What Types of SBA Programs are Available for Working Capital?

The SBA 7(a) is the administration’s flagship term loan program. However, the SBA also offers specialized loan programs for certain circumstances. Some loan programs small businesses that need working capital might qualify for include:

• CAPLines – A revolving line of credit for financing seasonal or short-term needs. CAPLine loans that will be used for working capital require the borrower to show that their business generates accounts receivable and/or has inventory already.

• International Trade – For businesses that need funds to export internationally. This program offers up to a $4 million guarantee for working capital

• Export Working Capital – provides additional funding to increase domestic export sales without disrupting your business plan. This program allows for advances of up to $5 million to fund export transactions. These loans require that the business has been established for at least 12 months, and that the Export Management Company or Export Trading Company will take the title to the goods or services being exported, and the EMC or ETC has no bank ownership.

• Microloans – SBA-backed loans up to $50,000

Who Qualifies for the SBA 7(a) Loan?

SBA 7(a) loans have attractive interest rates, repayment terms, and closing costs, but they do have stricter qualification requirements than other business loans. Generally, in order to qualify for one, you’ll need:

• A credit score of at least 690

• A record free of any bankruptcies in the past three years

• At least a 10% down payment

• For franchisees, a paid franchise fee before the loan funds are released

• A clean criminal history, or the ability to explain any misdemeanors on your record

• No current Federal debt

In addition, the business that will benefit from the loan will generally need to be:

• A for-profit entity

• A small business

• Based in the United States

• A business with invested equity

• A business that has exhausted its other financing options

These requirements ensure that the loan is eligible for SBA backing. If the loan is ineligible, you’ll need to seek other forms of small business financing.

Who Guarantees an SBA 7(a) Working Capital Loan?

All owners of your business who have at least 20% equity in the company will be required to guarantee the loan, and you’ll need to include the names and information for each of these owners in your application paperwork.

In addition, if your spouse has at least 5% equity in the company and you and your spouse’s equity totals at least 20% (for example, if you have 15% equity and your spouse has 5% equity), your spouse will have to guarantee the loan, too.

One distinction: if you are a sole proprietor, you will not need to provide a separate personal guarantee for your SBA loan because you execute the note yourself as a borrower (instead of as a business).

What Counts as Working Capital?

Generally, working capital is the operating liquidity available to a business. You can calculate your business’s working capital by subtracting the business’s current liabilities from its current assets. 

You may need additional working capital to:

• Pay expenses

• Pay debt

• Take advantage of business opportunities

• Invest money ahead of seasonal changes

• Increase business health with cash on hand

How Can I Use the Loan Proceeds to Fund My Projects?

If your business is upside down on its working capital ratio (in other words, if you have more liabilities than assets), you may need more working capital to operate, pay bills, or even to secure affordable financing.

If your small business is growing, you may need more working capital to help you achieve your goals, like hiring more employees, securing more contracts, marketing your product, or increasing your inventory. 

What Documentation Will I Need to Provide? 

Your lender will need specific information about your business, including the business type, size, age, location, and industry. You’ll also fill out forms providing your lender with your personal information, like your legal name, address, and immigration status.

The forms and documents commonly required in the application package include:

• SBA Form 1919 (borrower information form)

• SBA Form 912 (statement of personal history)

• SBA Form 413 (personal financial statement)

• Business and affiliate financial statements, including a balance sheet, profit and loss, and income projection

The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.

Case Study: Cynthia's Graphic Design Expansion

Cynthia, a small business owner in Jacksonville, Florida, had been running her successful graphic design company for five years. As her client base grew and the demand for her services increased, Cynthia realized she needed to hire more designers and expand her office space to accommodate the growth.

However, despite the success of her business, Cynthia didn't have enough cash on hand to cover the expansion costs. She tried to approach traditional banks for a loan but was turned down due to the variable nature of her income. Feeling frustrated, Cynthia started looking for alternative financing options.

That's when she came across the SBA 7(a) loan program, which seemed like the perfect solution for her working capital needs. Cynthia researched the program and discovered that she met all the eligibility requirements, so she began the application process.

Cynthia gathered all the necessary documents, including her financial statements, tax returns, and a detailed business plan outlining her expansion strategy. She approached a local bank that specialized in SBA loans and submitted her application.

While waiting for the approval, Cynthia faced some challenges in managing her growing business, such as juggling client deadlines and ensuring her employees had the resources they needed. She knew the expansion was critical to maintain her company's reputation for quality and efficiency.

A few weeks later, Cynthia received the good news that her SBA 7(a) loan application had been approved. The bank granted her a 10-year, $175,000 loan with a low, fixed interest rate, providing her with the working capital she needed to grow her business.

With the funds from the SBA 7(a) loan, Cynthia was able to hire additional designers, rent a larger office space, and invest in new equipment to improve her team's productivity. The expansion allowed her to take on more clients and generate higher revenue, ultimately contributing to the continued success of her graphic design company.

I'm Ready for a Working Capital Loan! (Next Steps)

Once you’ve decided that an SBA 7(a) loan is for you, you’ll need to contact a lender to help you get started. The paperwork, terms, and jargon involved in putting together an application package for an SBA loan can be overwhelming. You can get personalized guidance at SBA 7(a) Loans.

Because we live and breathe the SBA 7(a) loan process, we are here to help you at every stage. We match business owners like you with the best lender for your situation, even if it means that we have to look outside of the SBA 7(a) loan program.

Fill in the form below, and we'll get back to you with a free quote.

In this article:

1. Before We Talk Working Capital: What Is an SBA 7(a) Loan?
2. What Types of SBA Programs are Available for Working Capital?
3. Who Qualifies for the SBA 7(a) Loan?
4. Who Guarantees an SBA 7(a) Working Capital Loan?
5. What Counts as Working Capital?
6. How Can I Use the Loan Proceeds to Fund My Projects?
7. What Documentation Will I Need to Provide? 
8. Case Study: Cynthia's Graphic Design Expansion
9. I'm Ready for a Working Capital Loan! (Next Steps)
10. Get Financing