SBA to offer new working capital loan program with ‘innovative’ fee structure

PROVIDENCE – The U.S. Small Business Administration has announced a pilot program that offers a new structured line of credit designed to give lenders and small-business owners greater flexibility than traditional term loans.

The SBA said on June 6 that the 7(a) Working Capital Pilot Program is a significant expansion of the agency’s loan program, adding a line-of-credit product with an “innovative” fee structure that greatly reduces the cost of loans with shorter maturities, allowing a small business to pay a flexible annual SBA upfront guaranty fee on an annual basis.

The fee structure was first introduced under the SBA’s 7(a) Export Working Capital Program. The Working Capital Pilot Program will launch later this year, and more details will be released before that time.

“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 SBA Administrator Isabel Casillas Guzman.

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The agency said the program is intended to increase flexibility for small businesses and lenders, providing more options when structuring a line of credit to meet businesses’ specific needs.

According to the SBA, transaction-based 7(a) Working Capital loans will allow small businesses to fund individual projects or orders, enabling access to working capital earlier in the sales cycle.

Asset-based 7(a) Working Capital 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, the agency said.

The program will support both domestic and international sales under one facility.

And for small businesses participating in the Home Energy Rebate programs funded by the Inflation Reduction Act, the program will help companies ramp up capacity.