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New York, NY – The Small Business Administration has issued guidelines for banks and borrowers on how "America's Recovery Capital" (ARC loans) will work. The loans are designed to make up to $35,000 available to struggling small business owners to temporarily help them keep up with payments on existing loans, including credit card debt.

ARC loans are only open to businesses that have been in operation for at least two years and have been profitable in at least one of the last two years. Applicants must prove they are experiencing financial hardship, as evidenced by declining sales (a drop of at least 20% over the past year), frozen credit lines, rising business costs (again, 20% or more in the past year), or difficulty meeting payroll, paying rent or making loan payments.

But borrowers also have to be running a "viable" business. The SBA wants to see cash-flow projections for at least the next two years illustrating that the business will be able to repay its ARC loan and other debt obligations. Borrowers must have "acceptable" business credit scores, and they can't be more than 60 days past due on any loan they'd like ARC funds to help cover. Lenders may also require collateral to back up the loan.

The SBA won't make ARC loans directly. As with most of its lending programs, it will instead offer guarantees on loans made by banks. If the business owner defaults, the SBA pays off the debt. (The business owner still takes a hit on their credit report.) Each bank will set its own procedures and timeline for issuing loans, so business owners looking to apply should contact a participating bank.

Read the full story at cnnmoney.com.

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