The SBA Working Capital Pilot (WCP) program provides business lines of credit under the SBA 7(a) loan program. While the SBA also offers lines of credit through the CAPLines program, the WCP program offers more flexibility and caters to a wider range of small-business owners.
These WCP lines of credit, like other SBA loans, offer substantial funding amounts, competitive interest rates, and extended terms, making them a suitable choice for established businesses seeking working capital.
The program is a pilot initiative, meaning it is available for a limited time unless extended or made permanent. Currently, the program is scheduled to run from Aug. 1, 2024, through July 31, 2027.
The SBA Working Capital Pilot program offers business credit lines that are partially guaranteed by the U.S. Small Business Administration and are typically issued by participating lenders such as banks and credit unions.
The program falls under the SBA 7(a) loan program and abides by many of its guidelines. It provides working capital lines of credit up to $5 million that can be used for various business needs.
There are two types of credit lines available through the program: transaction-based lines that can be revolving or non-revolving and asset-based lines backed by specific collateral in the form of a monthly borrowing base certificate.
Lenders must conduct an annual review to ensure borrowers are creditworthy and compliant with program requirements. Failure to meet these criteria may result in the lender withholding further draws or renewals until requirements are met.
The maximum term for a SBA Working Capital Pilot line of credit is 60 months, with interest rates set based on the prime rate plus a negotiated spread. Fixed rates range from 13% to 16%, and variable rates range from 11% to 14.5%.
In addition to interest, lenders may charge various fees such as service and packaging fees, extraordinary service fees, and out-of-pocket expense fees. Borrowers also pay an annual short-term guarantee fee for each year their credit line is in use under the WCP program. The advantage of this arrangement is that you only pay a short-term fee for a one-year term, rather than a long-term maturity as you would for other types of 7(a) loans. The score is calculated based on factors such as coverage options, customer experience, customizability, cost, and more.
Depending on your creditworthiness and your business’s financials
When applying for a loan, the interest rate you receive will depend on various factors including your creditworthiness and your business’s financial situation. Lenders will assess these factors to determine the level of risk associated with lending to you. If you have a strong credit history and your business is financially stable, you may be able to secure a lower interest rate. On the other hand, if your credit score is low or your business is facing financial difficulties, you may end up with a higher interest rate to compensate for the increased risk to the lender.
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