Sen. Olympia Snowe (R-Maine), ranking member of the U.S. Senate Committee on Small Business and Entrepreneurship, recently introduced legislation (S. 2777) that immediately would repeal the America’s Recovery Capital (ARC) loan program at the U.S. Small Business Administration (SBA). 

Authorized by the American Recovery and Reinvestment Act, the ARC loan program was intended to assist struggling but “viable” small businesses. The loans were to be used to make full or partial payments, for up to six months, of “principal and interest for existing, qualifying small business debt including mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors, suppliers and utilities.” The loans were capped at $35,000 and came with a 100-percent guarantee and no associated fees.

Although the program was beset by problems since its inception, the program was rocked by a recent Office of Management and Budget (OMB) estimate that that more than 60 percent of ARC-loan recipients could default. A subsequent “Washington Post” story added fuel to the fire. 

Snowe attributed her introduction of S. 2777 to the default-rate revelation and said the bill would “safeguard taxpayer funds.” In addition to immediately repealing the program, S. 2777 would return the unobligated balance—well over $120 million—of the program’s original $255 million appropriation back to the U.S. Department of the Treasury.

The bill would not affect borrowers who already received an ARC loan.