Comment: Just attended a training session on ARC and I
couldn't agree with you more on your assessment of ARC. The program has too many
vague elements that come down to judgment calls at the time of SBA purchase
review
How viable is previously viable? A firm can show heavy losses but generate
substantial cash if there is a large depreciation base
Certain debts are ineligible except if they are reduced to a note ( landlord for
rent arrears or CAM reassessment, certain trade creditors) but where is the line
drawn between a pre-existing note and a note created for the purpose of ARC
refinancing?
Economic injury is required (and there's plenty to go around) but how much?
Credit card debt can be eligible but tieing the actual draws to business use can
be difficult
Less apparent is the issue of indirect origination cost and administration cost?
It is clearly intended that the lenders are required to use the same labor
intensive used to put on a regular 7-A loan in packaging, due diligence, funds
control, SBA reporting, servicing (which may be more complex than the average
SBA since these accounts are -by definition for troubled situations) and
liquidation. With no fees permitted, cost recoupment becomes an issue. The
average earnings on a 35K loan would be $2100/year- considering the risks and
liquidation rate to be expected- it will be hard to recoup all the overhead
expended. In a time when Banks are running lean to minimize losses, resources
aren't available for this type of a program
The loans might make sense to prop up a lender's own troubled accounts (where
the recovery on own paper may make them worthwhile ) but on that type of
financing delegation no longer applies due to potential preference issues on
most decisions. This will raise the cost of administration substantially
Finally, SBA will have the upper hand at time of purchase because the loans cant
be sold. SBA can raise questions especially on the more vague eligibility
elements (on which they may ultimately be proven wrong). SBA can simply refuse
to act until the issue is resolved to their satisfaction The lender may be faced
with the choices of accepting a repair or engaging in litigation more costly
than the loan balance to recover the purchase funds. Most lenders will take the
former.
SBA could rework the program to a viable alternative by removing some of the
restrictions on eligibility and use of funds (whole sectors of the
economy-notably retail and franchise will have difficulty qualifying) and
closely defining the remaining items greatly simplifying the required process to
reduce cost offering it as a 90% guaranty with guaranty adjustments restricted
to gross misfeasance (i.e..e. disbursing against your own loan and foreclosing
60 days later, making one to an associate of the lender) very narrowly defining
preference issues for this program and allowing full delegation on everything
else (including compromise settlements not involving a going business. For now I
doubt if we will do any - maybe on one or two troubled accounts.
Do you believe ARC was structured by the SBA as Congress and the Obama Administration mandated? Comments
1. Regardless it is very poorly structured and with little incentive for lenders
to make them. As structured it should have been delivered as a direct loan from
the SBA. Wed, Jun 17, 2009 10:05 AM
2. Yes Wed, Jun 17, 2009 7:26 AM
3. Yes Tue, Jun 16, 2009 12:46 PM
4. yes Tue, Jun 16, 2009 8:21 AM
5. Not sure - but the lenders sure were not consulted. Tue, Jun 16, 2009 7:49
AM
6. Maybe Tue, Jun 16, 2009 6:16 AM
7. To us, this program is the SBA's response to a Congressional mandate to
"do something". The program is overwhelming in its details and requirements...32
pages of guidelines for a $35,000 loan? The most common phrase found..."lender
must", which is a clear indication of an "out" for the agency if/when a guaranty
payment is requested. Also, there is the mysterious credit scoring system for
approvals into which lenders have no input. Tue, Jun 16, 2009 5:25 AM
8. No. Too tightly structured, too complicated to administer for such a small
loan. Tue, Jun 16, 2009 5:22 AM
ARC Loan Program Comments May 18, 2009 - June 17, 2009
1. what banks are participating in this program? Tue, Jun 16, 2009 10:50 AM
2. No, the economy tanked in September, my credit score in january, if you don't
have a decent score your not getting the cash. Just a big waste of money to bail
the banks, again! Mon, Jun 15, 2009 4:40 PM
3. BANKS DO NOT HAVE ANY INFORMATION ABOUT ARC LOAN PROGRAM Wed, Jun 10, 2009
9:44 PM
4. I have a small automotive business in Arcadia ca.I owe approx. 350,000
dollars on my variable rate sbc loan.I have had this loan since 2002,it has gone
up and down, however, I think in the next 5 years the interest rate could go sky
high. I just figured out that I have no cap on my interest rate. This could
cause some major problems. Before there is a major problem, I woula like to have
some kind of a cap or fixed rate. I don't have $10,000 to refinance. I have
contacted my mortgage company and they have basically said until there is a
major problem, we don't want to deal with it. I am willing to pay something to
aquire a fixed rate, I am not looking for a freebe, but $10,000 I don't have.
