SBA Launches Working Capital ‘Line of Credit’ Pilot Program

The U.S. Small Business Administration (SBA) announced the 7(a) Working Capital Pilot (WCP) Program. The WCP offers a newly structured line of credit, made by 7(a) lenders and backed by the SBA, designed to give greater flexibility than a traditional term loan.

“Small businesses require working capital through competitively-priced lines of credit to operate efficiently and fund their pursuit of growth opportunities – which is why the SBA is meeting the market needs, especially in a higher interest rate environment, by adding the 7(a) Working Capital Pilot Program to our suite of loan products,” said Administrator Guzman. “As the Biden-Harris Administration doubles down on its commitment to help entrepreneurs achieve their American Dreams of business ownership, this newly structured line of credit will empower more small businesses to pursue opportunities from President Biden’s Investing in America agenda, create jobs, and grow their businesses.”

This pilot program represents a significant expansion of the SBA’s loan programs by adding a line of credit product with an innovative fee structure engineered to increase flexibility for small businesses and lenders, providing more options when structuring a line of credit to meet businesses’ specific needs:

• The Transaction-Based WCP will allow small businesses to fund individual projects or orders, enabling access to working capital earlier in the sales cycle.
• Asset-Based WCP loans will provide small businesses with a cost-effective way to access working capital against their assets, allowing small businesses to better manage their cash flow while also supporting supply chain resiliency.
• For small businesses participating in the global marketplace, the WCP is designed to support both domestic and international sales under one facility.
• For small businesses participating in the Home Energy Rebate Programs funded by the Inflation Reduction Act, the WCP provides a new solution to help companies ramp up capacity and mobilize service.

The WCP is built around a flexible annual SBA upfront guaranty fee that allows small businesses to customize the loan to their individual needs. This innovative fee structure was first introduced under the SBA’s 7(a) Export Working Capital Program and greatly reduces the cost of loans with shorter maturities, allowing a small business to pay the SBA upfront guaranty fee on an annual basis.