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SBA CAP Lines

Category: Local Incentives, Grants & Loans


AGENCY: Small Business Administration (SBA)
DESCRIPTION: CAPLines are revolving lines of credit which allow a borrower to obtain funds as needed from a pre-approved credit account. The general formula is up to 80% of accounts receivable no older than 90 days and 50% of saleable inventory. All of SBA's short term lending programs fall under CAPLines, including Standard Asset-Based CAPLines, Small Asset Based CAPLines, Seasonal CAPLines, Contract CAPLines and Builders' Line CAPLines.
ELIGIBLE USES:
• The line of credit is designed to finance the general working capital needs of a small business, while allowing continuous borrowing and repayment during the period of the loan.
• Eligible uses of funds include:
• Purchase land or buildings, to cover new construction as well as expansion or conversion of existing facilities;?
• Acquisition of equipment, machinery, furniture, fixtures, supplies, ormaterials;?
• Long term working capital including the payment of accounts payable and/or for the purchase of inventory;?
• Refinancing existing business in debtedness which is not already structured with reasonable terms
and conditions;?
• Short term working capital needs including: seasona lfinancing, contract performance, construction financing, export production, and for financing against existing inventory and receivable under special conditions; or
• Purchase of an existing business.
PROGRAM/LOAN STRUCTURE:
• Maximum Program Benefits: Guarantees up to $1 million in certain circumstances; maximum guarantee is 85% on loans up to $150,000 and 75% on loans greater than $150,000.
• Maturities: Up to five years.
• Rates and Fees: See SBA Loan Guarantee program for rates and fees details.
• Holders of at least 20% ownership in the business are generally required to guarantee the loan. ?Although inadequate collateral will not be the sole reason for denial of a loan request, the nature and value of that collateral does factor into the credit decision. ?
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 project 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 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.
QUALIFICATION CRITERIA/COMMENTS:
• The SBA defines a small business as follows:?
• Manufacturing-Maximum number of employees may range from 750 to 1,000;?
• Wholesale-Maximum number of employees may not exceed 100;?
• Retail/Service-Average annual receipts may not exceed $7 million to $35.5 million; and
• Construction-Average annual receipts may not exceed $7 million to $33.5 million.
• For more financing information, visit http://www.sba.gov/financing/loanprog/caplines.html or visit the SBA homepage at http://www.sba.gov/starting_business/index.html.
 


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