Short-term and cyclical needs can drive costs sky-high for small businesses. The SBA offers the CAPLines program to businesses that have such needs, and there are four distinct programs within the CAPLines loan that address them. Each CAPLines loan program has terms and conditions that apply to it, specifically, as well as details that are ubiquitous to the CAPLines program.
For small businesses who make bids on contracts for specific types of work, such as construction or remodeling, the CAPLines Contract Loan has many benefits. Qualifications for the Contract loan are the same as the SBA 7(a) standard loan eligibility requirements. In addition, a small business must be able to demonstrate their ability to complete contracts they bid on, and have the financial and technical ability to perform on-time and on-budget.
All of the funds from the CAPLines Contract Loan must be used to cover costs related to specific contracts, including any sub-contracts, purchase orders, or other overhead related to the contracts in question. The maximum loan amount for the Contract loan is $5 million, with maturity no greater than 10 years.
Another CAPLines program designed to help contractual businesses grow is the Builder’s Line. This loan has the same requirements as the SBA 7(a) standard loan, plus the small business must be a construction contractor or homebuilder. The SBA requires that borrowers be able to demonstrate their ability to complete projects, have the staff to keep management on-site at all time, perform major and timely renovations, and be successful bidders.
Similar to the Contract Loan, borrowers of the CAPLines Builder’s Line must use the funds from the loan for costs associated with the specific projects that are approved. The Builder’s Line is a large loan, and goes up to $5 million. The term is short, however, and small businesses must be prepared for a 5 year maximum maturity.
Seasonal Line of Credit
The SBA offers seasonal lines of credit through the CAPLines program that have the same basic requirements as the SBA 7(a) standard loan. In addition to those requirements, small businesses seeking funding must have been in operation for at least a year, and have a proven seasonal need. The loans have a maximum loan amount of $5 million, with a guarantee of up to $3.75 million.
Small business owners must use the funds in ways that directly relate to seasonal needs, and not in ways that support the business during non-seasonal times. The seasonal line of credit is typically used for inventory and temporary labor.
Working Capital Line of Credit
Like the rest of the loan programs under the CAPLines program, the working capital line of credit has the same basic requirements as the SBA 7(a) standard loan. Small businesses must use the funds from the loan for operational needs, and related short-term needs. This program carries extra fees, and is also a revolving line of credit.
A business that uses credit for inventory or other purposes can also benefit from a Working Capital CAPLine program. The terms are similar to a standard SBA 7(a):
Maximum loan amount of $5 million
Guarantee percentage is up to 75% for loans of over $150,000 and up to 85% for loans of $150,000 or less
Maturity is up to 10 years
The loan proceeds must also not be used to pay delinquent taxes or trust funds like state or sales taxes. Also, a borrower can’t use the funds to obtain fixed assets.