SBA working capital line of credit: What small businesses need to know

Small business owners constantly juggle cash flow challenges. One month you're waiting on invoices, the next you need inventory for a big order. The Small Business Administration's Working Capital Pilot (WCP) Program launched in 2024 to help businesses manage these ups and downs with business lines of credit made by lenders and backed by an SBA guaranty. 

Unlike many SBA loans that give you a lump sum upfront, an SBA working capital line of credit lets you borrow only what you need, when you need it. You pay interest only on the amount you use.

This program combines SBA backing with the flexibility of a business line of credit, potentially giving you better rates than conventional options.

What is the SBA Working Capital Pilot Program?

The WCP program is a specialized initiative within the SBA's 7(a) loan program that focuses specifically on helping small business owners access working capital through lines of credit.

They come in two forms we’ll describe in a moment: transaction-based lines of credit, and asset-based lines of credit. 

Whether you need to manage seasonal fluctuations, finance large orders, or support your business's growth, this program may offer your business flexible financing options up to $5 million.

The program includes a government guarantee up to $3.75 million, with higher percentages available for smaller loans — up to 85% for loans of $150,000 or less. 

SBA loan guarantees are designed to protect lenders in case of borrower default, not to shield borrowers who can’t pay back their loans. The borrower is still fully responsible for repaying the loan. The guaranty, however, can make the program more attractive to lenders who make the loans. 

Key features

• Maximum loan amount of $5 million
• Repayment term of up to five years
• Government guaranty helps reduce lender risk
• Two distinct credit line structures: transaction-based and asset-based

SBA line of credit rates are tiered based on loan amount and cannot exceed:

• $50,000 or less: base rate + 6.5%
• $50,001–$250,000: base rate + 6.0%
• $250,001–$350,000: base rate + 4.5%
• $350,001 and greater: base rate + 3.0%

SBA line of credit rates

The base rate can be any of three options:

• The prime rate
• The daily Secured Overnight Financing Rate (SOFR) + 3%, or 
• SBA's Optional Peg Rate

Using the prime rate of 7.0% (as of October 30, 2025), maximum rates would be:

• Smallest loans (≤$50K): 13.50%
• Mid-range loans ($50K-$250K): 13.0%
• Larger loans ($250K-$350K): 11.50%
• Largest loans (>$350K): 10.0%

These rates represent the maximum allowable interest rates under SBA rules. Actual rates may be lower depending on the lender.

Transaction-based lines of credit

One form of this loan is the transaction-based line of credit.

It can be particularly valuable if you need financing for specific business transactions or projects. This type can be either revolving or non-revolving, making it ideal for manufacturers building up inventory or contractors working on government contracts.

Often used for:

• Single or multiple specific transactions
• Government contract work
• Seasonal inventory buildup
• Project-based businesses

Operational requirements for transaction-based loans:

• Cash collateral accounts: Required for all transaction-based structures to capture receivables and apply them against loan balance
• Maximum advance rates: Lesser of 85% of purchase order or contract value or the borrower's direct costs (materials and labor)
• Contract assignments: May be required for government contracts depending on terms and track record

Asset-based lines of credit

The asset-based line of credit works particularly well for businesses with consistent accounts receivable and inventory. This revolving credit line is based on a monthly Borrowing Base Certificate (a document that details the value of the collateral) and typically comes with a 12-month commitment and annual renewal options.

Often used for:

• Businesses with steady receivables
• Inventory-heavy operations
• Ongoing working capital needs
• Monthly cash flow management

The credit line is secured by your accounts receivable and inventory, providing a stable foundation for ongoing working capital needs.

Operational requirements for asset-based loans:

• Borrowing Base Certificates: Submit monthly if the loan exceeds $1M; quarterly if $1M or less.
• Field examinations: Required before first disbursement for loans $1M or greater, and annually for loans $2M or greater
• Advance rates: Up to 85% on domestic accounts receivable, up to 70% on uninsured foreign receivables, up to 60% on eligible inventory
• Cash collateral accounts: May be required based on your banking relationship with the lender

How to apply for SBA working capital

To apply for one of these loans, you’ll need to work with an SBA-approved lender that offers them.

