SBA Line of Credit: The 4 Options

SBA lines of credit are available through the Small Business Administration’s (SBA) CAPLines Program. The SBA guarantees fixed and revolving lines of credit of up to $5 million, made by partner banks and other direct SBA lenders. Business owners can secure the line with business or personal assets and use the money for short-term or seasonal capital needs.

Many people know about the SBA’s long-term business loans, but fewer are familiar with the SBA’s line of credit offerings. But if you’re in need of flexible financing to solve your working capital or cash flow needs, then an SBA line of credit might be perfect for you.

These lines of credit have all the advantages of traditional SBA loans— low-interest rates, manageable monthly payments—but allow for more flexible use of capital.

In this guide, we’ll walk through everything there is to know about SBA loans vs lines of credit, and where to find the best alternatives if you’re not able to qualify for the SBA program. To begin, here’s a summary of the four main types of SBA credit lines.

The SBA 7(a) loan program is by far the most popular option from the SBA. Fundera does not offer SBA line of credits on our marketplace (more on that below), but if you would like to see if you qualify for an SBA loan or other types of line of credits, get started below.

Most people associate the SBA with traditional small business SBA loans, not with lines of credit. But, a line of credit can be an invaluable financial tool for a small business that is facing a shortfall of working capital, seasonal/cyclical gaps in cash flow, or a big project with an uncertain budget.

The SBA makes lines of credit available through the CAPLines program. As part of this umbrella program, there are four types of lines of credit.

These are the four SBA line of credit options:

The Seasonal SBA Line of Credit can be used to pay for seasonal increases in inventory, accounts receivables, or higher labor costs as you try to meet the demand of the busy season. You can qualify for a credit line of up to $5 million.

The Working Capital SBA Line of Credit is for businesses that need money to cover general operating expenses. Examples including buying inventory, hiring additional employees, and covering unexpected expenses. Lenders must structure this line of credit as a revolving line of credit.

The SBA Contract Loan CAPLine is for small business owners who need materials, supplies, or labor to meet their obligations under a contract or purchase order.

A Builders SBA Line of Credit is for businesses that construct or renovate residential or commercial buildings for resale. Businesses can qualify for as much as $5 million and use the money for labor, supplies, materials, equipment rental, and landscaping.

Just like any other business line of credit, an SBA line of credit can be fixed or revolving. A credit line provides access to a pool of cash that you can draw on as needed for business reasons. And you only have to pay interest on the cash that you actually draw from your account. The difference between fixed and revolving credit lines lies in what happens when you make payments.

With a fixed line of credit, your overall credit keeps decreasing every time you withdraw money from your credit line. But with a revolving credit line, the credit limit gets replenished every time you pay back what you borrowed plus interest (kind of a like a credit card).

Note that the SBA itself doesn’t issue loans or lines of credit. Instead, they guarantee business loans offered by partner banks and SBA lenders. For lines of credit, the SBA guarantees 75% or 85% of the loan amount. By providing a guarantee, the SBA removes some of the bank’s risk when working with small business owners. As a result, the bank can offer low interest rates and favorable terms for the borrower.

The qualification standards for an SBA credit line are almost identical to the qualification requirements for standards SBA 7(a) loans. There are a few additional requirements for the line of credit, depending on which of the four CAPLines programs you’re applying for.

Here are the general requirements to qualify for an SBA line of credit:

• The business must be for-profit and an eligible type of business
• The business must meet the SBA’s size standards
• The business must show good character in ownership (typically through personal information given)
• The business owner must have good personal and business credit (lenders generally expect you to have a minimum of a 660 personal credit score)
• The business owner must have previous business management experience (typically shown in resume and business plan)
• The business must demonstrate an ability to repay the financing (typically shown through bank statements, personal and business tax returns, profit & loss statements, balance sheets, etc.)
• The business must pledge inventory, accounts receivables, purchase orders, pending contracts, or property as collateral for the financing.

This is a long list of conditions, but don’t worry if you don’t meet each of these requirements. Business owners who are unable to qualify for an SBA credit line have several alternative options, which we cover in the guide.

The SBA line of credit rates and SBA 7(a) loans are the same. The SBA sets maximum interest rates on a 7(a) loan, and lines of credit are subject to these same maximums.

