What are SBA CAPLines and how do they work?
Short answer
CAPLines are 7(a) lines of credit for short-term and cyclical working capital needs. The four types are Working Capital, Contract, Seasonal and Builders. The maximum is $5,000,000 (SOP 50 10 8.1, Sec. B, Ch. 4; 13 CFR 120.390).
CAPLines are 7(a) lines of creditA credit limit you can draw on, repay and draw on again. for the short-term and cyclical operating needs of small businesses. The four types are Working CapitalMoney for day-to-day costs such as payroll, rent and inventory. Full definition, Contract, Seasonal and Builders (SOP 50 10 8.1, Sec. B, Ch. 4; 13 CFR 120.390).
What each type does
- Working Capital: a revolving line against accounts receivable and inventory.
- Contract: finances the costs of one or more specific contracts.
- Seasonal: finances seasonal increases in receivables and inventory.
- Builders: finances small general contractors building or rehabbing property for resale.
Limits common to all four
- Maximum loan: $5,000,000 (Para. B.1).
- Guaranty: 85% on loans of $150,000 or less and 75% on larger loans. SBA's exposure is capped at $3,750,000 for you and your affiliates (Appendix 16, Paras. A and B.4).
- Maximum variable rate: Prime plus 3.0 to 6.5 percentage points, depending on loan size (Para. B.4).
- No collateral is required at $50,000 or less (Appendix 19, Para. B.5).
How approval works
A lender submits a CAPLine through SBA's non-delegated process or under its Preferred Lender Program (PLP) authority (Para. C.1). Cash flow is the primary source of repayment, and it may include converting assets to cash (Para. C). Coverage must be at least 1.15 on a historical or projected basis, and 1:1 on a global basis (Para. C.2).
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