SBA Line of Credit: How It Works and How to Get One

The SBA offers multiple lines of credit for business owners who need short-term working capital.
Marianne HayesJun 7, 2021

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The U.S. Small Business Administration provides loan products, including multiple lines of credit, through private lenders to help small-business owners thrive. SBA lines of credit can be worth up to $5 million, and this type of is typically best if you need short-term working capital to weather seasonal ups and downs or overcome temporary cash flow shortages.

An SBA line of credit is a flexible form of short-term financing that provides a reservoir of money that you can draw on as needed. You pay interest only on the amount you borrow, which is different from other that provide a lump sum that you pay back in its entirety over time.

Most SBA credit lines are part of the CAPLines program, which offers fixed or revolving lines of credit to meet different small-business needs. Revolving CAPLines somewhat mirror a credit card — after being approved for a certain credit limit, you can tap these funds on an as-needed basis and your borrowing power goes back up with each repayment you make. If the credit line is fixed, the overall credit limit declines with every withdrawal, regardless of your repayments.

SBA Express lines of credit are also available. These are a variation of , offering lower borrowing maximums (currently $1 million) but potentially faster funding.

There are four types of SBA CAPLines:

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CAPLines are part of the , and the borrowing maximum (up to $5 million) and interest rates mirror those loans. As of this writing, range from 5.5% to 8%.

Additional terms for an SBA line of credit depend on the specific product:

When , the government repays the lender a percentage of the outstanding balance. This is known as the loan's "guarantee." The maximum SBA guarantee for its credit lines has been temporarily increased to 90%. On Oct. 1, 2021, that percentage will return to 85% for lines up to $150,000 and 75% for lines that exceed that amount.

The qualifications for an SBA line of credit mirror standard, including being a for-profit small business that operates in the U.S. and being in good standing on any existing government loans.

Business owners seeking a CAPLine may also have to meet additional eligibility requirements:

Most SBA-approved lenders also expect good credit (a FICO score of at least 690) and prefer to work with companies that have been in business for at least two years and have strong annual revenue.

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The SBA itself does not dole out loans or lines of credit. Instead, it partners with approved . To apply for an SBA line of credit, look first to any bank or credit union you already have a relationship with to see if it's authorized to offer SBA-backed funding. You can also check the SBA’s tool for some guidance.

Once you’ve found a lender you’re comfortable with, it should be able to inform you of what documentation you’ll need to apply. If the SBA also needs to review your application, its turnaround period is around five to 10 business days.

If the qualifying criteria for an SBA line of credit proves too rigorous, consider a from a traditional lender. The annual percentage rate will likely be higher than with an SBA line of credit, but if your business needs short-term financing, it could be a good alternative.

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