Is an SBA CAPLine Right for Your Business? | Fora Financial Blog
How to Determine if an SBA CAPLine is Right for Your Business
August 15, 2018

How to Determine if an SBA CAPLine is Right for Your Business

The Small Business Administration (SBA) was created in 1953 to provide resources to small businesses. Since then, the role of the SBA has significantly increased, as they provide numerous financing options for small business owners to choose from.

One of the most popular financing programs is the SBA CAPLine. In this post, we’ll briefly discuss the four different SBA CAPLine options that are available and will help you determine which program makes the most sense for your business.

Getting to Know SBA CAPLines

SBA CAPLines are designed to provide small business owners with up to $5 million worth of credit. The purpose of these programs is to help small businesses “meet their cyclical and short-term working capital needs.” Although the four programs are somewhat similar in structure, there are significant functional differences between them.

  • Contract Loans: These are designed to cover specific contracts and the administrative expenses associated with them.
  • Seasonal Lines of Credit: This type of SBA CAPLine is ideal for businesses with substantial seasonal variations in cash flow. Seasonal Lines of Credit aren’t intended to provide year-round financing.
  • Builders Lines: This financing option is designed to cover the expenses associated with construction, which can include materials, labor, permits, and (depending on cost-structure) land.
  • Working Capital Lines of Credit: These are designed to help satisfy short-term working capital needs. Some restrictions may apply.

There are a few requirements that must be met in order to qualify for an SBA CAPLine. To start, you must be able to prove that you’re a for-profit business that has been operational for at least two years. Additionally, you’ll need to prove that you’ll be able to repay your loan, have had difficulty securing financing elsewhere, and that your annual revenue is at least $100,000. The recommended credit score for an SBA CAPLine is at least 620, so you’ll also need to meet this requirement.

When Should You Apply for an SBA CAPLine?

SBA CAPLines can be quite useful, although they’re only the ideal solution for a select group of businesses. To determine if an SBA CAPLine makes sense for your business, you should begin by examining your current working capital needs. If they are related to contracts, variations in seasonal cash flows, short-term situations, or new construction, then an SBA CAPLine may be worth pursuing.

In addition, the SBA will want you to try to secure financing through private resources before applying. Because the SBA is a federal program, and not an ordinary bank, they prefer to work with businesses that have exhausted traditional financing options.

When Does Applying for an SBA CAPLine Not Make Sense?

There are several situations in which an SBA CAPLine won’t be the best option for your business. If the type of working capital that you need doesn’t fit in the four categories mentioned above, then you’ll likely need to apply for a different form of financing.

Furthermore, if your current financing needs are greater than $5 million, SBA CAPLines probably aren’t the right type of credit for your business. Opening an SBA line of credit can often make it more difficult to secure additional funding elsewhere, which could prevent problems for your business if you need more financing in the future.

SBA CAPLines have very specific purposes, so if your credit is less than 620, your working capital needs are general, or your business can easily secure financing through traditional outlets, you should research other options.


Each of the four SBA CAPLine programs have helped many businesses establish a strong sense of financial security. If, after considering the relevant details of these programs, you still believe your business can qualify, then an SBA CAPLine may be exactly what you’ve been searching for.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Andrew Paniello
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Andrew is an experienced writer with a degree in Finance from the University of Colorado. His primary interests are investing, entrepreneurship, and economics.
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