Loans for Working Capital
A small business' need for working capital financing can vary greatly and can involve both short term and long term requests. Short term working capital requests are normally associated with revolving lines of credit whereby a small business can borrow against the line of credit, repay the line and then borrow again as cash flow needs dictate. Lines of credit are normally reserved for established companies with a known cash cycle.
Long term or permanent working capital requests can arise due to a number of factors including the start of a new business, significant sales growth by an existing business, a slow-down in receivables, etc. These requests are usually financed with longer term loans ranging from three to ten years.
The 504 Company offers short term and long term working capital financing. Short term requests are relegated to SBA’s Contractor CAP Lines program, which is designed to provide working capital support to specific contracts. Traditional revolving lines of credit typically involve significant monitoring and therefore The 504 Company refers these requests to its member banks.
Long term working capital requests are usually handled in conjunction with a member bank and the use of the SBA 7(a) loan program. These requests are often accompanied by a separate bank line of credit.
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