Each lender must follow SBA guidelines. But they may have additional requirements or preferences in terms of the types of businesses to which they will lend, their minimum credit score requirements, and the amount they will lend. 

Basic eligibility requirements

The SBA working capital requirements largely mirror other 7(a) loan program requirements. The biggest difference is that unlike some SBA loans available to startups, your business must be in operation for at least a year before you apply. 

1. Business history: Your business must have at least twelve months of operational history
2. Financial management: You need to demonstrate ability to repay through:
3. • Financial statements
   • Accounts receivable and payable aging reports
   • Inventory reports
4. Size standards: Must meet SBA size standards for your industry (determined by NAICS code)
5. Location: Must be organized for profit and located in the United States
6. Acceptable credit: No minimum credit score requirement, but business must be "creditworthy" and have acceptable credit. Lenders will review credit, including a FICO^® SBSS℠ Score. 
7. Permitted business type: Cannot operate in prohibited industries (gambling, speculation, etc.)

Application process

You’ll apply through an SBA-approved lender that offers the WCP program. Preferred lenders are lenders that are part of the Preferred Lender Program (PLP). If they have authority to offer the WCP program, they’re considered to have “WCP delegated authority.”

We'll refer to these lenders as PLP-WCP later in this article.

What does this mean in simple terms? These lenders can offer a more streamlined process — they can process, close, service, and liquidate WCP loans without prior SBA review.

Required documentation

You’ll likely need to provide the following documents, though your lender will guide you through the specific requirements for your loan. 

• Business tax returns (2–3 years)
• Personal tax returns for owners with 20%+ ownership
• Financial statements
• Business plan or loan proposal
• Cash flow projections
• Articles of incorporation and business licenses

Timeline expectations

SBA loans can take longer than online alternatives but may offer attractive terms that make it worth the wait. 

Lenders with PLP-WCP delegated authority can process loans faster since they don't require SBA pre-approval. Plan for at least 45–90 days for nondelegated processing through SBA, or at least 30–60 days with preferred lenders who have delegated authority.

Pros and cons of SBA Working Capital Pilot Program

SBA working capital vs. term loans

When choosing the type of small business loan you want to apply for, you may need to choose between business lines of credit and term loans. 

Understanding when to choose an SBA Working Capital line versus term loans can save you money and match financing to your actual needs.

Consider working capital when you need:

• Seasonal inventory financing
• To cover cash flow gaps
• Large order fulfillment
• Accounts receivable bridge financing

Consider term loans when you need:

• Equipment purchases
• Real estate acquisition
• Major business expansion
• Debt consolidation

Alternatives if you don't qualify

SBA loans aren’t right for every business. Consider these alternatives based on your situation:

If you need funding quickly:

• Online business lines of credit (funding in days)
• Business credit cards (immediate access)
• Invoice factoring (often same-day or next-day funding)
• Merchant cash advances (24–48 hours)

If you don’t have strong credit:

• Invoice financing or factoring
• Business cash advances
• Equipment financing (asset-secured)

Need a smaller loan amount:

• SBA microloans ($50K maximum)
• Business credit cards
• Online small business loans
• Equipment financing

Are in the startup stage:

• 0% intro APR business credit cards
• SBA microloans (some available to startups)
• Crowdfunding
• Alternative lenders with startup loan programs

Traditional alternatives to consider:

• Conventional business lines of credit
• Bank term loans
• Equipment financing
• Commercial real estate loans

Each option has trade-offs between speed, cost, and qualification requirements. 

Signing up for a free Nav account can help. Although Nav is not a lender, we help you compare financing options, which may include options from SBA-approved loans. 

Frequently asked questions