From the December 2009 issue of Entrepreneur

For small-business owners who have run into financial trouble, a new Small Business Administration loan program offers relief. But the America's Recovery Capital (ARC) loan will only help businesses that meet certain strict criteria.

ARC was funded with $225 million to provide five-year, zero-interest loans of up to $35,000 per qualified business. To qualify, businesses must demonstrate that sales are down, expenses are up or they are having trouble paying current loans or suppliers. Owners also must provide two years of cash-flow projections and explain their game plan for returning to profitability.

The program is not for new startups--to qualify, you must have been in business at least two years, and profitable for at least one of the past two years.

The SBA is working on building support from banks, which get just 2 percent interest over prime and can't charge a fee. Many national banks that make other SBA loans declined to participate. After a slow first month with just $16.4 million in loans approved by mid-July, $96.5 million in ARC loans had been made by early October. The program runs until September, or until funds are exhausted.

Working with a participating community bank where you already do business is helpful, says Neal Gordon, principal at the loan-intermediary firm Business Borrowers Alliance. That worked for Jim Brunberg, owner of recording studio Mississippi Studios in Portland, Ore., which needed help paying a loan for an ill-timed expansion. Brunberg worked with Albina Community Bank in Portland, where Mississippi has accounts, and said his ARC loan process was a breeze.

Not so for Auburn, Ala.-based decor-store owners Ingrid and Frank Brown, who sought an ARC loan from a national bank in June after sales sank 30 percent. Ingrid Brown says the bank was making ARC loans mostly to existing loan customers and turned the pair down. They reapplied and were approved for only $13,300. They passed on it to apply to a community bank where their businesses, The Villager and Auburn Art.com, have accounts. They got $15,000 of the $45,000 they wanted.

"We still need money to buy merchandise for the holidays," she says.