CAPLines Loan Program

Agency: Small Business Administration

Program: CAPLines Loan Program

Program Description: CAPLines is the umbrella program under which the SBA helps small businesses meet their short-term and cyclical working-capital needs. There are five short-term working-capital loan programs for small businesses under the CAPLines umbrella:

Seasonal Line: These are advances against anticipated inventory and accounts receivable help during peak seasons when businesses experience seasonal sales fluctuations. Can be revolving or non-revolving.

Contract Line: Finances the direct labor and material cost associated with performing assignable contract(s). Can be revolving or non-revolving.

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

Standard Asset-Based Line: This is an asset-based revolving line of credit for businesses unable to meet credit standards associated with long-term credit. It provides for financing for cyclical growth, recurring and/or short-term needs. Repayment comes from converting short-term assets into cash, which is remitted to the lender. Businesses continually draw from this line of credit, based on existing assets, and repay as their cash cycle dictates. This line generally is used by businesses that provide credit to other businesses. Because these loans require continual servicing and monitoring of collateral, additional fees may be charged by the lender.

Small Asset-Based Line: This is an asset-based revolving line of credit of up to $200,000. It operates like a standard asset-based line except that some of the stricter servicing requirements are waived, providing the business can consistently show repayment ability from cash flow for the full amount.

Proceeds of an SBA loan cannot be used: to finance floor plan needs; to purchase real estate where the participant has issued a forward commitment to the builder/developer, or where the real estate is primarily held for investment purposes; to make payments to owners or pay delinquent withholding taxes; to pay existing debt unless it can be shown that the refinancing will benefit the small business and the need to refinance is not indicative of imprudent management. (Proceeds can never be used to reduce the exposure of the participant in the loans being refinanced.)

Eligibility: Although most small businesses are eligible for SBA loans, some types of businesses are ineligible and a case-by-case determination must be made by the Agency. Eligibility is generally determined by four factors: type of business, size of business, use of loan funds, and special circumstances.

Funding Information: A CAPLines loan can be for any dollar amount except for the Small Asset-Based Line described above. Each of the five lines of credit has a maturity of up to five years, but, because each is tailored to an individual business’s needs, a shorter initial maturity may be established. Interest rates are negotiated with the lender and can be up to 2.25% over the Prime rate. The guaranty fee is the same as for any standard 7(a) loan. The SBA places no fee restrictions on the lender for the standard asset-base line but will require full disclosure to ensure that fees are reasonable. On all other CAPLines, the annual fee is restricted to two percent base on the outstanding balance. Holders of at least 20% ownership in the business are generally required to guaranty the loan. For most SBA loans there is not legislated limit to the total amount of the loan that may be requested from the lender. However, the maximum amount the SBA can guaranty is generally $750,000. Thus, with a lender requesting the maximum SBA guaranty of 75%, the total loan amount available under this program would be limited to $1 million. However, there are some exceptions. For those applicants that meet the SBA’s credit and eligibility standards, the Agency can guarantee up to 80% of loans of $100,000 and less, and up to 75% of loans above $100,000 (generally up to a maximum guaranty amount of $750,000).

Timelines: Applications are accepted year round.

Contact: Int www.sba.gov

Sacramento (916)498-6410 Fresno (209)487-5791

Glendale (818)552-3210 San Diego (619)557-7250

Santa Anna (714)550-7420 San Francisco (415)744-6820