Inside the SBA’s New Working Capital Program (WCP)

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Inside the SBA's New Working Capital Program (WCP)We’ve written about the importance of working capital before. You might not know that Uncle Sam is about to open up another source of funding to small business owners.

The SBA has been piloting the Working Capital Program (WCP) and it officially launches to the public on August 1, 2024. It lives within the SBA’s existing 7(a) Loan program and can provide guaranteed lines of credit up to $5M to support domestic and international transactions. The program runs until July 31, 2027.

Let’s Look at the Numbers

Some of the important stats include:

  • SBA guarantees 85% of the loan up to $150,000, 75% for amounts greater than $150k
  • The maturity of the loan can run up to 60 months
  • Rates for loans of $50,000 or less cannot exceed the base rate (prime) + 6.5%
    • For $50-250k, this drops to 6.0%
    • For $250-350k, 4.5%
    • For $350k+, 3.0%

Lenders who already have Export Working Capital Program (EWCP) authority can immediately begin lending under this program. Other lenders can apply for the same delegated authority.

In fact, the fees for this program are modeled on what has already been working under the EWCP, namely that borrowers can customize the loan to their exact needs, paying only for the time they require.

Who Could Use This?

There are many applications for this type of funding. For example, for those looking to finance transactions, they can access working capital in this program earlier than they could using a traditional line of credit. For those looking to use assets as a basis for lending, they can efficiently borrow against their accounts receivable and inventory. Anyone who wants to go after a contract or expand its orders can now look to this program to help.

You might be wondering “what’s the catch?” Well, the requirements from the SBA are actually not too onerous:

  • The borrower must have had a history of 12 full months of operations before applying
  • If the application is in support of a new business, the acquirer must still have had a history of 12 months of operating the business, effectively putting a one-year waiting period on this program for buyers.
  • The business must be able to provide timely financial statements
  • The borrower must be prepared to offer annual financial statements and be creditworthy at the outset

Why Now?

The SBA has said that it wants to broaden its facilities available to businesses, and programs like their SBA Express loan have been less appealing to lenders, in part because it only offers a 50% guarantee.

Whatever the reason the program is rolling out now, it’s something that small business owners should look into for themselves.

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