Money for Tough Times

Facing a cash crunch? Grab a no-interest loan from the federal government

October 1, 2009

A loan from the U.S. Small Business Administration can keep your business afloat or help you expand.

It’s been a question without a clear answer for some time now: Are individual real estate practitioners eligible for the various loan programs offered by the U.S. Small Business Administration?

This summer, NATIONAL ASSOCIATION OF REALTORS® President Charles McMillan sought much-needed clarification from the government agency. "First and foremost, real estate agents are entrepreneurs and should not be viewed as significantly different from entrepreneurs that operate as sole proprietorships or franchisees," McMillan said in a letter.

The SBA responded just weeks later, saying that, yes, real estate practitioners and brokers are allowed to apply for its federally backed loans. The news is especially welcome at a time when many real estate professionals are struggling to find capital for day-to-day operating expenses, debt service, capital expenditures, and funding for expansion.

So now the question is: Which SBA loans might you want to apply for, and what could you use the funds for? NAR analysts have identified three types of small-business loans that are most applicable to sales associates.

Of most immediate interest is a new no-interest, no-fee, deferred-payment short-term loan called ARC—an acronym for America’s Recovery Capital. This loan program was created as part of the massive economic rescue effort initiated early in President Barack Obama’s administration to give businesses a quick shot of money to help them ride out a temporary cash crunch. The loans, for up to $35,000, are intended to help you maintain payments on, or even replace, high-cost business debt. You can use the money to pay the principal and interest on existing debt, including credit card debt if the debt is for business expenses, NAR analysts say.

Other options to consider are the SBA’s two flagship products, Section 7(a) loans and Section 504 loans. With the 7(a) Guaranty Loan Program, you would apply for funding with a participating private-sector lender, such as a bank. The money can be used for working capital or debt replacement. The 504 Loan Program, meanwhile, is facilitated through community agencies, with loans used mainly to pay for fixed assets. This type of loan is ideal if you’re expanding your business or if you’re a broker who’s opening up a new branch.

For individual practitioners, the 7(a) loan program is probably the more useful option, NAR analysts say. And it’s recently been modified to become more attractive to borrowers during the downturn; fees have been temporarily cut and the loan guarantee level has been increased to 90 percent from 75 percent, among other things. The maximum loan amount, at $2 million, is far more substantial than the ARC loans, as the loan is intended for long-term needs rather than emergencies.

For more information on eligibility for financial help, speak with your SBA district office. Contact information is available at

Robert Freedman

Robert Freedman is the former director of multimedia communications at NAR.