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Skip Navigation LinksHome > Business Services > Investing & Brokerage > SBA Loan Sales & Pool Investing > Selling SBA Loans

Selling SBA Loans

Selling your SBA loans is one method of ensuring that your institution’s capital is working effectively. Determine the rate of return that your SBA portfolio is earning and then consider the following:

  Do you consider your SBA lending department a profit center?

SBA loans can be sold at premium prices.

  • There is strong investor demand for SBA loans and pools.
  • These loans have the “Full Faith and Credit” guarantee of the U.S. Government.
  • The SBA adjustable coupon provides price stability.
  • Financial institutions realize immediate profits on sale of originated loans.
  • SBA lending department can become a company profit center.
  Do you maintain the needed funds to meet your current SBA loan demand?

SBA loans offer increased liquidity.

  • Loans can be sold quickly into the secondary market.
  • Sale proceeds can be used to originate new SBA loans.
  • More funds are available to meet high loan demand.
  • Government guarantee ensures marketability of loans
  How quickly is your SBA servicing portfolio growing?

Selling SBA loans can help create or increase your servicing portfolio.

  • A minimum 100 bps servicing fee must be retained for each SBA loan sold.
  • SBA loans rapidly build up or “leverage” into a large servicing portfolio.
  • Prepayment penalties and increased fees offer lenders protection from prepayment risk.
  Do you meet all of your customers’ needs?

SBA loans help maintain relationships with your customers.

  • Premiums received from sales allow the lender to reduce some or all of borrower’s origination fees.
  • You can continue to service your customers’ loans.
  About the SBA Loan Sale Process:
  • A financial institution originates a new SBA loan and sells the guaranteed portion (which can be up to 90% of the total gross loan amount) into the secondary market.
  • The lender must retain a minimum servicing fee of 100 bps from each loan sold.
  • Sale of the guaranteed portion of the loan is documented in SBA Form 1086, “Secondary Participation Guarantee and Certification Agreement.” A certified copy of the note, SBA Form 147, must be attached.
  • Each month, the lender remits the pro-rata share of the principal and interest payment on the guaranteed portion of the loan to Colson Services Corporation, the Fiscal and Transfer Agent (FTA) for the Small Business Administration. Colson Services Corp. forwards the applicable portion of the payment to the investor.

This content is based on information available to the public. No representation is made that it is accurate or complete. The Small Business Administration (SBA) guarantees the timely payment of principal and interest on pool certificates and on SBA individual loans certificated on the DRC program, NOT on individual loan certificates; the SBA does NOT guarantee premiums on any secondary market sale. Pool certificates may be prepaid prior to maturity. Any prepayment penalty paid by a borrower is paid to the SBA as a “subsidy recoupment fee.” Certain securities may be considered high-risk investments and not suitable for all investors.


 
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