The SBA is unveiling new credit lines of up to $5 million to fund small businesses

cnbc.com:

The U.S. Small Business Administration plans to unveil new government-backed credit lines of up to $5 million for small businesses, SBA Administrator Isabel Casillas Guzman told CNBC.

The SBA is launching a working capital pilot program in the coming months that is designed to be more attractive to both lenders and borrowers than the agency's existing products, Guzman said in a phone interview.

«An ongoing challenge for small businesses who are trying to go after that contract, perhaps to help us rebuild infrastructure… or a manufacturing facility that's trying to expand its orders, is being able to have working capital to deliver against that,» Guzman said.

The project is part of the SBA's efforts to broaden its flagship lending program for American small businesses. Through its 7(a) loan program, the SBA provides guaranties to lenders to encourage them to extend loans to small business owners.

The program backed more than 57,000 loans worth $27.5 billion last year, a 7% increase from 2022; most of those loans were for less than $350,000.

But the SBA's efforts to provide revolving lines of credit have had «less uptake» from lenders and business owners than the agency had hoped, Guzman said.

The agency's SBA Express loan, for instance, offers credit lines of up to $500,000, but with a 50% guaranty, which made it less appealing to lenders, she said. Another SBA product called CapLines had a complicated fee structure that wasn't as affordable, Guzman said.

«This product is our aim to increase access to a simpler working capital line,» Guzman said. «It basically takes the best of our various options to create a pilot program to see if we can get more borrowers an affordable working capital line, versus just a pure reliance