There are many potential advantages to investing in SBA Pools. In fact, SBA Pools have historically earned strong yields. Meanwhile, their variable rate feature allows upside-yield potential in the event rates rise. In a declining rate market SBA Pools maintains wide spreads over alternative indices. Consider the following questions and highlights:
Signature Securities Institutional Trading group and the vast experience of its financial professionals makes the SBA pooling process simple for institutions of any size. A brief overview of the process is outlined in the steps below:
- First, a financial institution originates a new SBA loan and sells the guaranteed portion to an SBA pool assembler.
- Then the pool assembler combines several SBA loans of similar characteristics into a pool in a process similar to a mortgage backed security formation.
- By “stripping away” a portion of the coupon from each loan, the assembler may sell the pool for a lower dollar price.
- The resulting security maintains the same “Full Faith and Credit” guarantee of the U.S. government.
- The investor in a SBA pool owns an interest in a diverse group of SBA loans.
- Each month, the lender (originator) remits the pro-rata share of the principal and interest payment from the guaranteed portion of the loan to Colson Services Corporation, the Fiscal and Transfer Agent (FTA) for the Small Business Administration.
- Colson Services Corp. then forwards the applicable payment to the SBA pool investor.