Visa Embedded Lending June 2024 Banner

White House Launches Working Capital Pilot Program for Small Business

The Small Business Administration (SBA) plans to launch a working capital pilot program featuring a newly structured line of credit for small businesses that is designed to give greater flexibility than a traditional term loan.

The 7(a) Working Capital Pilot (WCP) Program will launch later this year, the SBA said in a Thursday (June 6) press release.

“Small businesses require working capital through competitively priced lines of credit to operate efficiently and fund their pursuit of growth opportunities — which is why the SBA is meeting the market needs, especially in a higher interest rate environment, by adding the 7(a) Working Capital Pilot Program to our suite of loan products,” SBA Administrator Isabel Casillas Guzman said in the release.

The program’s newly structured line of credit is made by 7(a) lenders and backed by the SBA, according to the release.

This line of credit product has a fee structure that is designed to give greater flexibility to both small businesses and lenders, providing more options when structuring a line of credit, the release said.

The program will include a Transaction-Based WCP that will enable access to working capital earlier in the sale cycle, Asset-Based WCP loans that will allow small businesses to cost-effectively access working capital against their assets, and a new solution for small businesses participating in the Home Energy Rebate Program funded by the Inflation Reduction Act, per the release.

To reduce the cost of loans with shorter maturities, the WCP allows small businesses to pay the SBA up-front guaranty fee on an annual basis, according to the release.

Complete details about the WCP will be posted at www.sba.gov and SBA’s team of Export Finance Managers will offer one-on-one counseling for lenders interested in the program, per the release.

CNBC reported on the upcoming launch of WCP on Tuesday (June 4), saying that the new working capital pilot program is designed to be more appealing than the SBA’s current offerings and to increase access to a simpler working capital line.

Only about 8.5% of small and medium-sized businesses (SMBs) have found working capital loans from banks to be readily available, according to “What’s Next in Credit: Why SMBs Prefer Corporate Credit Cards for Short-Term Financing,” a PYMNTS Intelligence and Cross River collaboration.