Please let me know if you can help.My name is Jeff Stellern at Arcadia Ultimate
Automotive. 626-821-0262. Or Stellern@sbcglobal.net. Thank you Wed, Jun 10, 2009
3:21 PM
5. Would like to participate. Few banks are participating. Banks are choosing
not to participate. The news is good, but the reality is not good. Tue, Jun 9,
2009 1:56 PM
6. Not sure yet - still haven't posted what rate lenders will be paid. Fact we
can't charge any fees, even out of pocket for processing/docs or late fees once
repayment starts is also disconcerting. Mon, Jun 8, 2009 3:07 PM
7. SBA's main objective -- to look good and sound helpful……this program will fail
miserably Fri, Jun 5, 2009 11:30 AM
8. Scary that all this publicity is taking place before the banks receives any
specifics on who is eligible, underwriting requirements, and terms and
conditions. Fri, Jun 5, 2009 6:48 AM
9. I agree with the earlier comment that I would only offer this to an existing
Bank borrower as a lifeline. Why would anyone want to bring in a troubled
business that currently banks with someone else? As far as the exclusion of SBA
borrowers, I imagine SBA would say offer them a deferment. Fri, Jun 5, 2009 6:13
AM
10. I agree totally, at least 35,000 could pay off some very high interest
accounts and afford more cash flow if used the right way. Thu, Jun 4, 2009 2:04
PM
11. We are in big trouble to save some jobs. My employees are working here for
past 14 years. This is going to be little helpful foe us.. Sat, May 30, 2009
6:35 AM
12. Maybe.
It is typical of the agency to release information to the general public about
the great benifits of this new program before they have the details and
procedures out to the lenders. The business phsyche is not helped by the
continual "I am not sure, I don't have the details yet" responses from the local
lenders. This could be a helpful tool in our box, however there are many
questions left unanswered. How to process the new ARC loans, how should the
banks account for the deferral, will the banks be allowed to roll deferred
interest into the final loan and will the process be sufficiently streamlined
(i.e. Express style) to not disincent the banks. Wed, May 27, 2009 6:28 AM
13. This is worse than the express loan program which was a failure Sat, May 23,
2009 7:33 AM
14. I'm also a small business owner and have received NOTHING in the way of a
bailout yet the bitchy and whiny lender comments above who've probably received
funds from TARP or in the least were able to draw from a Fed discount window at
nearly 0 cost really piss me off when they say "what's in it for me?" What's in
it for you??? NOTHING! It isn't about you! You've gotten your bailout with MY
TAX DOLLARS now I WANT IT BACK! So stop your bitching and whinning and start
doing your responsibility to the people who bailed your collective asses out
over the past 18 months! Fri, May 22, 2009 4:25 PM
15. I would participate if my small business would qualify. I haven't seen
details of what qualifies a small business, who pays the interest on the money
borrowed, when do you pay back the money and what happens if the small business
fails even with the ARC loan. I am a small business. I was refused a loan from
my bank three years ago, but they wanted to give me a line of credit. I wanted
to know what the difference was between a line of credit and actual loan. My
question would be what does the bank and the SBA get out of this generous offer.
Fri, May 22, 2009 2:36 PM
16. I have 3 established businesses that could benefit from this program. The
lender who can come through with this program for us will get all of our
business and personal banking. Lets see, benefits for all: No more job loss,
between the 3 businesses I employ over 120 people. Like many business owners I
hate and distrust the banks who got us into this crisis in the first place and
participating in this program could go a long way with rebuilding the
relationships damaged by this crisis. Lets see, state the obvious, it is in the
best interest of everyone that formerly thriving businesses stay in business
(tax base, community, charity, employment etc etc etc.) Fri, May 22, 2009 1:19
PM
17. I intend on applying for a loan. This what's in it for me attitude by the
banks is rather appalling. It is partially because of the banks' greed that we
are in this mess now. IMHO, everyone in the business community has to come
together and make a decent economy out of what's going on now. The businesses
that are left now can probably survive for awhile without the loan but to be
honest, the government is trying to suck up to the small business people.
