"This is a way to provide relief to small businesses" that have seen a decline in sales because of current economic conditions and are having trouble paying their fixed obligations, said Phillip Silva, district director for the Small Business Administration, or SBA, which is overseeing the American Recovery Capital Loan Program.
Qualified businesses can receive interest-free loans for up to $35,000 for up to five years. The loans are guaranteed by the SBA, but businesses must apply to area banks, which will determine whether a loan will be granted. The SBA also is paying the loan interest costs charged by banks for the loans.
The loan program is part of the $700-billion-plus economic stimulus bill passed by Congress early this year. About $255 million was set aside for the SBA to pay interest charges for loans granted to small businesses across the nation.
The federal government is paying the loans' interest rate charges, which have been set at the prime rate plus 2 percent -- currently around 5.25 percent.