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United States Small Business Management plans to open new government-backed lines of credit of up to $5 million for small businesses, SBA administrator Isabel Casillas Guzman told CNBC.
In the coming months, the SBA is launching a pilot working capital program that is designed to be more attractive to both lenders and borrowers than the agency’s existing products, Guzman said in a phone interview.
“The ongoing challenge for a small business that is trying to fulfill this contract, perhaps to help us rebuild the infrastructure … or a manufacturing facility that is trying to expand their orders, is having the working capital to solve this problem,” Guzman said.
The project is part of the SBA’s efforts to expand its core lending. program for American small businesses. Through its 7(a) loan program, the SBA provides guarantees to lenders to encourage them to make loans to small business owners.
The program has supported more than 57,000 loans worth $27.5 billion last year growth of 7% compared to 2022; most of these loans were under $350,000.
Isabel Guzman, administrator of U.S. Small Business Administration (SBA) nominee Joe Biden, is sworn in during her confirmation hearing before the Senate Small Business and Entrepreneurship Committee in Washington, D.C., on Wednesday, February 3, 2021.
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However, the SBA’s efforts to provide revolving credit lines have met with “less response” from lenders and business owners than the agency had hoped, Guzman said.
agencies SBA Express The loan, for example, offers lines of credit up to $500,000 but with a 50% guarantee, making it less attractive to lenders, she said. Another SBA product called CapLines According to Guzman, they had a complex fee structure that was not as affordable.
“This product is our goal to expand access to a simpler line of working capital,” Guzman said. “Essentially, it’s about using the best of our various options to create a pilot program to see if we can provide more borrowers with an affordable line of working capital rather than just relying on credit cards” or other sources of capital, she said.
According to the agency, the new SBA working capital lines will have annual fees and interest rates based on the prime rate plus 3% to 6.5%, which would be about 12% to 15% today. They will allow small business owners to either finance specific projects or take out loans against their assets.
Loans over $150,000 will have a 75% SBA guarantee, limiting the losses lenders face if customers fail to repay their debts. Loans under $150,000 have an 85% guarantee, according to the agency.
“In a higher interest rate environment, we want to make sure the SBA becomes an option for more businesses,” Guzman said.
Business owners interested in applying when the program begins should contact the SBA. Web site or its pre-qualification lender PlatformShe said.