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Small-Business Banker Damns ARC Program

By Anonymous Banker

I thought I would be inundated with requests for America's Recovery Capital loans over the last few months at the bank I work at. But alas, small business owners across America know that the program is nothing more than rhetoric.

I finally put through one request that I thought should be approved. The funding would have given this particular client some breathing room to make it through this depression (yes, you heard me right: I dare to use the word). Not surprisingly, this client was declined. Why? Well, according to Small Business Administration guidelines, the business had to either show evidence of profitability or positive cash flow in one of the past two years. Unfortunately, this company had a loss of about $2500 in 2008. Never mind that it has been in business for ten years, and has been current on all payments. Or that it has personal credit scores of 685 and 745. Or that it has received a 20% increase in revenue for 2009 due to some new local-government contracts, and indeed that its cash flow projections show a return to strong profitability in 2009 and 2010. Apparently, a loss is a loss is a loss. It only took the bank ten days to come back with a rejection.

I was so outraged that I visited the SBA site to check on the progress of the ARC program and the list of participating banks and number of loans made by each bank. As this blog has noted, here have been a total of 1193 ARC loans made to date. Let's assume that each loan was for the maximum amount of $35,000. That comes to almost $42 million dollars in SBA support provided through the ARC program to America's entire small business community. Did you perhaps notice that I did not use the word billions?

The names of the banks that participated in this program were, for the most part, unknown to me. Most of them were not any of the big banks that have received so much help from the government (or, more correctly, the taxpayers and citizens of this country). Bank of America and Citibank were not listed as lenders. (Regions, Sun Trust, and Wells Fargo did appear on the list, along with JPMorgan Chase.)

It's impossible to tell exactly how many ARC loans were made by each bank. In President Obama's new age of transparency (yes, I'm being sarcastic), the SBA website did not see fit to break out the totals for each bank. The SBA gives the impression that it does not want anyone to be able to do a simple tally.

The stimulus package allocated a mere $255 million dollars for ARC loans to the entire U.S. small business community. Now, it is falling short of even my lowest expectations.

I expected that those paltry funds would be gobbled up in the first 60 days of the program. But, actually, not more than 16% of the funds have been dispersed through the banks. Is this because the small business owner is not really suffering through this economic crisis? No one could possibly believe that! Or perhaps the banks, which we have bailed out, have once again refused to meet their fundamental role as lenders?

And if the applicants are not qualifying for loans under this program, then what does that say about the state of this nation's economic recovery? Wake up and take notice. The ARC plan has failed. And the government's transparent abandonment of the small business community in your economic recovery plan is quite clear to all of us. If this is the best it can do, then this country is in big, big trouble.

Anonymous Banker is a 35-year veteran of the banking industry who has spent much time as small-business banker and credit underwriter. He blogs at anonymousbanker.com.

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