Working Capital Line of Credit under SBA CAPLines
A working capital Line of Credit under the SBA CAPLine offers small businesses a maximum of $5 million in funds to change short-term assets such as pending invoices to cash all around the year. It is mainly used for working capital and short-term operating needs. Apart from the standard 7(a) requirements, the other attributes necessary to qualify include inventory or accounts receivable.
In case your business produces goods or sells products and services on the invoice, yet you do not have a fixed selling season; you could just utilize the working capital SBA CAPLine. If, for instance, you own a nail salon, you could use the SBA line of credit to acquire supplies and to pay for operating costs and labor. Once you start receiving cash flow from the services provided, you can use it to pay off your SBA CAPLine. The facility cannot be used for the payment of certain taxes like trust funds, state sales, and withholding. Note that the line of credit should be revolving. Further, the lender has the right to structure the overall payments.
There are additional collateral requirements like the first lien over inventory and accounts receivable. In some cases, the lender has to make sure of a 1:1 collateral coverage through the assignment of business assets and other personal assets.