The SBA sets rate caps based on the prime rate, a benchmark interest rate that serves a reference for many types of loans.

Loans and lines of credit with less than 7 years’ maturity:

• Less than $25,000: Prime rate + 4.25%
• $25,001 to $50,000: Prime rate + 3.25%
• Over $50,000: Prime rate + 2.25%

You can check the current prime rate by going here.

You should also be aware that, like a 7(a) loan, an SBA line of credit from one of the 4 CAPLines programs comes with a guarantee fee. The SBA charges lenders a guarantee fee for the risk that the SBA takes on in guaranteeing a portion of the loan. Lenders typically pass this fee on to the borrower.

Here’s how the SBA guarantee fees stack up:

• For lines of credit of $150,000 or less, the guarantee fee is 2%.
• For lines of credit between $150,001 and $700,000, the guarantee fee is 3%.
• For lines of credit over $700,001, the guarantee fee is 3.5% (additional 3.75% fee on guaranteed amounts over $1 million)
• For short-term funding with a repayment term of one year or less, the guarantee fee is just 0.25% of the guaranteed amount.

These fees are assessed on the guaranteed portion of the loan, not on the full loan amount. The SBA guarantees up to 85% of the loan. For example, a lender might extend you a $100,000 working capital line of credit. The SBA will guarantee $85,000 of that loan. The fee will be 2% of $85,000, which is $1,700.

Lender cannot charge a higher fee on SBA-guaranteed loans and lines of credit than on similar non-SBA guaranteed products.

Each of the SBA credit lines have a maximum maturity date of 10 years, with the exception of the Builders Line, which has a maximum maturity date of 5 years.

The maturity date is the date by which you must repay the lender in full. But, there are smaller payments that might be due along the way. For instance, if you’re using funds from a Seasonal CAPLine to finance a specific contract, you must pay back the lender once your busy season is over.

Every month, you’ll receive a statement showing your minimum payment (just like a credit card bill). You can pay the minimum amount, but to save on interest, you can pay more than the minimum or the full amount you’ve borrowed to date.

Again, Fundera does not offer any SBA line of credits within our marketplace, but if you would like to see if you qualify for an SBA loan or other types of line of credits, get started below.

As you read up on SBA lines of credit, be sure to remember one crucial detail: Banks issue SBA loans and lines of credit. And bank financing is very tough to qualify for, even if you do have the SBA’s guarantee attached to it.

But if your local bank declines your application for an SBA business line of credit, that doesn’t mean you’re out of options. Lots of online alternative lenders offer lines of credit. These options are certainly costlier than SBA financing, and you won’t be able to get nearly as much capital. However, they offer you the same flexibility of use and repayment and are a lot easier to qualify for.

Here are some popular online line of credit lenders:

• Line amounts: $6,000 to $100,000
• Repayment term: 12 months 
• Cost: APR ranges based on your business’s qualifications
• Qualification requirements: 625+ credit score, 1+ year in business, and $100,000+ in annual revenue

OnDeck offers both short-term loans and revolving lines of credit for a variety of funding needs.

A line of credit with OnDeck goes up to $100,000 and features a repayment term of 12 months. The APRs on an OnDeck line of credit start as low as 35.9% (based on loans originated in the half-year ending March 31, 2024; minimums provided are rates that at least 5% of customers received).

To qualify, you’ll need a 625 personal credit score, one year in business, and at least $100,000 in annual revenues.

Read our full OnDeck review.

• Line amounts: $5,000 to $250,000
• Repayment term: 6 or 12 months (paid back weekly)
• Cost: Weekly fee on your balance
• Qualification requirements: 625+ credit score, 24+ months in business, and $40,000+ in monthly revenue

Bluevine is a lender that offers revolving lines of credit for small businesses. It’s easy to apply online for a Bluevine line of credit, and you can get funding within just a day or two. 

Read our full Bluevine review.

As a reminder, Fundera does not offer SBA line of credits in our marketplace, but if you would like to see if you qualify for an SBA loan or other types of line of credits, get started below.

The SBA has a great line of credit program. With low interest rates and repayments terms of up to 10 years, any small business owner would be lucky to qualify. But the SBA isn’t the only option around. If you’re seeking flexible capital but can’t qualify for an SBA line of credit, several alternatives are available.