Lastly, if the feds are not subsidizing this program, I would be completely
shocked. Fri, May 22, 2009 9:41 AM
18. The 35k is not for existing SBA loans. Thu, May 21, 2009 5:30 PM
19. May 21 Update ARC Procedurals and Apps will be availablr to Lenders on June
8. Apps will be available to business owners on June 15. Gerald Watson Thu, May
21, 2009 12:43 PM
20. See www.bobgreenfest.wordpress.com for insight. Thu, May 21, 2009 11:59 AM
21. The only loans I would even consider under the program would be for existing
borrowing bank customers. I'm not willing to take on someone elses problems. We
are so swamped right now with good loans, that it would be stupid to pull my
underwriters off of the good requests to do a bunch of $35,000 loans to
questionable companies. Thu, May 21, 2009 10:37 AM
22. In theory it sounds like a good idea, but in reality and as a Loss Mitigator,
I believe that these loans will only avoid the inevitable for some business' and
paint a rosey picture regarding Business Loan defaults, until the $$ runs out
and after 6 months the borrower is back were they were before the ARC came
along. Thu, May 21, 2009 10:28 AM
23. We'll participate because it's a low cost account acquisition for the
future. Thanks to all the sideliners! Thu, May 21, 2009 8:38 AM
24. I'm a small business person whose family business has been hit hard by
economic downturn. By the time the legislation and the SBA and the powers that
be, (the banks) get off their butts, we'll probably be out of business. Billions
at the drop of a hat to insurance companies and bankers . . . and a small
business person can't get a $35,000 loan. Wed, May 20, 2009 2:08 PM
25. No interest or fee income to the bank. Basically, here's $35M, start giving
me back the money in one year at drawn out payments. The banks are already in
trouble, is the SBA & Fed. Gov't trying to make it worse? Wed, May 20, 2009
10:40 AM
26. Per ARC policy, US SBA will pay monthly interest to the lender at reasonable
rates throughout the loan term Wed, May 20, 2009 8:42 AM
27. Most of my past due commercial loans were made under an SBA program.
Excluding those borrowers from the ARC does nothing for them. If they really
want to help, include existing SBA credits! Those loans made after FEb. 17, 2009
shouldn't be in trouble yet anyway! I see no real benefit except that any loans
made under this program should just as well be called "grants" Wed, May 20, 2009
8:26 AM
28. Think this would be best deliverd as a Direct Program. Far too many holes in
it. One that is quite troubling relates to the determination of "business
viability." Don't have the confidence that it would not be second guessed. Wed,
May 20, 2009 7:33 AM
29. As a former small bank "credit policy" person, "Viable" is a key word in my
view. However, a BIGGER issue is the regulations/regulators view of a commercial
bank making a "new", separate loan (including ARC) that helps bring a past due
loan current (a reg violation to the best of my knowledge) or avoids a likely
past due situation with what is likely already a rated credit (certainly would
open the eyes of a bank examiner). Wed, May 20, 2009 7:14 AM
30. Loan amount is too small to work on. Wed, May 20, 2009 6:47 AM
31. We would participate. Local paper announced program on 5/18/09. To date our
Bank has not received any information on the program. Not aware it was to start
6/15 (newspaper did not specify a start date either). We dojn't even know if
there is a separate application or eligibility checklist. Kind of in the dark
right now. Wed, May 20, 2009 6:44 AM
32. Interest free to borrower doesn't translate to no interest to the lender.
SBA pays the interest. Wed, May 20, 2009 6:23 AM
33. not enough details to comment yet Wed, May 20, 2009 5:42 AM
34. I UNDERSTAND THAT A BORROWER WITH AN EXISTING SBA LOAN CAN"T GET THE ARC
LOAN...SO WHAT GOOD IS IT? WAKE UP SBA!!! Wed, May 20, 2009 5:15 AM
35. Not as I read it now, why would we offer a 6 year intest free loan with
underwirting and servicing of the loan costing more than we could ever feasibley
charge an already cash strapped borrower? Tue, May 19, 2009 2:02 PM
36. With no fees or interest, which is great for the borrower, what is the
incentive for the lending institutions to push the ARC program? Tue, May 19,
2009 1:38 PM
37. I'm a packager in Michigan. This program essentially looks like a gimmick by
SBA to make it look like they're doing more than they actually are right now.
