SBA SOP 50 10 8.1, B.Ch4.A.2 — Contract CAPLines

SOP 50 10 8.1 B.Ch4.A.2

Effective 2026-10-01 · publisher's stamp for this provision

2. Contract CAPLines a. Eligibility To be eligible for a Contract CAPLine, the Applicant must: i. Be able to demonstrate the ability to operate profitably based upon the prior completion of similar contracts; ii. Possess the overall ability to bid, accurately project costs, and perform the specific type of work required by the contract(s); and iii. Have the financial capacity and technical expertise to complete the contract on time and at a profit. b. Eligible Uses of Proceeds i. The contractor must use loan proceeds only to finance the costs of one or more specific contracts, including overhead or general and administrative expenses, allocable to the specific contract(s). ii. Contract CAPLine proceeds may not be used: a) For permanent working capital; b) To acquire fixed assets; c) To pay delinquent taxes or similar funds held in trust (directly or indirectly); d) To refinance existing debt; e) To finance a contract in which significant performance has already begun; f) To finance a change of ownership; g) For floor plan financing; or h) To cover any mark-up or profit. c. Advances of loan proceeds financing performance of one contract or sub-contract under a master agreement may not be used to finance the performance of another contract or sub-contract. d. Progress payments or proceeds received in the performance of a contract or sub-contract financed with this line must not be applied in repayment of a different contract or sub-contract. Funding and payment applications must be accounted for in conjunction with the specific contract or sub-contract to which they relate. e. A single Contract CAPLine may be used to fund a single or multiple contracts. Once the overall line amount has been approved by SBA, the lender may advance against additional contracts without SBA approval, provided that the Borrower and Lender are in compliance with all terms. The contracting parties, as a result of a properly executed change order, may agree to increase the contract price subsequent to the approval of the Contract CAPLine. In such event, if the overall line amount needs to be increased, the Lender must comply with Ch. 6, Para. B.2, For SBA loans that have been fully disbursed, in this Section below to obtain SBA’s approval of the increase in the line. The contracting parties, as a result of a properly executed change order, also may agree to decrease the contract price subsequent to the approval of the Contract CAPLine and/or after a progress advance was made. In such event, the lender must ensure the Borrower is aware that the next future advance or future advances, if necessary, will be at the decreased amount.

Source: SBA SOP 50 10 8.1, B.Ch4.A.2 — Contract CAPLines · source URL · snapshot 0fb0c4692cf52938