be found at www.sba.gov/idc/groups/public/documents/ma_boston/ma_lenders.pdf

"When you're talking about putting stimulus dollars to work, this is not a bad way to get some of that going," said Mike Tucker, president and CEO of Greenfield Co-operative Bank.

Workshop set

ARC loans will be part of the Valley Community Development Corp.'s June 30 workshop on the economic stimulus and how it relates to small businesses.

Facilitators will also address stimulus programs such as loan fee elimination, higher loan guarantees, the availability of micro-loans and technical assistance and refinancing fixed asset loans.

Another session, slated for June 22 and addressing money management for business owners, will be held at 7 p.m. at the Forbes Library in Northampton. This workshop will address how personal and business budgeting are related, the impact of personal credit history on business financing and fair debt collection practices.

Both workshops are free and open to residents or small business owners in Northampton, Amherst, Hadley and Easthampton. Registration is requested and can be completed at www.valleycdc.com/training.

"We took a look at the economy and a look at our clients ... and put together a program that addressed the economic realities of today," said Gene R. Talsky, director of small business development at the Valley Community Development Corp. "It's very spotty out there. Some people are doing well - and others are not."