It all seemed so promising…

Last year, Senator John Kerry’s Small Business and Entrepreneurship Committee managed to not only save several small business loan programs that were effectively reduced or completely nixed under the President’s proposed 2009 budget, but they also managed to secure over $100 million in additional funding. This additional funding was supposed to cover “increased loan oversight and reduced fees, microloans, contracting assistance, Small Business Development Centers, Women’s Business Centers, veterans outreach programs, and technical assistance programs…”

Over the year that followed, the SBA has heavily promoted its flagship offerings to small businesses- namely the 7(a) and 504 lending programs. And recently, it caused a stir with its America’s Recovery Capital Program, or A.R.C. Under this program, previously profitable small businesses currently experiencing financial difficulty would be given the chance to catch up on their debt. The A.R.C. loans, which can go up to $35,000, carry no fees and no interest, and are to be used to pay down existing debt. What’s more, the borrowing company does not have to begin repaying the loan until a year after it receives the final installment.

It sounded great, and many small businesses owners across the nation no doubt breathed a sigh of relief expecting that help would come their way. But the help has been slow in coming. Even with all the money and high hopes, banks both big and small and other “preferred” SBA lenders have been reluctant to offer SBA- backed loans (or any loans for that matter) to small businesses (for example, read here and here).

Even though both the SBA and the media have reported that small business lending has increased in the last few months, it is too little, too late for many of the small businesses who need this funding the most.

All disappointment, frustration, (an even anger) aside, the reality is that most small businesses would do better to abandon hopes for a government life-preserver and instead consider alternative forms of financing, such as accounts receivables factoring and merchant cash advances or tapping into the resources of friends and family to stay afloat in these difficult times.