SBA is launching a new working capital pilot program

The U.S. Small Business Administration (SBA) is launching new government-backed credit lines of up to $5 million for small businesses, aiming to offer more attractive options for both lenders and borrowers. SBA Administrator Isabel Casillas Guzman revealed that the new working capital pilot program will roll out in the coming months to help small businesses secure essential working capital for expansion and project execution.

This initiative is part of the SBA's broader strategy to enhance its flagship 7(a) loan program, which saw significant growth last year. The pilot program seeks to simplify access to working capital lines, with improved terms and higher guaranty percentages to mitigate lender risks.

Key Points

1. New Credit Lines Introduction: SBA to offer credit lines up to $5 million, designed for better lender and borrower appeal.

2. Upcoming Launch: The working capital pilot program will be introduced in the next few months.

3. Objective: Addressing the need for working capital for small businesses looking to expand or take on new projects.

4. 7(a) Loan Program Expansion: The program supported over 57,000 loans worth $27.5 billion last year, with the majority under $350,000.

5. Challenges with Existing Products: Current offerings like SBA Express loans and CapLines had low uptake due to lower guaranty percentages and complex fee structures.

6. Features of New Program: Includes an annual fee, interest rates tied to the prime rate plus 3% to 6.5%, and SBA guaranties of 75% for loans over $150,000 and 85% for loans under $150,000.

7. Application Process: Business owners can apply via the SBA’s website or pre-screening lender platform once the program is live.

Additional Relevant Information

• High Interest Rate Context: The program aims to provide a viable option for businesses amidst high interest rates, ensuring they can access affordable funding.

• Loan Usage Flexibility: Credit lines can be used for specific projects or general working capital needs.

• SBA's Goal: To reduce dependence on costly credit cards and other expensive capital sources, offering a sustainable financial solution for small businesses.