7(1) SBA Loans


In addition to the basic loan guaranty, the SBA has 7(a) programs for specialized needs. Unless otherwise indicated, the rules, regulations, interest rates, fees, and other guidelines of the basic 7(a) loan guaranty govern these programs as well.

CAPLines Loan

Through CAPLines, the SBA helps small businesses meet their short-term and cyclical working-capital needs. A CAPLines loan can be for any dollar amount, and the SBA will guarantee up to $1 million, as with the basic 7(a) guaranty. There are five short-term working-capital loan programs for small businesses under CAPLines:
 

Seasonal Line: This line advances funds against anticipated inventory and accounts receivable for peak seasons and seasonal sales fluctuations. It can be revolving or nonrevolving.
 

Contract Line: This line finances the direct labor and material costs associated with performing assignable construction, service or supply contracts. It can be revolving or nonrevolving.

Builders Line: If you are a small general contractor or builder constructing or renovating commercial or residential buildings for resale, this line can finance your direct labor and material costs. The building project serves as the collateral, and loans can be revolving or nonrevolving.
 

Standard Asset-Based Line: This program guarantees asset-based revolving lines of credit that are structured under SBA rules and provided by lenders. These loans let businesses borrow against their existing inventory and accounts receivable provided such assets have value, and the line is repaid when the business collects the cash from the sale of these assets. These loans are continually disbursed and repaid, and the borrower must provide a report on the status of the inventory and/or receivables with each disbursement. This line is generally used by businesses providing credit to other businesses. Since these loans require continual servicing and monitoring of collateral, the lender may charge additional fees.

 
Small Asset-Based Line: This is an asset-based revolving line of credit up to $200,000. It operates basically like a standard asset-based line. Some of the stricter servicing requirements are waived, however, if the business can consistently show repayment ability from its cash flow.



Terms, Interest Rates & Fees

Each of the five lines of credit has a maximum maturity of five years, but because each is tailored to your individual needs, a shorter initial maturity may be established. You may use CAPLines funds as needed throughout the term of the loan to purchase assets, as long as sufficient time is allowed to convert the assets into cash by maturity.
 

You and your lender negotiate the CAPLines interest rate, with the maximum set at 2.25 percent over the prime rate. The guaranty fee is the same as for any standard 7(a) loan. The SBA places no servicing-fee restrictions on the lender for the Standard Asset-Based Line, but it does require full disclosure to ensure the fees are reasonable. On all other CAPLines loans, the additional fee is limited to 2 percent based on the average outstanding balance.
 

Collateral

Your primary collateral will be the short-term assets financed by the loan.


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