SBA rolls out new loan program

• March 5 webinar to focus on Asset Based Working Capital Program.

Last fall, the Small Business Administration (SBA) quietly unveiled a new 7 (a) loan program providing loan guarantees to lenders for up to $5 million. So far, no loans have been made in Mississippi.

To help loan applicants better understand the new loan program, the SBA will host a webinar March 5 from 3 pm to 4 pm to focus on the Asset-Based Working Capital Program financing method.

The Working Capital Pilot (WCP) Program offers a structured line of credit with greater flexibility than a traditional term loan. Among the innovative features: The 7 (a) WCP has a fee structure modeled after SBA’s 7 (a) Export Working Capital Program; it can support project financing to allow a borrower to access the working capital at an earlier stage than a traditional line of credit; it’s positioned to allow small businesses to efficiently borrow against their accounts receivable and inventory. It will allow new-to-export firms to use the 7 (a) WCP to open international markets without needing to obtain a separate line of credit. To help make sense of it all, SBA provides one-on-one counseling with SBA’s Export Finance Managers. 

The 7 (a) loan program, SBA’s primary business loan program for providing financial assistance to small businesses, can be used for the acquisition, refinancing, or improvement in real estate and buildings (it doesn’t cover house flipping); short- and long-term working capital; refinancing business debt; and the purchasing and installation of machinery and equipment, including AI-related expenses. It also covers purchasing furniture, fixtures, and supplies, change of ownership, and multi-purpose loans. 

Key eligibility factors are based on income components, credit history, and the site of the business. Other factors include being considered a small business under SBA size requirements (99.3 percent of businesses in Mississippi are considered small). Some businesses are ineligible for SBA loans, such as non-profits, life insurance companies, government-owned entities (except businesses owned or controlled by a Native American tribe), businesses located in a foreign country, and lenders. 

To apply, a small business owner may use SBA’s Lender Match tool to connect with a participating SBA lender. The application will go directly through a lender. 

“Using Lender Match doesn’t guarantee that you’ll get matched, or be offered a loan,” said SBA Mississippi Director Janita Stewart, noting that more than 800 lenders nationwide participate in Lender Match. “Lender Match isn’t a loan application; it’s a tool to help businesses find lenders in their communities.”

Existing borrowers may create an account in the MySBA Loan Portal (lending.sba.gov) to monitor loan status, view statements, and make payments. 

SBA recommends that business owners do their due diligence on potential lenders by asking them about interest rates, minimum credit score, and cash flow requirements, and also prepayment penalties, grace periods, and whether a lender may demand full repayment of the loan’s principal at any time.

Most 7 (a) term loans are repaid with principle-and-interest monthly payments from the cash flow of the business. Payment remains the same for fixed-rate loans. For variable rate loans, the lender may require a different payment amount, according to the interest rate. 

For the loan application, be able to describe needs based on a short series of questions, get matched in two days, talk to lenders, and apply for a loan. On the front end, make sure to have a solid business plan, know how much capital will be needed, know how it will help the business, and provide financial projections and possible collateral such as a car, home, inventory, or other property owned. Industry experience is a must.