Congress needs to help clean up the ARC mess it created

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Is Congress finally going to address the problems with ARC?  And, while they’re at it, admit they’re partly to blame?

ARC is the American Recovery Capital program, a $255 million government program launched by the Small Business Administration last spring, aimed at providing federally guaranteed, zero-interest loans of up to $35,000 to small business.  Last week, Senator  Bill Nelson of Florida (a Democrat. That’s his picture.)  held a press conference about the underwhelming response by banks. So far, only 65 loans have been made in Florida, he said.

According to Nelson, the culprits include the banks and the SBA.  While I can’t fault him for that, the real story is more complicated.  Most banks have been reluctant to participate because they figure they won’t net enough money to make the cost and time involved worth it.   You kind of can’t blame them. (Although I do find it appalling that, as Nelson also pointed out, the too-big-to-fail bailout recipients  aren’t making these loans).

As for the SBA, much as I like to criticize the agency, it’s actually doing what Congress told it to do. It’s true that ARC recipients have to be in business for at least two years and to be profitable for at least one, ruling out the eligibility of most companies needing a loan. However, as the You’re the Boss blog points out, it was Congress that passed a rule mandating companies to be “viable” and “experiencing immediate financial hardship”.  And it also insisted that banks comply with the onerous paperwork requirements required by all participants in the stimulus program.

Nelson said he wrote a letter to President Obama urging the president “To develop an aggressive plan of action to increase participation in SBA loan programs by all TARP recipients.”    That’s a good idea. But, to provide real help to small business Congress needs to stop blaming everyone else and trying to score political points, and seriously reconsider its actions.  That means completely rewriting ARC or, possibly, throwing it out and replacing it with something different.  I know it’s complicated–banks have legitimate qualms about lending to small businesses in this economy–but so what?

There are thousands of small businesses that need help and they need it now.