The Ultimate Guide To SBA CAPLines Lines Of Credit

The SBA offers competitive lines of credit through its CAPLines program. See how you can qualify for up to $5 million with this flexible business funding opportunity.

WRITTEN & RESEARCHED BY
Erica Seppala
Editor & Senior Staff Writer

Last updated onUpdated August 18, 2024

REVIEWED BY

Expert Contributor

Our content reflects the editorial opinions of our experts. While our site makes money through , we only partner with companies that meet our standards for quality, as outlined in our independent .

Key Takeaways

The SBA offers four types of CAPLines: Working Capital, Seasonal, Contract, and Builder’s.
To qualify for SBA CAPLines, businesses must meet SBA-defined criteria, including credit score and collateral requirements.
The application process can be lengthy but offers competitive rates and terms for those who qualify.

In June 2024, the SBA announced plans to launch a new working capital pilot program. This new program will provide revolving lines of credit up to $5 million for eligible borrowers. The program is designed to make lines of credit more accessible and affordable than CAPLines or SBA Express lines of credit. Merchant Maverick will continue to monitor the status of this program and will provide updates after it goes live.

The SBA is known for its low-cost, long-term loans. Borrowers that need more flexible options than Standard 7(a) loans or 504 loans might want to consider an SBA line of credit.

SBA offers four lines of credit through its CAPLines program. With high borrowing limits, repayment terms up to 10 years, and competitive interest rates, these funding options are popular among many small business owners. Keep reading to learn more about CAPLines and see if you qualify.

Table of Contents

What Are SBA CAPLines?
The 4 Types Of SBA Lines Of Credit
SBA Line Of Credit Eligibility & Collateral Requirements
SBA Line of Credit Rates, Terms, & Fees
How To Apply For A CAPLines Line Of Credit
Alternatives To SBA CAPLines
The Bottom Line On SBA Lines Of Credit

What Are SBA CAPLines?

The Small Business Administration provides invaluable resources to small business owners, from educational materials to low-interest loan programs. The SBA 7(a) loan program is the most popular and has several loan options available to small businesses. One of those options is CAPLines, which provides qualified business owners with a flexible line of credit of up to $5 million.

The SBA does not distribute loans itself — this is done by intermediary lenders like banks and credit unions. What the SBA does is guarantee up to 80% of each line of credit. This takes some of the financial risks off the lender, making them more apt to lend to businesses that may not qualify for funding elsewhere.

The SBA also sets interest rates and repayment terms, allowing businesses like yours to have access to affordable lines of credit for various business expenses.

The 4 Types Of SBA Lines Of Credit

There are four distinct loan programs offered under the CAPLines program for small business owners: the Working Capital CAPLine, Seasonal CAPLine, Contract CAPLine, and Builder’s CAPLine.

CAPLine Type	Loan Use
Working Capital CAPLine	Line of credit that can be used for short-term needs such as working capital or operating expenses.
Seasonal CAPLine	Line of credit used by seasonal businesses to cover the costs of seasonal increases in accounts receivable or inventory. Seasonal CAPLines can not be used to cover costs during the off-season.
Contract CAPLine	Line of credit available for contractors to cover the costs of specific contracts. Credit lines can be used for overhead and general/administrative expenses.
Builder’s CAPLine	Line of credit used for expenses related to the construction and renovation of residential or commercial buildings for resale. This line can be used for costs such as labor, supplies, materials, landscaping, or other substantial costs during the construction and renovation process.

Let’s take a closer look.

Working Capital Line Of Credit

Working Capital CAPLines are revolving lines of credit that can be used for your short-term operating and working capital needs. Funds can’t be used for:

State sales tax
Delinquent withholding taxes
Floorplanning

Seasonal Line Of Credit

A Seasonal Line of Credit CAPLine can be used to finance businesses that need additional capital during certain times of the year. Funds can be used for:

Inventory
Accounts receivable
Labor costs

It’s a misconception that this type of credit is meant to get you through the off-season, as the proceeds must go toward supporting growth during high-volume periods rather than boosting your working capital during slow periods.

Contract Line Of Credit

A Contract CAPLine is used to finance the costs of specific contracts. Funds can be used to cover overhead or administrative costs and general expenses, too, as long as these are tied to a specific contract.

Funds from a Contract CAPLine can’t be used for:

Permanent working capital
Purchasing fixed assets
Paying delinquent taxes
Refinancing existing debt
Financing a contract that is already significantly underway
Change of ownership for floorplan financing
Covering a markup or profit
Financing the performance of another contract

Builder's Line Of Credit

Similar to the Contract Line of Credit, a Builder’s Line of Credit can only be used for very specific purposes. If you’re a business owner who needs to finance the cost of direct expenses incurred during a construction project, this may be your opportunity.

You can’t use the funds to purchase vacant land for future construction or hold any rental property for future rehab, but you can use funds for the following:

Labor
Supplies and materials
Equipment rental
Direct fees like permits, inspections, etc
Utility connections
Septic tank construction
Landscaping
Renovation (over ⅓ of the purchase price or fair market value)

SBA Line Of Credit Eligibility & Collateral Requirements

To receive an SBA CAPLine, you must:

Be a small business as defined by the SBA
Demonstrate you have the ability to repay the loan
Operate for profit
Conduct business in the U.S. and have a physical location in the U.S.
Show that you have invested your own money and time in your business
Prove that you were not able to obtain financing from other lenders

These are the basic requirements for receiving an SBA line of credit. You met also meet the specific requirements of each program, personal credit score requirements, and provide collateral (for some programs) to receive a line of credit.

