SBA rules · SOP 50 10 8.1
What is an SBA CAPLines loan?
An SBA CAPLines loan is a short-term 7(a) revolving or non-revolving line of credit up to $5,000,000 designed to finance cyclical, recurring, or short-term operating capital needs across four specialized subprograms.
Quoted from SBA SOP 50 10 8.1Every quote checked word for word
In detail
- Subprograms and eligibility: CAPLines consists of four subprograms: Working Capital, which requires generating accounts receivable or inventory; Contract, which requires profitable completion of similar contracts and demonstrated capacity to complete the work; Seasonal, which requires at least 12 calendar months in operation and a definite pattern of seasonal activity; and Builders, which requires homebuilders or contractors to perform or supervise construction and prompt, significant renovation of more than one-third of purchase price or value.
- Loan size and guaranty: The maximum loan amount is $5,000,000, with a maximum guaranty of 85% for loans up to $150,000 and 75% for loans exceeding $150,000, subject to an aggregate $3,750,000 SBA guaranty exposure limit.
- Maturity and loan structure: Working Capital, Contract, and Seasonal CAPLines have a maximum maturity of 10 years, while Builders CAPLines cannot exceed 60 months plus construction or rehabilitation time. Working Capital CAPLines under $2,000,000 may be disbursed using a Borrowing Base Certificate (BBC) or a 1:1 collateral ratio, but facilities of $2,000,000 or greater must be administered via a BBC.
- Underwriting and equity: Debt service coverage must equal or exceed 1.15:1 on a historical or projected basis and 1:1 globally, and start-up businesses in operation for 1 year or less must provide at least a 10% equity injection based on total project costs.
The source
What the SOP says
“Lines of credit under CAPLines finance the short-term operating capital needs (revolving and non-revolving) of eligible small businesses.
“To be eligible for a Working Capital CAPLine, the Applicant must generate accounts receivable (not notes receivable), and/or have inventory.
“To be eligible for a Seasonal CAPLine, the Applicant must: Have been in operation for at least 12 calendar months; and Be able to demonstrate a definite pattern of seasonal activity.
“The maximum loan amount is $5,000,000.
“For Working Capital CAPLines, Lenders have the option of disbursing the line loan proceeds based on a BBC, or 1:1 collateral ratio when the loan is less than $2,000,000. For Working Capital CAPLines equal to or greater than $2,000,000, loan proceeds must be administered through a BBC.
“The maximum maturity on a Working Capital, Contract, or Seasonal CAPLine is 10 years.
“13 CFR § 120.396 The loan must not exceed 60 months plus the estimated time to complete construction or rehabilitation.
Have a deal in mind?
Tell us about it and we will tell you how these rules apply, and which lenders finance deals like yours.
More on what the money can pay for
Can an SBA loan be used for construction?Can an SBA loan be used to buy equipment?Can an SBA loan be used to buy land?Can an SBA loan be used to pay taxes?Can an SBA loan cover closing costs and fees?Can an SBA loan pay for inventory?All SBA rules
Related reading
Working Capital Loans for Existing Businesses: What Actually WorksStop Burning Money on Rent: How to Buy Your Building with Zero Down
This page quotes the SBA's Standard Operating Procedure 50 10 8.1. Lenders can ask for more than the SBA minimum. It is general information, not a loan approval or legal advice.