| Jack Goodison CEO of the J Goodison Company (right) speaks to U.S. Sen. Jack Reed and Jeanne A. Hulit about his government contracts during a tour of a ship repair facility in North Kingstown, R.I. |
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There are two kinds of CAPLines: the lines of credit version and something called the Contract Line. The latter is particularly important for construction contractors or contractors that are doing work for the government says Hulit. “When they get a big contract order or a big government order they may not have the working capital to meet that order. The contract line is an SBA-guaranteed credit line that will be collateralized with the contract. It helps the contractor scale up.”
While the SBA has had similar programs in the past, they have been paperwork-intensive and have only been guaranteed to 50 percent of the credit line. Banks didn’t like either part of that equation.
The new CAPLines program “makes it more consistent with the way banks manage their revolving lines of credit internally – underwrite, document and monitor them – as well as making it easier for the borrower to access.”
Instead of traditional forms of collateral, the new program “is designed to be collateralized by your accounts receivable and your inventory,” explains Hulit. “As your accounts receivable and your inventory grow, your availability can grow.”
With Congress wrangling over deficit reduction and cutting the size and funding of government programs, Hulit is asked if this expanded lines of credit endeavor will require going to Congress for additional funding.
“What we’re trying to do in this administration is really look at what we have currently and deliver it better. We want to streamline our programs, we want to simplify them. We want to modify them within our own procedural ability and be targeted about the government resources we have at our disposal,” Hulit explains.
| Jeanne Hulit and SBA Deputy Administrator Marie Johns in Londonderry, NH, earlier this year visiting a local business that used SBA loans to help finance its growth. |
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“The CAPLine program didn’t require any statutory approval or regulatory changes. It was taking an existing program and making it better. That’s what we’re trying to do for all of our programs. If our banks feel our programs are more user-friendly they’re more apt to deliver guaranteed loans to the small businesses that need them most.”
Hulit is asked if part of that user-friendliness includes language that’s easier for everyone to understand (related Corp! story at www.corpmagazine.com/features/cover-stories/itemid/1454/can-plain-writing-improve-your-bottom-line--or-ch). “We do have to have our standard operating procedures reviewed and edited by lawyers,” she laughs. “That is in its own right a challenge. But for the most part it’s not the borrowers who need to decipher our programs and terminology, it’s really the banks. We do a great job training our lenders. We’re doing our best!”
Those two programs -- the working capital and the contract line -- are, according to Hulit, “Our response to the fact that the economy is recovering and a lot of these businesses had their balance sheets banged up a fair bit over this past recession. They have viable businesses and their receivables are going to grow and they need to build inventory and we need to make sure they have the working capital to do that.”