SBA's America's Recovery Capital Loan Program can provide up to $35,000 for viable small businesses that need short-term help to make principal and interest payments on existing qualifying debt. ARC loans are interest-free to the borrower, carry a 100 percent guarantee from the SBA to the lender, and require no fees paid to the SBA.
Loan proceeds are provided over a six-month period, and repayment is deferred for 12 months. Repayment can extend up to five years. ARC loans are being offered from June 15 and will be available as long as the funding lasts or until Sept. 30, 2010, whichever comes first.
The other SBA program, 7(a) loans, can be used for working capital and refinancing existing debt. However, the program was recently expanded to include dealer floorplan financing for eligible boat, auto, motorcycle and recreational vehicle dealers. Beginning July 1, SBA Dealer Floor Plan loans will come with a 75 percent government guarantee and a maximum repayment term of five years. DFP loans will be available for a minimum of $500,000 and up to $2 million. The loans will be made only for titleable inventory, such as boats or boat trailers.
In general, the maximum repayment period is seven years for working capital and 25 years for real estate and equipment. Interest rates are negotiated between the lender and the borrower, up to the applicable maximum allowable SBA interest rate, and may be fixed or variable.
For both the ARC and 7(a) loans, eligibility is tied to the SBA's definition of a small business. For a marine dealer, this means total annual receipts of less than $7 million, or tangible net worth of $8.5 million or less and average net income of $3 million or less for the preceding two completed fiscal years.
Boatbuilders are eligible if they have fewer than 500 employees, or tangible net worth of $8.5 million or less and average net income of $3 million or less for the preceding two completed fiscal years. For information on SBA loans, visit www.sba.gov.
Another, perhaps lesser-known program is the U.S. Department of Agriculture's Rural Business and Industry Guaranteed Loan for businesses of all types in rural areas (population less than 50,000). These loans are also issued through banks and are guaranteed by the federal government. Loans up to $25 million may be used to purchase land, buildings, equipment and for permanent working capital. Refinancing debts may also be eligible. To find out if a business is eligible for USDA loans, visit http://eligibility.sc.egov.usda.gov.
In March, the National Marine Manufacturers Association helped get non-auto floorplan loans included in President Obama's Term Asset-Backed Securities Lending Facility. Under TALF, the New York Fed will lend up to $200 billion in non-recourse funding to eligible borrowers with eligible collateral. The program does not help marine businesses directly, however. It was designed to allow banks to bundle loans into asset-backed securities that are backed by the government and sold to investors. The goal is to improve liquidity in the market by providing banks with funding to shore up their balance sheets so they can make additional loans.
This article originally appeared in the July 2009 issue.