CAPLines is a family of SBA 7(a) loans for short-term and cyclical working capital. There are four: the Working Capital CAPLine, an asset-based revolver against receivables and inventory; the Contract CAPLine, for the costs of specific contracts; the Seasonal CAPLine, for seasonal build-ups; and the Builders CAPLine, for construction or renovation of buildings for sale. They follow 7(a) rules: up to $5 million, a guaranty of 85% on loans of $150,000 or less and 75% above, capped SBA interest rates, and personal guarantees from every 20% owner. The guaranty lets a lender lend where a conventional line would not.
- Program
- SBA 7(a) CAPLines: Working Capital, Contract, Seasonal, Builders
- Maximum loan
- $5 million, the 7(a) limit
- SBA guaranty
- 85% up to $150,000, 75% above; capped at $3.75 million per borrower
- Maturity
- Up to 10 years for working capital, usually set to the cycle being financed
- Personal guarantee
- Every owner of 20% or more
- Main trade-off
- SBA eligibility, a guaranty fee and borrowing base reporting
Why CAPLines exist
A bank extends a conventional line of credit when it is comfortable that the business earns enough to carry it and that the collateral covers it without much help. An asset-based lender extends a line when the receivables and inventory are large and clean enough to justify the cost of monitoring them. A company with a few million in revenue, lumpy earnings or a short track record can fall between the two: too thin for the bank's cash-flow line, too small for most asset-based lenders.
CAPLines fill that space by putting the SBA's guaranty behind a working capital line. The lender still underwrites the business and still takes the collateral, but if the loan fails, SBA covers the guaranteed share of the loss. That changes what a lender can say yes to. The price is that the loan is a 7(a) loan in every respect: the borrower must be eligible, the lender must follow the SBA's rules, and the loan carries the SBA guaranty fee.
The four CAPLines, and what each one finances
| CAPLine | What it finances | How it is repaid | How availability is set | Typical borrower |
|---|---|---|---|---|
| Working Capital | General operating needs, revolving | Collections on receivables and the sale of inventory | A borrowing base of eligible receivables and inventory, reported regularly | A distributor, manufacturer or service business with receivables to lend against |
| Contract | Labor and materials to perform specific contracts or purchase orders | Payment on the contracts financed | The costs of each contract, advanced as work proceeds | A contractor or government supplier with signed work but not the cash to perform it |
| Seasonal | The build-up of inventory, receivables and labor ahead of a busy season | The season's sales and collections | A seasonal cash flow projection and the business's history of past seasons | A retailer, grower or supplier with a predictable annual peak |
| Builders | Direct costs of building or renovating residential or commercial property for sale | Sale of the property | Construction budget, draws against completed work | A small builder constructing or renovating for resale |
The Working Capital CAPLine is the one that behaves most like a conventional line of credit: a revolver whose availability moves with the borrowing base. The other three are closer to purpose loans. A Contract CAPLine is tied to named contracts, much like contract financing; a Seasonal CAPLine works like the seasonal lines banks write, with a period each year when the balance is expected to come down; a Builders CAPLine is a construction loan for small builders.
How a Working Capital CAPLine is sized and run
The lender advances against eligible receivables and inventory using the same logic as any asset-based lender. Asset-based lenders typically advance 80% to 90% of eligible receivables, and advance against inventory at up to 85% of net orderly liquidation value, or roughly half of cost; SBA lenders set their own advance rates within their credit policies and are often more conservative on inventory. Receivables more than 90 days past invoice are typically excluded, and so are the other standard ineligibles.
What makes it an SBA product rather than a bank ABL is what surrounds the borrowing base:
- Reporting. The lender must be able to monitor the collateral, which means regular borrowing base certificates, agings and inventory reports, and often field exams. Some lenders charge a servicing fee for that monitoring, within limits SBA sets.
- Cash control. Collections commonly run through an account the lender controls, so repayment comes from the assets financed.
- Cash flow still matters. SBA requires debt service coverage of at least 1.15x, and 1.0x globally including the owners. A borrowing base does not excuse a business that cannot service its debt.
- Guarantees and collateral. Every owner of 20% or more personally guarantees the line, and the lender takes a lien on the business assets financed.
A CAPLine gives a small company an asset-based line. It does not give it an asset-based line without the reporting, and the reporting is where many small borrowers struggle.
Guaranty, rates and fees
Because CAPLines are 7(a) loans, the standard 7(a) numbers apply. SBA guarantees 85% of loans of $150,000 or less and 75% above that, and its guaranty to one borrower is capped at $3.75 million across all its 7(a) loans. A CAPLine counts toward the $5 million 7(a) maximum along with any other 7(a) loan the business has.
Most CAPLines are variable-rate, and SBA caps the rate: base rate plus 6.5% for loans of $50,000 or less, plus 6% from $50,001 to $250,000, plus 4.5% from $250,001 to $350,000, and plus 3% above $350,000. Current rates at SBA lenders are on the SBA loan rates page, and the cap itself is explained under SBA maximum interest rate.