This money would have been better spent on extending the fee-waiver program on
the 7a side, which has boosted 7a lending tremendously over the past few months.
I talked to Hazard today, and they have 305 loans on the stack (compared to
about 20 on any given day before the March rule changes). I agree with other
comments I've read - if it's interest free, what's in it for the lender? If
there is no allowance for fees, once again, what's in it for the lender? I can
see that the lender may benefit from 'saving a customer' who cannot make their
payments currently, but usually a lender would downgrade a credit like that,
probably making it non-eligible for this ARC program. A downgraded credit (say a
5 or worse) would probably be considered a loan that would transfer liability
onto SBA, which SBA would almost certainly be opposed to (as they are in their
7a program). Tue, May 19, 2009 1:08 PM
38. I do not believe banks will use this program enough to benefit small
businesses. Small businesses now have impaired financial statements and will not
get enough attention from banks who already have stressed out portfolios and are
being pressured by regulators to improve capital ratios. The SBA needs to
consider doing these loans directly as disaster loans in certain states like
Florida, California, Nevada, and Arizona. Tue, May 19, 2009 11:21 AM
39. Although the new ARC program may sound like a good idea, the ultimate test
will come when the loans are eventually submitted for repurchase. I wonder how
many denials or repairs will be made because the lender's exposure to the
applicant was reduced. Ultimately our participation in the new ARC loan program
will depend upon SBA's ability to issue clear program guidelines that address
any and all conflicts with existing SOP regulations. Tue, May 19, 2009 11:16 AM
40. Probably not going to use this 'program'- too many questions and the program
was thrown together with probably way too many loopholes and/or pitfalls. No
thanks. Tue, May 19, 2009 11:11 AM
41. Not too many ARC loans will be made here. May be few to our existing
clients. By the way, can a lender sell these loans on the secondary market? Tue,
May 19, 2009 11:08 AM
42. They should have used financial intermediaries rather than banks. Tue, May
19, 2009 10:49 AM
43. Yes we will participate. However, we do not have very many details and we
may change our minds. Tue, May 19, 2009 10:30 AM
44. Procedures? Program Eligibility? Again, the SBA has communicated to the
public of a "great new product" and forgot to inform the lenders the basic
information of who, what, when, where, why & how. As a result, we're now
receiving calls from many borrowers that we no idea if they qualify or not Or,
if they did, how to process the application. Our decision to participate in the
program will have to wait until the SBA gives us a clear policy and procedure
that can be implemented. Tue, May 19, 2009 10:08 AM
45. Yes Tue, May 19, 2009 9:15 AM
46. I am a business broker and the ARC Loan Program is capricious at best. It
does not help existing SBA barrowers and it is so small that it might help the
tiniest of businesses but it ends there. A bigger conceern is the good will
limitations on loans. This is a joke. Most small businesses generate revenue and
thus profits based on good will. They do not have vast assets to collateralize
or the revenue streams required to service the debt typically associated with an
asset bassed operation. This limit is a dagger in the heart of progress with
respect to the recovery of small businesses in our country. Why did we give $172
billion to AGI and only $20 billion to millions of businesses who are successful
and employ multiple times more people than AIG and the auto industry combined?
