What collateral does an SBA CAPLine require?
Short answer
None at $50,000 or less. Larger lines depend on the type. Working Capital lines need a first lien on receivables and inventory. Contract lines need a first lien on the contracts. Builders lines need a lien on the property (SOP 50 10 8.1, Appendix 19, Para. B.5).
SBA does not require collateralProperty a lender can take and sell if a loan is not repaid. on a CAPLine of $50,000 or less. Above that, SOP 50 10 8.1, Appendix 19, Para. B.5 sets the rules by CAPLine type.
Working Capital CAPLines
- With a borrowing base certificate: a first lien on accounts receivable and inventory.
- Without one: the lender must assume full use of the line and secure it at a 1:1 collateral ratio.
- If those assets fall short, the lender must take personal real estate equity from owners of 20% or more and non-supplemental guarantors.
- A lien is not required when equity is less than 25% of fair market value (Appendix 19, Para. A).
Contract CAPLines
A first lien on the contract or contracts financed and their proceeds, by assignment and Uniform Commercial Code (UCC) filing, unless an assignment exception applies. The lender may take more under its own policies.
Builders CAPLines
SBA accepts no less than a second lien on the property, if the first lien was used to acquire it (Para. B.5; 13 CFR 120.395). With a second lien, releasing both liens may not cost more than 80 percent of the finished project's fair market value (Para. B.5).
Commercial real estate
A CAPLine over $500,000 secured by commercial real estate requires an appraisal. At or below that, an appraisal is required for related-party deals or when SBA or the lender decides it is needed. Otherwise an evaluation is enough (Para. B.5).
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