As of June 15, 2009, small business owners have a unique chance at survival - and maybe even financial recovery. In conjunction with the American Recovery Capital Program, the Small Business Association (SBA) is set to issue 10,000 loans to help struggling businesses. These loans may be the sole source of salvation for a host of organizations that are trying to make ends meet in a turbulent economy. The SBA loans have a variety of unique features, as well as strict eligibility requirements.

Features

The new loans backed by the SBA are slightly different from a traditional loan that a small business might acquire independently. They are designed with special features to help business owners cover expenses and get ahead:

  • No fees. The SBA and the lenders who are issuing the new loans will not charge borrowers any fees.

  • No interest. As an added bonus, the SBA is assuming responsibility for the interest on these loans. Each one comes with a full guarantee on interest payments from the SBA.

  • Deferred payments. After the borrower's loan has been disbursed, they are entitled to a one-year deferral period. No payments are due on the principal balance during this time period. After the one-year deferral period expires, borrowers then have five years to repay the loan in full.

Eligibility Requirements

Not just any business is eligible to apply for a new SBA-backed loan. The SBA and American Recovery Capital Program have issued a set of strict guidelines regarding what funds may be used for and what businesses can apply for the loans:

  • Size and age. Small for-profit businesses that are privately owned and have 500 employees or less are eligible to apply, as long as they have been in operation for at least two years.

  • Financial hardship. Only businesses that can demonstrate a true financial hardship can apply. The standard for financial hardship includes a significant decline in revenue or sales (at least 20%).

  • Profitable record. Businesses must prove that they made a profit in at least one of the last two years.

There are over 30 million small businesses in the United States; however, only 10,000 loans will be issued to ones that meet these very strict requirements. Competition for the funds will be fierce, but the chance at securing up to $35,000 interest free is enticing for small businesses across the country.