SBA 7(a) Working Capital Pilot Program
June 21, 2024
by a searcher from University of Pennsylvania - The Wharton School in Los Angeles, CA, USA
SBA 7(a) is some of the most attractive debt I’ve seen for entrepreneurs and business buyers (and one of the best pieces of debt I’ve seen in my professional career). Earlier this month, the SBA announced the forthcoming launch of new government-backed credit lines of up to $5mm. The program will offer small businesses loans that fund individual projects or provide a line of credit against the collateral assets of a business.
What was the problem?
According to a recent study, only 8.5% of small and medium-sized businesses have found working capital loans from banks to be an available source of capital.
Formerly, the SBA offered revolving lines of credit to limited success. The SBA’s Express Loans only offered up to $500,000 to borrowers, and the maximum SBA guarantee of 50% was not attractive enough to convince lenders to extend loans. The SBA also offered CAPLines, but these options had various structures, complicated fees, and lacked flexibility. Since businesses can be capital intensive, these limitations led to entrepreneurs struggling to grow and ultimately resulted in an underutilized SBA program.
What does this mean for small businesses?
Interest rates for the new credit line will be based on the prime rate plus 3.0%-6.5%. This it isn’t cheap in this current rate environment; however, it provides small business owners with much-needed liquidity and capital for growth.
For aspiring entrepreneurs to current small business owners, the SBA is trying to work to relieve pain points and offer a simpler working capital line. What do you think about the new SBA 7(a) credit lines and their impact on small businesses? Share your thoughts below!
from Seattle Pacific University in Shoreline, WA, USA
But perhaps for a smaller business that is less established or has less history, if access is easy, a working line of capital could be useful.
in Los Angeles, CA, USA