ARC Loan: What It Is, How It Works, and Who Qualifies

Running a small business is no easy feat, especially during economic downturns. That’s where financial relief programs like the ARC loan come in. The ARC (American Recovery Capital) loan was designed by the U.S. Small Business Administration (SBA) to help small businesses weather financial difficulties—offering interest-free, deferred-payment loans.

But what exactly is an ARC loan? Who is eligible? And is it still available?

What Is an ARC Loan?

An ARC loan, or American Recovery Capital loan, was a temporary program initiated by the SBA in 2009 under the Recovery Act. It provided interest-free loans of up to $35,000 to help viable small businesses pay down existing debts and stabilize their operations.

ARC loans were:

Interest-free for the borrower
100% guaranteed by the SBA
Designed for short-term relief, not long-term financing

These loans were paid directly to the borrower’s creditors, not to the business itself.

Key Features of ARC Loans

Feature	Details
Loan Amount	Up to $35,000
Interest Rate	0% for the borrower (interest paid by SBA)
Repayment Period	5 years
Payment Deferral	12 months (no payments due during the first year)
Use of Funds	To pay existing debt (principal, interest, fees)

Who Was Eligible for an ARC Loan?

To qualify for an ARC loan, businesses had to meet several criteria:

For-profit small businesses based in the U.S.
Had to be current on existing debts (not over 60 days delinquent)
Demonstrated profitability in at least one of the past two years
Showed a reasonable chance of recovering from hardship

The goal wasn’t to rescue failing businesses but to support financially viable companies struggling due to temporary setbacks.

What Could ARC Loans Be Used For?

ARC loans could be used to pay off existing, qualifying debt, including:

Business credit card balances
Bank loans
Vendor lines of credit
Equipment financing
Real estate-related debt

However, they could not be used for working capital, expansion, or hiring.

Is the ARC Loan Still Available?

No, the ARC loan program expired in 2010. It was a temporary measure introduced during the Great Recession and is no longer active.

However, the SBA and other lenders continue to offer similar relief programs during economic crises, such as the PPP (Paycheck Protection Program) and EIDL (Economic Injury Disaster Loan) during the COVID-19 pandemic.

Alternatives to the ARC Loan Today

While ARC loans are no longer available, small businesses can explore:

SBA 7(a) loans – For general-purpose financing
SBA 504 loans – For real estate and equipment purchases
SBA Microloans – For loans up to $50,000
Disaster Loans – For businesses affected by emergencies
Private small business loans from community lenders

ARC Loan Forgiveness or Grants?

ARC loans were not forgivable, as they were meant to be repaid over 5 years. However, borrowers benefited from:

No interest costs
A 12-month grace period
SBA payment of interest to lenders

Conclusion

The ARC loan was a powerful short-term relief tool during one of America’s toughest economic periods. While it’s no longer available, its legacy lives on in today’s SBA disaster relief efforts and small business support programs.

If you’re a small business owner seeking financial help, it’s essential to explore current SBA offerings, compare loan terms, and work with a trusted lender to find the best fit for your needs.

FAQs

1. What is an ARC loan?

An ARC loan (American Recovery Capital loan) was a short-term, interest-free loan offered by the SBA in 2009 to help small businesses pay off existing debts during financial hardship. It was part of the federal stimulus efforts during the Great Recession.

2. How much could you borrow with an ARC loan?

Eligible small businesses could borrow up to $35,000, with no interest charged to the borrower. The SBA paid the interest directly to lenders, and borrowers had a 12-month payment deferral followed by a 5-year repayment term.

3. Is the ARC loan still available today?

No, the ARC loan program expired in 2010. It was a temporary program under the American Recovery and Reinvestment Act. However, other SBA loan options such as 7(a), 504, and microloans are currently available.

4. What were the eligibility requirements for an ARC loan?

To qualify, businesses had to be for-profit, U.S.-based, current on existing debts, and show viability (i.e., profitability in at least one of the past two years). It was designed for businesses experiencing temporary cash flow issues, not for those failing.