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Working Capital and Mortgage Resources

Working Capital Loan Program

The Facts About ...CAPLines

CAPLines is the U.S. Small Business Administration's umbrella lending program that helps small businesses meet their short-term and cyclical working-capital needs.

CAPLines can be used to:

  • Finance seasonal working-capital needs;
  • Finance the direct costs of performing construction service and supply contracts;
  • Finance the direct cost associated with commercial and residential construction without a firm commitment for purchase;
  • Finance operating capital by obtaining advances against existing inventory and accounts receivable.

There are five distinct short-term working capital loan programs under the CAPLines umbrella including:

Seasonal LineFinances

- anticipated needs during seasonal upswings in the business cycle. Repayment is made from the sale of inventory and collection on receivables created during the season. The Seasonal Line can be revolving or nonrevolving.

Contract Line

Finances the direct labor and material costs associated with performing assignable contract(s). One contract line can finance more than one contract.

Builders Line

Finances the direct labor and material costs for small general contractors and builders that construct or renovate commercial or residential buildings. The building project serves as the collateral; Builders Line loans can be revolving or nonrevolving.

Standard Asset-Based Line

Provides financing for cyclical, growth and recurring short- term needs by advancing funds against existing inventory and accounts receivable. Repayment comes from converting short- term assets into cash and remitting this cash to the lender. Businesses continually draw and repay as their cash cycle dictates. This line of credit is generally utilized by businesses that provide credit to other businesses. These loans require periodic servicing and monitoring of collateral, for which additional fees are usually charged by the participating bank.

Small Asset-Based Line

Provides up to $200,000 under an asset-based revolving line of credit similar to the Standard Asset-Based Line, except that some of the stricter servicing requirements are waived (provided that the business can consistently show repayment ability from cash flow for the full amount).

Loan & Guaranty Amount

All CAPLines are only provided on a guaranteed basis and can be for any dollar amount except for the Small Asset-Based loan, which is limited to $200,000. However, the maximum SBA guaranty share is limited to $750,000 or 75 percent, whichever is less.
Loan Maturity & Disbursement
Each of the five lines of credit has a maturity of up to five years. However, to meet the needs of the applicant, a shorter initial maturity can be established. CAPLines funds may be used as needed throughout the term of the loan to purchase short-term assets, as long as sufficient time is allowed to convert the assets into cash by maturity.
The primary collateral will be either the current assets to be acquired with the loan proceeds or the current assets serving as a base for disbursements. Personal guaranties will also be required from the principal owners of the business.
Credit Requirements
Loan applicants must: - Demonstrate the capability to convert short-term assets into cash;
- Demonstrate sufficient management ability, experience and commitment necessary for a successful operation;
- Demonstrate the capability to perform, and collect payment for that performance;
- Have a feasible business plan;
- Have adequate equity or investment in the business;
- Have the capability of providing required updates on the status of current assets;
- Pledge sufficient assets to adequately secure the loan;
- Be of good character;

Guaranty & Service Fees - A guaranty fee is paid by the lender and is usually passed on to the borrower. On loans with maturities of up to one year, the fee is 0.25 percent. On loans where the guaranteed portion is $80,000 or less with maturities of more than one year, the guaranty fee is 2 percent of the guaranteed portion. On loans where the guaranteed portion exceeds $80,000 with maturities of more than one year, the guaranty fee is figured on an incremental scale. The lender also may charge a servicing fee no greater than 2 percent of the outstanding balance on an annual basis for all CAPLines loans except the Standard Asset-Based loan, where there are no fee restrictions.
Interest Rates - The rate of interest will be negotiated between the borrower and the lender, but cannot exceed the prime rate plus 2.25 percent.For More InformationInformation is power. Make it your business to know what is available, where to get it and, most importantly, how to use it. Sources of information include:

U.S. Small Business Administration
SBA District Offices
SBA OnLine (electronic bulletin board)
Business Information Centers (BICs)*
One-Stop Capital Shops (OSCSs)*
Service Corps of Retired Executives (SCORE)*
Small Business Development Centers (SBDCs)*
U.S. Export Assistance Centers (USEACs)*
Women's Business Centers (WBCs)*
* Inquire at your local SBA office for the location nearest you.

Other Sources of Information:
State economic development agencies
Chambers of commerce
Colleges and universities
Manufacturers and suppliers of small business products and services
Small business or industry trade associations
Did you know that in fiscal year 1997 the SBA - maintained a guaranteed-loan portfolio of more than $29 billion in loans to 200,000 small businesses that otherwise would not have had such access to capital?
backed over 49,400 loans totaling a record $10.9 billion to America's small businesses?
made a record 2,700 investments worth $2.37 billion through its venture capital program?
provided 50,000 loans totaling $1.1 billion to disaster victims for residential, personal-property and business losses?
extended management and technical assistance to nearly 900,000 small businesses through its 12,400 Service Corps of Retired Executive volunteers and approximately 1,000 small business development center locations?
assumed a leadership role in the President's Welfare-to-Work Initiative by encouraging entrepreneurship and linking small businesses with potential employees?Did you know that America's 23 million small businesses - employ more than 50 percent of the private workforce,
generate more than half of the nation's gross domestic product, and are the principal source of new jobs?
All of the SBA's programs and services are provided to the public on a nondiscriminatory basis.

Additional Working Capital Resources:
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