NEW YORK (CNNMoney.com) -- The Small Business Administration is still drawing up guidelines for its forthcoming emergency loans program, a stopgap measure intended to shore up small businesses struggling to keep up with payments on existing debt. But the agency this week confirmed an unexpected twist: Businesses with current loans backed by the SBA won't be able to use the new loans to cover payments on their existing SBA debt.
The upcoming program, tentatively dubbed the "America's Recovery Capital" (ARC) loan program, is a measure mandated by last month's stimulus bill. The bill requires the SBA to create a new "business stabilization" program to back loans of up to $35,000 to small businesses "experiencing immediate financial hardship." The loans are intended to be used to make interest and principal payments on a "qualifying small business loan" for up to six months.
In several announcements this week, SBA officials said that SBA-backed loans made before the stimulus bill's passage on Feb. 17 won't be eligible for ARC loan relief. The reason: The American Recovery and Reinvestment Act, the stimulus bill, forbids it. A provision Congress wrote into the bill explicitly prevents the new stabilization loans from being used to pay down SBA-backed loans made before the bill's enactment.
A staffer with the House Small Business Committee said that restriction was mandated by the Congressional Budget Office to comply with pay-as-you-go prohibitions against increasing the federal deficit through new direct-spending measures.
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Saturday, March 21, 2009
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