SBA working capital pilot program: All you need to know

Recognizing that many US small businesses struggle to obtain adequate working capital finance, the US Small Business Administration is offering a new lending program to meet this important need.

Page written by Chris Godfrey. Last reviewed on October 2, 2024. Next review due October 1, 2025.

What is the SBA working capital pilot program?

Launched on August 1st 2024, the SBA working capital pilot program (7a WCP) is a new lending scheme for US small businesses. Offering funds for use as working capital, the program is designed to:

Support a range of financing needs for growing small businesses
Bring together the best features of the existing permanent 7(a) line of credit delivery methods
Provide financing for domestic and/or export purposes
Offer one-on-one counseling with SBA’s subject-matter experts to both small businesses and lenders

7a WCP allows US businesses to borrow up to $5,000,000, with the SBA guaranteeing 85% of loans up to $150k and 75% of loan amounts over $150k. Loans must be paid back within 60 months. Unlike many other SBA loans, young businesses – those with only one year or more of operating history – may be eligible for this program.

Collateral to the full value of the loan is usually required.

Interest rates vary from +6.5% to +3.0% depending on the amount you borrow.

Who is the pilot program for?

7a WCP is suitable for businesses that:

Can benefit from a line of credit up to $5 million
Operate in industries like manufacturing, wholesale, or professional services
Have at least one-year of operating history
Can produce timely and accurate financial statements, accounts receivable and accounts payable data, and inventory reports
Wish to fulfill large contracts or projects and/or borrow against accounts receivable or inventory

Pros and cons of the program

Like many other types of borrowing, SBA 7a WCP loans have their advantages and disadvantages:

Pros:

Borrow up to $5,000,000
May pay lower interest rates than other standard business loans
May pay low or no upfront guarantee fees to secure the loan
Up to five years to repay the loan, compared to 1 or 2 years for many other working capital loans

Cons:

Can be tough to qualify
Slow to fund – often taking several months from time of application to funds in your bank
Collateral for the full value of the loan usually required
Bad credit may disqualify you

How to apply for the pilot program

Applying for an SBA loan can be a complicated process, with qualifying rules and terms and conditions varying from one lender to another. Shopping around before settling on a deal is therefore crucial. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will immediately introduce you to a choice of loans from different SBA-approved lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out an SBA loan before.

What you may be required to provide:

Business details
Bank statements – minimum past 6 months
Cash flow forecast
Balance sheet and profit and loss statement
Tax returns – personal and business – past 3 years
Business plan and/or ‘use of funds’ statement

Alternatives to the working capital pilot program

If the SBA working capital program is not a fit for your business, you may be able to obtain the working capital you need with other types of loan:

SBa7a loan: Additional loans from the SBA. Borrow up to $5,000,000 with terms as long as 25 years. Security (collateral) required.
SBA microloan: An SBA loan for organizations that typically struggle to access standard business finance. Borrow up to $50,000 with FICO scores as low as 500, or even with no credit score at all. Security or personal guarantee is usually required.
Term loan: A lump sum that is paid back plus interest in regular instalments over a fixed period. The loan may be secured or unsecured.
Business line of credit: This type of borrowing functions like a bank overdraft facility, with the borrower having the freedom to withdraw and pay back borrowed funds from a flexible loan account. Borrowing is subject to maximum credit availability and any minimum payment conditions. May be secured or unsecured.
Merchant cash advance: Borrow against credit card receipts, repay with a percentage of your monthly or weekly card income.
Invoice financing: Also known as account receivable financing. The company borrows against the value of its outstanding accounts receivable (unpaid customer invoices). The invoices provide security to the lender. No additional collateral is usually required.
Business credit card: A credit card with a fixed borrowing limit in the name of the business. Usually unsecured, but often comes with higher interest rates and fees.

Get started with Swoop

No matter if you’re seeking your first working capital loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high quality SBA loans from a choice of lenders. Give your organization the working capital it deserves. Register with Swoop today.

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