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CAPLines: Revamped Working Capital Program Helps Small Businesses with Growing Pains

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CAPLines: Revamped Working Capital Program Helps Small Businesses with Growing Pains

By Karen Mills, Former SBA Administrator
Published: November 4, 2011 Updated: November 4, 2011

On Wednesday, I visited an innovative green business in Memphis that retrofits big air-conditioning units in order to reduce wear-and-tear while saving their customers on energy costs.  As businesses like this grow and find new customers, we need to do everything we can to make sure they have the working capital they need to scale up and create jobs.

That’s why I was proud to announce that SBA recently reengineered our CAPLines program.  Banks are already starting to use it to put more capital in the hands of small businesses.

When a business lands a big new order or wins a federal contract, they often don’t have the necessary cash on-hand to hire workers and buy materials to fulfill it.  Now more than ever, we need to make sure a business in that position can secure the necessary financing to take full advantage of those opportunities.  The new-and-improved CAPLines program will do just that, giving these small contractors and suppliers the breathing room they need.

One lender that has already made a CAPLines loan is M&T Bank.  A startup IT firm had just won several federal contracts and needed a line of credit to cover payroll.   The owner had been in business for less than two years.  He didn’t have enough collateral, and he didn’t have much equity in his home.  M&T Bank said that under the old CAPLines program, they probably wouldn’t have been able to help, but because of the new streamlined process under the new CAPLines, it was much easier. 

Here are some benefits of the revamped CAPLines program:

  • Small businesses can now borrow against accounts receivable, inventory, contracts, and purchase orders in order to secure an SBA revolving line of credit.  For example, when fulfilling a purchase order request, that same order can be used as collateral to obtain an SBA-guaranteed line of credit to hire more workers and buy more materials.
  • Small business subcontractors can now obtain an SBA-guaranteed line of credit to finance their work on a contract with a federal prime contractor.
  • The SBA no longer requires small business owners without buildings or equipment to use their personal assets as collateral to secure working capital.  CAPLines lets them pledge accounts receivable, inventory, contracts, and purchase orders.
  • Small businesses benefit from the increased SBA 7(a) loan limit of $5 million, which went into effect with the Small Business Jobs Act of 2010.  These larger loan sizes will help small businesses that are poised to win bigger contracts and create a significant number of jobs.

If you think that the new CAPLines program might be helpful to you – or your lender – contact an SBA office near you and ask for a Lender Relations Specialist.

About the Author:

Karen Mills

Former SBA Administrator

Karen Gordon Mills is the Former Administrator of the U.S. Small Business Administration. The SBA helps both Main Street and high-growth small businesses get access to capital, counseling, federal contracts, disaster assistance and more.

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