For the past several months, I've been following U.S. Senator Olympia Snowe's attempt to help struggling small businesses through the implementation of the ARC Loan Program - - a stimulus-package incentive she helped to create, no less. You'll recall that this “America's Recovery Capital” loan program provides a maximum of $35,000 to a small business that must demonstrate viability, yet also be in need of the funds (an oxymoronic qualification if there ever was one). And for these past several months, you have continually heard me oppose the program (in blog posts here, here, here, here and here - - five so far). Now, $131 million later, Ms. Snowe has just submitted a bill (one week ago, today) to abolish the ARC program, citing her “new” realization that nearly 60% of the loans are projected to default.
While the program may have initially appeased the people of Washington, those left to sort through the “gift” were less enthusiastic. Qualifying for the ARC program and finding a bank that will participate are far from simple tasks, though they look downright painless in comparison to the hoops required to jump through in order to obtain actual funding.
From June through November - - six months - - we have spent millions of dollars to implement a program that never should have passed. Again, I say, it would have been far more beneficial, though not nearly as glamorous for the political class, to rework some of the existing SBA programs . . . and I've mentioned that on more than one occasion in this blog as well: here, here, here, here, here, here, here, here, here, here, here, here, and here (13 posts, going back to October of 2008).
The major problem with the ARC program is how inaccessible the capital is for small business owners. By surrounding the allotted $255 million in red tape, Snowe's good intentions quickly morphed into an inadequate program. And for those lucky enough to find their way through the mess of bureaucracy and paperwork, the end reward is far from satisfying. The impact of ARC to recipients is marginal at best (not sure how $35,000 would make much of an impact to a company with a payroll above a few hundred thousand dollars, for instance), and it provides little relief to wounded companies. Yet, rather than take the time to get in touch with the true needs of the small business community and to identify these major deterrents in their program, we wasted valuable resources creating a new program that only a few small business owners will ever, barely be able to utilize. There will always be a critic, but when the critic and the recipient are one in the same (as is now the case with Ms. Snowe), we should take a moment to really evaluate the choices we are making.
Now, it's possible that Senator Snowe recently began following my blog here and she's finally taken my words of advice to heart. But, it's much more likely that she has finally fallen upon the good sense to recognize bad public policy and revoke the program (at least she admitted she was wrong, though it was little consolation). Regardless, Senator Snowe understands the ARC program is far from the “lifeline” that she made it out to be originally (and it was known at the time of proposal that a 56% default rate was projected - - maybe she doesn't read the legislation she puts forth either), and we are back to the drawing board in attempts to save countless small business owners from drowning in the current climate of a near-moratorium on lending.
As I'm sure you're painfully aware by now, we're going to have to fend for ourselves until (or unless) the government gets its act together. I, for one, am going to keep plugging away at my businesses every day. I encourage you to do the same, and we'll make it through this mess, with or without the help of Washington.