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KAI RYSSDAL: This is National Small Business Week. To kick things off today in Washington, the head of the Department of Labor's Small Business Administration Karen Mills unveiled a program to help struggling companies: 35,000 loans interest-free. It's a government program, so it's got an acronym, of course. ARC -- America's Recovery Capital. Although Mills gave it a catchier handle in making her pitch.
KAREN MILLS: A bridge over troubled water, so this is for a business that's viable, that's shown it can be successful, but it's having some hardship.
As Mitchell Hartman reports now from the Entrepreneurship Desk at Oregon Public Broadcasting, the program is an answer to a problem a lot of companies have right now, big or small: How to pay off their mounting debts so they can get back on their feet.
MITCHELL HARTMAN: Carpenter Gerri Cannon of Merrimack, N.H., was doing OK until about two years ago. Then one big customer didn't pay up. Which meant Cannon couldn't pay down his credit-card debt, which he'd accumulated buying supplies in advance.
GERRI CANNON: I found that my bank cut my credit limit to about a third of what it was. And also they increased my interest rate.
Cannon's now maxed out at his $6,000 limit. He can only afford the monthly interest payment.
CANNON: And I can't pick up any larger projects now because that was my source of temporary funding.
JACKIE BABICKY-PETERSON: One of the problems with credit-card debt is it keeps you from getting other types of loans.
That's Jackie Babicky-Peterson at the SBA's Center in Portland. She sees lots of entrepreneurs who need 10 to 25,000 to cut their debt and stay in business, which is exactly what these new SBA-guaranteed loans are for. Cannon says he'll definitely apply: it would allow him pay off his business debts, interest-free and give him up to six years to pay the money back.
A bank makes the loan, but Uncle Sam pays the interest and backs it 100 percent. Good for the bank. But what about the taxpayer? SBA Administrator Karen Mills.
KAREN MILLS: This in the risk profile of the SBA is a more risky loan in that we expect to be giving to a business which is having difficulty.
To minimize that risk, businesses will have to show they've been profitable in the past, and have a decent shot at making money again once the economy turns around.
I'm Mitchell Hartman for Marketplace.