How much more convoluted can our dunderheads in Washington think? It truly is
astounding. Tue, May 19, 2009 9:11 AM
47. We won't be participating if these loans are truly "interest-free". We don't
have enough details at this point to determine. Tue, May 19, 2009 9:05 AM
48. At this point we will probably not participate. What about this program is
of value to the Lender? We make a no-interest/no-payment loan to a troubled
borrower. If it defaults, do we have to wait until all collateral is liquidated
to collect on our 100% Guaranty? Why doesn't the Agency just issue these loans
directly? This program will be viewed by most banks as imprudent. Tue, May 19,
2009 8:57 AM
49. Will not particiapate.
Reason: STAR Program, Not nearly enough return for the risk and associated work
Tue, May 19, 2009 8:56 AM
50. We don't have enough details. Tue, May 19, 2009 8:52 AM
51. My only question is why would any commercial bank consider processing these
loans when there are no fees, no interest, and no visible way to justify taking
the banks capital and booking loans that will not provide any kind of return on
equity to the bank? How are the banks going to justify the loans to their board
when there is apparently no way to have any kind of return on the equity? Either
the program is flawed or the complete picture has not been exposed. Tue, May 19,
2009 8:45 AM
52. The term VIABLE must be vetted and a non-subjective way to determine what is
"viable" means must be given to our Bank. I do not want to have SBA come back
and tll me that they are not paying the guarantee because the business was not
viable. I think we will only participate for existing customers. I also think
the hype of the program in the public is going to cause a huge PR problem for
SBA when the funds for the program are gone in 3 months. Tue, May 19, 2009 8:41
AM
53. I've got clients that are interested, but not sure I can find a bank. Also
need definitions on "start up".
Have established businesses that were purchased within 2 years that may or may
not qualify. Tue, May 19, 2009 8:30 AM
54. How does a lender complete the forms and application? How does a lender get
compensated for this loan when it is zero interest rate? Without these questions
& others answered it is hard to determine if we should participate. Tue, May 19,
2009 8:20 AM
55. Enormous boondoggle that will ultimately result in great embarrassment for
SBA. Tue, May 19, 2009 8:13 AM
56. I plan to participate in the program. My business needs the help and, as I
read it, this program is 100% guaranteed by SBA, is interest-free to the
borrower, and doesn't have the typical SBA fees. I can't see the down side. Tue,
May 19, 2009 7:55 AM
57. Are site visits going to be required to verify that the business is open and
operating. Tue, May 19, 2009 7:23 AM
58. We will wait to see the implementation details. We want to use it, but need
the details on how it is going to work. The news release is nice, but it has no
implementation information and the District Offices do not have any information,
so it is still going to be a while before we know if it is usable or not. Tue,
May 19, 2009 7:20 AM
59. No interest to the bank ? Why particiipate other than to potentially bail
out your potential bad loans. Tue, May 19, 2009 6:47 AM
60. no Tue, May 19, 2009 6:45 AM
61. To help our small business clients with short term cash flow problems in an
attempt to save their businesses and make sure they do not get forced to borrow
additional funds at outragious credit card rates. Tue, May 19, 2009 6:35 AM
62. It appears to be a great benefit to a borrower - But with no interest being
charged to them, how does the bank make any money on the loan? Is this to be a
purely benevolent relationship?
We are on the fence. Tue, May 19, 2009 6:15 AM
63. We don't work on smaller loans Tue, May 19, 2009 6:15 AM
64. difficulty finding banks to fund ARC Tue, May 19, 2009 6:12 AM
65. Have not received any clarification as to how the bank is receive their
accrued interest if the borrower is not responsible. Tue, May 19, 2009 6:09 AM
66. As the owner of a Lender Service Provider firm, we work with hundreds of
banks throughout the country. I absolutely understand the plight of small
business borrowers. Lenders are exploring all kinds of options to help their
borrowers get through this difficult time. I view the ARC Loan Program as more
of a grant than a loan program. I can foresee a very high default rate for users
of this program. A small loan of $35,000 may provide some amount of temporary
help, but I think the administration of the program will be onerous compared to
the benefit. While the ARC Loan Program may be well intentioned, I think it will
turn out to be a give away program - much the same as the Low Doc Loan Program
turned out to be. While we in the small business lending community must be
sensitive to the needs of stressed borrowers, extending and/or deferring
payments on SBA loans would likely serve the same purpose without the
introduction of a new loan program.
