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Join For FreeThe Ultimate Guide To SBA CAPLines Lines Of Credit
The SBA offers competitive lines of credit through its CAPLines program. See how you can qualify for up to $5 million with this flexible business funding opportunity.
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Key Takeaways
- The SBA offers four types of CAPLines: Working Capital, Seasonal, Contract, and Builder’s.
- To qualify for SBA CAPLines, businesses must meet SBA-defined criteria, including credit score and collateral requirements.
- The application process can be lengthy but offers competitive rates and terms for those who qualify.
In June 2024, the SBA announced plans to launch a new working capital pilot program. This new program will provide revolving lines of credit up to $5 million for eligible borrowers. The program is designed to make lines of credit more accessible and affordable than CAPLines or SBA Express lines of credit. Merchant Maverick will continue to monitor the status of this program and will provide updates after it goes live.
The SBA is known for its low-cost, long-term loans. Borrowers that need more flexible options than Standard 7(a) loans or 504 loans might want to consider an SBA line of credit.
SBA offers four lines of credit through its CAPLines program. With high borrowing limits, repayment terms up to 10 years, and competitive interest rates, these funding options are popular among many small business owners. Keep reading to learn more about CAPLines and see if you qualify.
Table of Contents
What Are SBA CAPLines?
The Small Business Administration provides invaluable resources to small business owners, from educational materials to low-interest loan programs. The SBA 7(a) loan program is the most popular and has several loan options available to small businesses. One of those options is CAPLines, which provides qualified business owners with a flexible line of credit of up to $5 million.
The SBA does not distribute loans itself — this is done by intermediary lenders like banks and credit unions. What the SBA does is guarantee up to 80% of each line of credit. This takes some of the financial risks off the lender, making them more apt to lend to businesses that may not qualify for funding elsewhere.
The SBA also sets interest rates and repayment terms, allowing businesses like yours to have access to affordable lines of credit for various business expenses.
The 4 Types Of SBA Lines Of Credit
There are four distinct loan programs offered under the CAPLines program for small business owners: the Working Capital CAPLine, Seasonal CAPLine, Contract CAPLine, and Builder’s CAPLine.
| CAPLine Type | Loan Use |
|---|---|
| Working Capital CAPLine | Line of credit that can be used for short-term needs such as working capital or operating expenses. |
| Seasonal CAPLine | Line of credit used by seasonal businesses to cover the costs of seasonal increases in accounts receivable or inventory. Seasonal CAPLines can not be used to cover costs during the off-season. |
| Contract CAPLine | Line of credit available for contractors to cover the costs of specific contracts. Credit lines can be used for overhead and general/administrative expenses. |
| Builder’s CAPLine | Line of credit used for expenses related to the construction and renovation of residential or commercial buildings for resale. This line can be used for costs such as labor, supplies, materials, landscaping, or other substantial costs during the construction and renovation process. |
Let’s take a closer look.
SBA Line Of Credit Eligibility & Collateral Requirements
To receive an SBA CAPLine, you must:
- Be a small business as defined by the SBA
- Demonstrate you have the ability to repay the loan
- Operate for profit
- Conduct business in the U.S. and have a physical location in the U.S.
- Show that you have invested your own money and time in your business
- Prove that you were not able to obtain financing from other lenders
These are the basic requirements for receiving an SBA line of credit. You met also meet the specific requirements of each program, personal credit score requirements, and provide collateral (for some programs) to receive a line of credit.
SBA Line of Credit Rates, Terms, & Fees
Here’s what to expect when it comes to CAPLine terms.
| Maximum Borrowing Amount | $5 million |
| Maximum Term Length | 5 years for Builder’s CAPLine 10 years for Seasonal, Working Capital, and Contract CAPLine |
| % Guaranteed By The SBA | 85% for loans below $150,000 75% for loans above $150,000 |
| Other Fees | Guarantee fee of 0.25% – 3.75% of the portion of the loan guaranteed by the SBA Other possible fees charged by the bank/partner lender |
Interest rates are calculated using the prime rate plus a markup. These rates are based on the amount borrowed and term lengths. SBA CAPLines rates are as follows:
| Borrowing Amount | Repayment Terms Less Than 7 Years | Repayment Terms More Than 7 Years |
|---|---|---|
| Less than $25,000 | Prime Rate + 4.25% | Prime Rate + 4.75% |
| $25,000 to $50,000 | Prime Rate + 3.25% | Prime Rate + 3.75% |
| $50,001+ | Prime Rate + 2.25% | Prime Rate + 2.75% |
Rates can be fixed or variable, so make sure you understand the terms before deciding what’s best for your business needs.
Additional fees for CAPLines lines of credit may include:
- Packaging fees
- Service fees
- Late payment fees
- Appraisal fees
- Environmental report fees
- Renewal fees
How To Apply For A CAPLines Line Of Credit
The first step to applying for a CAPLines program is to find an SBA-approved lender. You can use the SBA’s Lender Match tool, or you can ask for a referral from your financial institution.
Once you’ve found a lender, you’ll work together to complete your application. In addition to providing personal and business information, you’ll also need to gather documentation. While your lender can provide you with the specifics, some basic documentation requirements include:
- Personal financial statement
- Income statements
- Balance sheets
- Cash flow projections
- Income tax returns from the last three years
Once your loan application package has been submitted, you’ll await approval from the lender and the SBA. The entire process takes roughly 30 to 90 days, although there may be additional delays in the process. Make sure to keep in touch with your lender throughout the process to avoid these delays and get your funding as quickly as possible.
Alternatives To SBA CAPLines
For some businesses, a CAPLine just doesn’t fit. Whether you don’t meet the requirements, need something faster, or simply want to arm yourself with more knowledge, researching other business lines of credit is critical to finding the right funding for your business.
Online lenders can provide an easier way to get a flexible line of credit with few limitations on how funds are spent. The ease and freedom of other lines of credit may come as a cost with higher rates, lower credit lines, or less-favorable repayment terms. But for some businesses, an online loan may still be the right choice overall.
The Bottom Line On SBA Lines Of Credit
The process of applying for an SBA loan can be difficult and time-consuming, and the SBA CAPLines program is no exception. However, if you meet all of the requirements and have the patience, you’ll be rewarded with one of the best business lines of credit in the industry.
Erica Seppala
Editor & Senior Staff Writer at Merchant Maverick
Erica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.
View Erica Seppala's professional experience on LinkedIn.
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