New Government-Backed Credit Lines to Support Small Businesses
The U.S. Small Business Administration (SBA) is set to introduce new government-backed credit lines, providing up to $5 million of support for small businesses. SBA Administrator Isabel Casillas Guzman shared this news in an interview with CNBC. The upcoming working capital pilot program aims to be more appealing to both lenders and borrowers compared to the agency’s current offerings.
Guzman highlighted the challenge faced by small businesses when trying to secure contracts for infrastructure rebuilding or expanding manufacturing facilities. These businesses often struggle to access the necessary working capital to fulfill their commitments. The SBA’s initiative aims to address this issue and broaden its flagship lending program for American small businesses.
One of the SBA’s existing programs, the 7(a) loan program, encourages lenders to provide loans to small business owners by offering guaranties. Last year, this program supported over 57,000 loans, totaling $27.5 billion, with most loans being under $350,000. However, the SBA’s efforts to provide revolving lines of credit have not gained as much traction as expected.
Guzman explained that the SBA Express loan, which offers credit lines up to $500,000 with a 50% guaranty, was not as appealing to lenders due to the guaranty percentage. Additionally, the SBA’s CapLines product had a complex fee structure that made it less affordable for borrowers. To address these issues, the SBA’s new working capital lines will simplify the process and offer affordable options to borrowers.
The new credit lines will have an annual fee and maximum interest rates based on the prime rate plus 3% to 6.5%, approximately 12% to 15% currently. Small business owners will be able to use these credit lines to fund specific projects or borrow against their assets. The SBA will provide guaranties of 75% for loans larger than $150,000 and 85% for loans smaller than $150,000, limiting the losses for lenders.
Guzman emphasized the importance of making the SBA a viable option for businesses, especially in an environment of higher interest rates. The SBA’s website and pre-screening lender platform will be the avenues for business owners to apply for the program when it becomes available.
In conclusion, the SBA’s upcoming working capital pilot program aims to address the challenges faced by small businesses in accessing working capital. By simplifying the process and offering more affordable options, the SBA hopes to increase uptake from both lenders and borrowers. This initiative aligns with the SBA’s goal of supporting American small businesses and promoting economic growth.
 is introducing new credit lines up to million. With simplified processes and affordable options, this working capital pilot program aims to address the challenges faced by small businesses. Find out more about how the SBA is supporting American small businesses and promoting economic growth. Apply soon through the SBA's website and pre-screening lender platform.){kind=link}