Thank You,br />
G. Arne Monson
PPresident
Holtmeyer & Monson Tue, May 19, 2009 6:01 AM
67. conceptually something like this program may make sense. as a lender
however, if a lender is delinquent on their loans, how is giving, and that is
what it appears to be, a delinquent borrower money to pay past due obligations
responseble? Loans need to be granted to borrowers who show the capacity to
repay an obligation. Deferral of current obligations only creates future
problems for repayment. Loans are simply that, loans. They are not gifts or
grants and need to be repaid. This appears to be not much different than loans
granted to individuals to purchase SFR's who didn't qualify to begin with. Tue,
May 19, 2009 5:58 AM
68. If it will benefit our cusomters and help them remain current on their
loans, then we would be interested in participating. However, complete details
on the program will have to be released before we can make out final decision.
Tue, May 19, 2009 5:58 AM
69. We will likely participate however SBA's approach is very concerning. To
date the lenders responsible for delivery have been provided little information
and nothing outside the press release format. On a daily basis we have been
addressing customer questions without backing, now a date has been issued and
lenders still know little other than etran is required. Small issues like
interest payments have yet to be addressed. We were under the impression that
interest would be subsidized during the disbursement and deferment period with
P&I thereafter. The news release says interest free to he borrower but no
mention of subsidized interest or the mechanics of reporting, such as 1502. We
have no intention of providing interest free loans despite a 100% guarantee; we
are in the end for profit business looking for an investor return. Tue, May 19,
2009 5:51 AM
70. I am banker. My comment is there needs to be greater clarification on what
will motivate the banks to make these loans. We have scarce resources that we
must employ to make these loans. Tue, May 19, 2009 5:41 AM
71. Yes, but probably for current customers only. I hesitate as I have heard
nothing on how the lender can profit - Only that the loans bear no interest for
the life of the loan. Tue, May 19, 2009 5:40 AM
72. We do not yet know if we will participate. Until all the guidelines are
published we cannot assess the program.
We might not participate based on interest rate restrictions that would render
the program unprofitable. Also, as with any SBA guaranty, there is the concern
that the agency might repair or outright refuse to honor the guaranty. This
could be a very high-risk form of lending. We are also attempting to assess the
potential demand for the program, since most existing SBA borrowers are not
eligible. Tue, May 19, 2009 5:33 AM
73. unknown @ this time. Need more details of the program. We feel there will
not be many businesses eligible to meet the guidelines. May further erode our
SBA portfolio, jeopardizes the "risk" grade which we feel is not justified. Tue,
May 19, 2009 5:23 AM
74. There are still a number of ambiguities to the program, but probably not.
"Interest free to the borrower?" Why would we do that? It looks like we can
charge fees, but why burden the borrower with fees up front when they're cash
strapped already. Proceeds can only be used ot make debt payments so the fees
apparently can't be paid through the loan. Eligibility requirments are still
vague. SBA's web site states that borrowers whose history or past cash flow
indicates the business might not be viable "...are not good candidates.." So are
they eligible or not? I assume additional information will come out on the
program, but as I understand it now, we will not utilize it. Tue, May 19, 2009
5:19 AM
75. Small business is the economic engine to get us out of this recession. The
ARC will be like fuel! Tue, May 19, 2009 5:17 AM
76. No Tue, May 19, 2009 3:54 AM
77. not likely - no stated ability yet to charge an interest rate Mon, May 18,
2009 10:46 PM
78. yes Mon, May 18, 2009 10:36 PM
79. I need more information, but it sounds like a good idea, especially since
the credit card companies are in a melt-down. Mon, May 18, 2009 6:50 PM
80. To early to know. Detailed requirements of the guaranty needed. Mon, May 18,
2009 4:07 PM
81. I want one! Mon, May 18, 2009 2:37 PM
82. Yes. We have at least two businesses that would be perfect candidates for
this program. They have been in business 15 = years and need soem help right
now. Mon, May 18, 2009 2:28 PM
83. No Fee, No Interest to SBA. Have to intuit that Comm. Lenders MAY charge a
fee and/or interest or their incentive is zero. Perhaps an incentive is to save
an otherwise lost loan. Probably will see Comm. Lenders getting a fair fee up
front from the ARC proceeds and maybe a small interest carry over the term or
even renegotiating the primary loan to cover the carry on the ARC loan. There
has to be a market value to doing the loan or it won't get done. SBA does not
have a specific application or checklist that I could find. Lenders should worry
about how to document to protect the guaranty when is it called upon. Mon, May
18, 2009 1:59 PM
84. yes Mon, May 18, 2009 12:49 PM