The guaranty fee is charged on the guaranteed portion and depends on the loan's size and maturity; loans with a maturity of a year or less carry a lower fee than longer ones. On a revolver the fee is due whether or not the line is drawn, which matters when comparing a CAPLine with a bank line whose only standing cost is an unused line fee.
CAPLines against the alternatives
| SBA CAPLine | SBA Express line | Bank line of credit | Asset-based line | |
|---|---|---|---|---|
| Maximum | $5 million | $500,000 | Set by the bank | Set by the borrowing base and the lender's minimums |
| Guaranty behind the lender | 85% or 75% from SBA | 50% from SBA | None | None |
| What it is sized on | Borrowing base or the specific contract, season or project, plus SBA cash flow tests | Largely the lender's own credit judgement | Earnings and debt service coverage, commonly 1.25x | Eligible collateral first, earnings second |
| Personal guarantee | Every 20% owner | Every 20% owner | Usually the owners, often unlimited | Often narrower, sometimes only a validity guarantee |
| Reporting | Borrowing base reports and SBA requirements | Lighter | Annual financials and covenant certificates | Frequent borrowing base certificates and field exams |
| Who it suits | Small or thin companies with collateral a bank alone will not lend against | Small, straightforward needs | Profitable companies with steady earnings | Companies with large, clean receivables and inventory |
For the head-to-head with a bank line, including cost, see SBA CAPLines vs a conventional bank line of credit. The smaller SBA option is covered in SBA 7(a) vs SBA Express. A company that qualifies for a conventional line on its earnings usually does better there: no guaranty fee, and a guarantee that is more often negotiable. The CAPLine earns its place when the answer from the bank is no, or a line too small to use.
Eligibility limits that catch borrowers
A CAPLine is subject to everything that makes a business eligible for 7(a) at all: a for-profit business within SBA size standards, owners of good character, the credit elsewhere test, and use of proceeds SBA allows. A few rules come up often with working capital lines:
- SBA will not refinance an active merchant cash advance or a factoring agreement. From 1 October 2026, under SOP 50 10 8.1, an advance becomes eligible only once converted to a term loan that has amortized for at least 24 months with no new advance since. A business that wants to leave factoring for a CAPLine should read moving from factoring to a line of credit first.
- Proceeds cannot fund a distribution to owners, or refinance debt that did.
- Affiliated businesses count toward size standards and the loan limits, under the SBA affiliation rules.
- SBA's refinancing test applies to any 7(a) proceeds used to retire existing debt: the new payment must be at least 10% lower and the debt current for the last 12 months.
Paperwork follows Transparent's SBA checklist: two to three years of business tax returns, a P&L and year-to-date P&L, a balance sheet, a debt schedule with copies of notes being refinanced, personal tax returns and a personal financial statement for each 20% owner, and optionally bank statements, a use-of-proceeds narrative and the owner's resume. A Working Capital CAPLine adds the line of credit list: an AR aging by customer with days outstanding, an AP aging, and an inventory report where inventory is in the base.
Not every SBA lender writes CAPLines, and fewer run asset-based ones well. Transparent's book holds 278 lenders that write SBA 7(a) and 504 and 235 that write asset-based loans and lines, so the same file can be shown to the SBA lenders that monitor borrowing bases and to conventional asset-based lenders, and the terms compared side by side. On SBA loans the lender pays Transparent, not the borrower.
Common questions
- Is a CAPLine a revolving line of credit?
- The Working Capital CAPLine is a revolver whose availability follows a borrowing base. Contract and Seasonal CAPLines can revolve or be drawn down for a specific purpose, and a Builders CAPLine is drawn against a construction budget. All four are 7(a) loans.
- How large can an SBA CAPLine be?
- Up to $5 million, the 7(a) maximum, and it counts toward that limit together with any other 7(a) loans the business has. SBA's guaranty to one borrower is capped at $3.75 million.
- Do I have to personally guarantee a CAPLine?
- Yes. Every owner of 20% or more personally guarantees an SBA loan, and CAPLines are no exception. See who has to guarantee an SBA loan.
- Can a CAPLine pay off a merchant cash advance?
- Not an active one. SBA will not refinance an active merchant cash advance or a factoring agreement. From 1 October 2026 an advance becomes eligible only once converted to a term loan that has amortized for at least 24 months with no new advance since. Refinancing an advance into a conventional term loan first is covered on the MCA refinance page.
- How does a CAPLine differ from an SBA Express line?
- SBA Express loans go up to $500,000 with a 50% guaranty and give the lender more discretion over the credit decision. A CAPLine can go up to $5 million with the full 7(a) guaranty, but it comes with the program's borrowing base or contract structure and more SBA process.
- Does a CAPLine need a field exam?
- A Working Capital CAPLine is asset-based, so the lender must be able to monitor the collateral. That usually means regular borrowing base certificates and agings, and many lenders also run field exams. Contract, Seasonal and Builders CAPLines are monitored against the contract, season or project instead.