SBA Line Of Credit Requirements By Program

Each CAPLines program also has its own set of requirements. Here’s a breakdown of these specific requirements:

CAPLine Program	Requirements
Contract Line	Must prove profitability based on prior similar contracts Must be able to bid on and perform the work outlined in the contract Must have the finances and expertise required to complete the work on time and at a profit
Builders Line	Must be a builder or construction contractor with managerial and technical experience Must plan for “prompt and significant” renovations Must prove prior success in bidding on and completing a similar project Must perform the work or manage the job with at least one supervisor onsite throughout the project
Seasonal Line Of Credit	Must have been in operation for at least 12 months Must prove a pattern of seasonal activity
Working Capital Line Of Credit	Must have accounts receivable or inventory

You can discuss specific requirements with your lender to determine if you qualify.

CAPLines Credit Score Requirements

To get an SBA CAPLine, you’ll need to have a strong personal credit score and history. There are no set requirements for receiving a CAPLine. However, a score of around 680 is generally recommended. Some lenders may have lower credit score requirements, but your score should be in the mid-to-high 600s at a minimum.

Lenders will also evaluate your credit history. During the application process, you may have to explain negative items on your credit report such as late payments or collections. Recent foreclosures, bankruptcies, and defaults on government loans may disqualify you from receiving SBA funding.

CAPLines Collateral Requirements

Because each CAPLine meets a specific need, there are some variations in collateral requirements for each distinct type. Here’s a quick look at what to expect for each.

CAPLine Type	Collateral Requirements
Working Capital CAPLine	First lien posion on accounts receivable and inventory
Seasonal CAPLine	No specific collateral requirements
Contract CAPLine	First lien position on the contract and proceeds
Builder’s CAPLine	First lien position on accounts receivable and inventory

Additionally, each owner with at least a 20% stake in the business must sign a personal guarantee to accept personal liability for the debt if the loan goes into default.

SBA Line of Credit Rates, Terms, & Fees

Here’s what to expect when it comes to CAPLine terms.

Maximum Borrowing Amount	$5 million
Maximum Term Length	5 years for Builder’s CAPLine 10 years for Seasonal, Working Capital, and Contract CAPLine
% Guaranteed By The SBA	85% for loans below $150,000 75% for loans above $150,000
Other Fees	Guarantee fee of 0.25% – 3.75% of the portion of the loan guaranteed by the SBA Other possible fees charged by the bank/partner lender

Interest rates are calculated using the prime rate plus a markup. These rates are based on the amount borrowed and term lengths. SBA CAPLines rates are as follows:

Borrowing Amount	Repayment Terms Less Than 7 Years	Repayment Terms More Than 7 Years
Less than $25,000	Prime Rate + 4.25%	Prime Rate + 4.75%
$25,000 to $50,000	Prime Rate + 3.25%	Prime Rate + 3.75%
$50,001+	Prime Rate + 2.25%	Prime Rate + 2.75%

Rates can be fixed or variable, so make sure you understand the terms before deciding what’s best for your business needs.

Additional fees for CAPLines lines of credit may include:

Packaging fees
Service fees
Late payment fees
Appraisal fees
Environmental report fees
Renewal fees

How To Apply For A CAPLines Line Of Credit

The first step to applying for a CAPLines program is to find an SBA-approved lender. You can use the SBA’s Lender Match tool, or you can ask for a referral from your financial institution.

Once you’ve found a lender, you’ll work together to complete your application. In addition to providing personal and business information, you’ll also need to gather documentation. While your lender can provide you with the specifics, some basic documentation requirements include:

Personal financial statement
Income statements
Balance sheets
Cash flow projections
Income tax returns from the last three years

Once your loan application package has been submitted, you’ll await approval from the lender and the SBA. The entire process takes roughly 30 to 90 days, although there may be additional delays in the process. Make sure to keep in touch with your lender throughout the process to avoid these delays and get your funding as quickly as possible.

Alternatives To SBA CAPLines

For some businesses, a CAPLine just doesn’t fit. Whether you don’t meet the requirements, need something faster, or simply want to arm yourself with more knowledge, researching other business lines of credit is critical to finding the right funding for your business.

Online lenders can provide an easier way to get a flexible line of credit with few limitations on how funds are spent. The ease and freedom of other lines of credit may come as a cost with higher rates, lower credit lines, or less-favorable repayment terms. But for some businesses, an online loan may still be the right choice overall.

The Bottom Line On SBA Lines Of Credit

The process of applying for an SBA loan can be difficult and time-consuming, and the SBA CAPLines program is no exception. However, if you meet all of the requirements and have the patience, you’ll be rewarded with one of the best business lines of credit in the industry.

Bio
LinkedIn
Latest Posts

Erica Seppala

Editor & Senior Staff Writer at Merchant Maverick

Erica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.

View Erica Seppala's professional experience on LinkedIn.

Latest posts by Erica Seppala (see all)

Mercury IO Business Credit Card Review - April 9, 2025
The Cheapest Accounting Software For Small Business - March 14, 2025
BHG Financial Review - March 7, 2025
Lendefied Review - February 27, 2025
Commercial Fleet Financing Review - November 21, 2024

Show less

Our Experts Are Listening

Get in touch with a real human being on the Merchant Maverick team! Send us your questions, comments, reviews, or other feedback. We read every message and will respond if you'd like us to.

Reach Out

Our Experts Are Listening

Get in touch with a real human being on the Merchant Maverick team! Send us your questions, comments, reviews, or other feedback. We read every message and will respond if you'd like us to.

Reach Out

We Want Your Feedback

Let us know how well the content on this page solved your problem today. All feedback, positive or negative, helps us to improve the way we help small businesses.

Give Feedback