Now that U.S. mortgage rates are at 6.05% based on Bankrate.com data, near the lowest in three years, the U.S. Small Business Administration (SBA) is highlighting for homebuilders the 7(a) Working Capital Pilot (WCP) Program.
The SBA said that with access to capital, homebuilders can accelerate residential construction and increase housing availability for American families with expanded access to capital. The SBA offers builders project-based lines of credit up to $5 million, and up to 100% financing of direct project costs, including labor, materials, and subcontractors.
“The 7(a) Working Capital Pilot Program is designed to assist in building our communities, providing jobs, and creating an opportunity for homebuilders to broaden their construction footstep providing more affordability for future homeowners,” says Atlantic Regional Administrator Matt Coleman, the head of the U.S. Small Business Administration’s Atlantic Region who oversees the federal agency’s operations throughout the U.S. Virgin Islands, Puerto Rico, New York and New Jersey. “We look forward to guaranteeing loans that will help streamline homebuilding without any reckless regulations or costs challenging the progress.”
The WCP features a flexible SBA guarantee fee designed to accommodate each borrower’s unique financing needs. The guarantee fee is set at 0.25% for the first 12 months, and 0.275% for each additional 12-month period, with loan terms available for up to 60 months based on borrower and project requirements. This annualized cost framework enables homebuilders to maintain a ready line of credit that can be efficiently deployed as new projects start.
When used by general contractors, the WCP can provide the dedicated working capital necessary to compete for and perform larger contracts. Homebuilders can leverage the program to finance project costs in residential housing developments, including those located in Opportunity Zones.
This empowers local builders to contribute to growing the nation’s housing supply. WCP loans may be structured as a revolving or non-revolving project-based line of credit, support both single- and multi-phase contracts, and are tailored to meet the needs of each homebuilder.
Builders interested in learning more about the 7(a) Working Capital Pilot Program can email 7aWCP@sba.gov to connect with an SBA working capital specialist.
