Republican Sen. Olympia Snowe has introduced a bill to immediately end the American Recovery Capital loan program. The legislation would return $153 million in unspent ARC money to the Treasury.
The Maine senator says that the ARC program has been plagued by problems, most notably the high loan default rate.
New York Times financial blogger Robb Mandelbaum disagrees that the high default rate is the biggest problem with the ARC program. Mandelbaum writes:
“As Agenda readers know, the initiative has been flummoxed by its own design: Congress wrote the loan limits too small and the terms too generous for banks to profit from making the effort. Further, the impossible mandate of targeting struggling yet ‘viable’ businesses, coupled with Congress’s demand for rigorous accountability on stimulus spending … led inexorably to strict underwriting standards from the SBA Bankers, fearing they won’t be reimbursed for bad loans, have meanwhile adopted an even more cautious stance, disqualifying apparently worthy applicants.”
Snowe, the top-ranking Republican on the Small Business Committee, was a driving force behind the initial legislation, says Mandelbaum.
The House recently passed a bill that would extend the ARC loan program with a few tweaks, such as increasing loan limits and making the application process easier. It seems unlikely, however, that the bill will pass in the Senate.
This article was submitted by Katie Kapler, Director of Online Strategy for Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to email@example.com