The Georgia Loan Participation Program (GA LPP) will enable lenders to provide more loans to businesses since the lender is able to diversity its risk by sharing exposure with the State.
GA LPP is used to purchase a portion of a loan originated by a lender to an eligible small business borrower. Interest rates, maturity, collateral and other loan terms are negotiated between the borrower and the lender. The primary lender conducts all of the customer interaction, including payment processing and loan workouts.
Corporations, partnerships, and sole proprietorships are eligible, as well as non-profits and cooperatives. SSBCI programs target an average borrower size of 500 employees or less, but the business may not exceed 750 employees. Business purposes include start-up costs, working capital, franchise fees, equipment, inventory, as well as the purchase, construction, renovation, or tenant improvements of an eligible place of business that is not for passive real estate investment purposes. GA LPP also works well with the interim construction phase of SBA 504 loans.
OPERATING MECHANICS OF GA LPP:
- A Master Loan Participation is executed between the primary lender and DCA.
- The primary lender originates the loan, and Georgia through GA LPP will purchase up to 25% of the loan. The GA LPP will purchase up to 30% of the loan for CDFI and MDI banks.
- DCA will purchase from enrolled lenders a participation in loans ranging from $100,000 to $5 million. The maximum loan amount that DCA may participate with is $20 million.
- The maximum amount of DCA’s participation may vary from time to time based on program liquidity. The current maximum amount of DCA’s participation is $1,250,000 for loans greater than $5 million.
- Underwriting is performed by the primary lender that is shared with DCA to streamline the approval process of the purchased participation.
- The maximum term is 10 years with an amortization of 25 years. Loans are renewable in the SSBCI 2.0 program.
- Lenders are capped at 3% fees, 18% interest rate, and no pre-payment penalties.
- The lender closes the loan and sells a portion to DCA.
- The lender keeps all its standard fees. There are no additional fees to use the GA LPP for the lender or the borrower.
- Loan servicing is performed by the primary lender, which shares proportional debt payments with DCA.
- DCA will be in a subordinate lien position, and the primary lender will have first claim to all recoveries until its losses are covered.
- Rates, fees and terms are determined by the primary lender.
- DCA may provide a lower interest rate than the primary lender for a limited period of time in order to improve the borrower’s debt coverage ratio.
- The primary lender has the unconditional right to repurchase the participation sold in the original loan to DCA at any time.