The SBA is introducing new credit lines of up to $5 million to support small businesses.

• The Small Business Administration in the U.S. is set to reveal new government-guaranteed credit lines of up to $5 million for small businesses, as announced by SBA Administrator Isabel Casillas Guzman to CNBC.
• In the upcoming months, the SBA will introduce a new working capital pilot program that aims to appeal to both lenders and borrowers, according to Guzman, who spoke in a phone interview.
• The SBA's new working capital lines will have an annual fee and interest rates that are 3% to 6.5% above the prime rate, which would be approximately 12% to 15% today, as stated by the agency.

The Small Business Administration in the U.S. is set to reveal new government-guaranteed credit lines of up to $5 million for small businesses, as announced by SBA Administrator Isabel Casillas Guzman to CNBC.

In the upcoming months, the SBA will introduce a new working capital pilot program that aims to appeal to both lenders and borrowers, according to Guzman, who spoke in a phone interview.

Guzman stated that small businesses face a challenge in securing working capital to fulfill contracts, whether it's for rebuilding infrastructure or expanding manufacturing orders.

The SBA's flagship lending program for American small businesses is being expanded through its 7(a) loan program, which guarantees loans to small business owners.

Last year, the program backed over $27.5 billion in loans, which was a 7% increase from the previous year. The majority of these loans were for amounts less than $350,000.

Despite the SBA's efforts to offer revolving lines of credit, there has been "less uptake" from lenders and business owners than the agency had hoped, according to Guzman.

The SBA Express loan offered credit lines of up to $500,000, but with a 50% guaranty, which made it less appealing to lenders, Guzman said. Additionally, CapLines had a complicated fee structure that wasn't as affordable, she added.

Guzman stated that the product is aimed at increasing access to a simpler working capital line by combining the best of their various options into a pilot program to test its effectiveness in providing affordable working capital to more borrowers, rather than solely relying on credit cards or other capital sources.

The SBA's new working capital lines will have an annual fee and interest rates based on the prime rate plus 3% to 6.5%, which would be roughly 12% to 15% today, according to the agency. These lines will enable small business owners to either finance particular projects or obtain loans secured by their assets.

The SBA offers a 75% guaranty for loans larger than $150,000, while loans smaller than $150,000 have an 85% guaranty.

Guzman stated that in a higher interest rate environment, it is crucial to ensure that the SBA is accessible to more businesses.

To apply for the program when it becomes available, business owners should visit the SBA's website or its lender platform, she advised.