When it comes to the business landscape, more money commonly equals, or creates, more opportunities.
And with the news that the Small Business Administration (SBA) has started soliciting insights on a new pilot program within the 7(a) Loan Program designed to support small and medium-sized businesses (SMBs), putting working capital to work is top of mind for SMBs.
The Working Capital Pilot Program (WCP), as detailed by the SBA, aims to address the need for accessible and flexible working capital among SMBs by providing short-term loans. These loans may be approved up to $5 million and used to back both international and domestic transactions.
Under the WCP, lenders may authorize a loan term of up to 60 months and must pay a guarantee fee to SBA for each loan made. The guidelines note that 7(a) lenders making WCP loans of $150,000 or less will have an 85% SBA guaranty, and WCP loans greater than $150,000 will have a 75% SBA guaranty.
“As small businesses grow, they require access to working capital. Working capital is most economically delivered through a line of credit and allows businesses to take on new opportunities in a way that a term loan cannot,” said Isabella Casillas Guzman, SBA administrator, in a statement.
The SBA has said it expects to approve around 270 WCP loans, with a total value of about $337 million, during 2025. The program itself is set to take effect Aug. 1 and expire by the end of July 2027.
The launch comes as U.S. merchants’ optimism is low, which means that effective management of working capital is more important than ever for businesses that hope to grow.
Read more: How Businesses Leverage Working Capital Solutions to Drive Growth
The SBA’s WCP program is designed to be more attractive to both lenders and borrowers than the agency’s existing products. The SBA first announced the pilot program in June, and comments on the program are due by Aug. 14.
Unlike traditional loan structures, the WCP Program offers a deferred payment option, allowing businesses to postpone their first loan payment. This feature is designed to provide SMBs with the breathing room they need to stabilize their operations before tackling repayment obligations.
After all, stabilizing operations can include things like covering costs such as payroll, inventory and other day-to-day expenditures that are crucial for maintaining and growing a business, as well as making strategic long-term investments into newer technologies and digital solutions.
In addition to other uses, loan proceeds under the program may be used to provide a temporary advance against state and federal tax credits or rebates, the SBA noted.
The SBA isn’t alone in its SMB focused initiatives. The British Business Bank, the U.K. government’s economic development bank, has itself launched a program July 8 designed to support access to finance for smaller U.K. businesses.
The British Business Bank has accredited 41 lenders for the program and will accredit more in the coming weeks. Twenty of these lenders are now open for applications, while the remainder are putting in place the operations they need to start lending under the program.
Read more: Embedded Lending Puts SMBs at Center of Financial Services Landscape
Still, improving SMB access to working capital solutions that fit their needs represents a puzzle that banks and other lenders have long struggled to solve.
Only about 8.5% of 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.
“The number one pain point for small businesses is access to capital,” Luke Voiles, CEO at Pipe, told PYMNTS in June. “It’s a powerful thing to give someone that has never had access to capital, but has an amazing small business. … It can be a huge multiplier.”
But the opportunity to crack the SMB lending space remains a big one, and the SBA offerings will also face competition from the private sector. Just Tuesday (July 16), FIS launched a solution designed to help banks source, underwrite and fund loans to SMBs. The new SMB Digital Lending solution was created in partnership with small business financial solutions technology platform Lendio.
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