SBA working capital loans

The SBA offers many types of loans for US businesses. Some of these are provided for specific purposes, such as environmental farm development, but others may be used as working capital. 

How do SBA loans work?

SBA loans are provided by banks, credit unions and online lenders who are part of the SBA lender network. Partially backed by the US Government, these loans usually come with lower interest rates and fees than other commercial lending. However, depending on the type of SBA loan you apply for, meeting the strict qualifying rules may be challenging for some businesses. As well as an approval process that can take several months, organizations will typically need to have been in business for at least four years and have annual revenues over $180,000. The business owner’s personal credit score must also be at least 680.

SBA 7a loans

The 7(a) loan program is the SBA’s primary program for providing financial assistance to small businesses. Terms and conditions, such as the guaranty percentage (how much of the loan the US government will pay the issuing bank in case you default), and the loan amount, will vary depending on the type of loan you choose.

Popular SBA 7a loans for working capital:

• Standard: Borrow from $500,000 up to $5,000,000. SBA guarantees 75% of the loan amount. Collateral to the full value of loan is required
• Small: Borrow up to $500,000. SBA guarantees 85% up to $150k, 75% for loans over $150k. Collateral is not required if you borrow less than $50,000
• Express: Borrow up to $500,000. SBA guarantees 50%. Collateral is not required if you borrow less than $50,000. Express loans are designed to fund faster than SBA Standard and Small loans but come with a lower SBA guarantee. This may make them more difficult to obtain and/or have higher interest rates than other SBA loan products

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. 

SBA microloan

Nonprofit and community-based lenders may provide SBA Microloans to businesses that typically struggle to secure standard business loans of $100k or less. These types of SBA loans are ideal for underserved communities, including women, veterans, minorities, immigrants and refugees. 

SBA Microloans are available up to $50,000 and can usually be obtained with FICO scores as low as 500, or even with no credit score at all. However, be aware that they usually still require full collateral or a personal guarantee that makes you personally responsible for the debt, not your business.