SOURCE: CDC Small Business Finance

September 29, 2010 18:01 ET

Bank of America and CDC Small Business Finance Kick-Start Secondary Market Program for SBA Loans

Creation of Nation's First Pool of SBA-504 First-Mortgage Loans Intended to Increase Access to Capital for Small Businesses

CHARLOTTE, NC and SAN DIEGO, CA--(Marketwire - September 29, 2010) - Aiming to help create more jobs, Bank of America has collaborated with CDC Small Business Finance to assemble the nation's first pool of U.S. Small Business Administration 504 first-mortgage loans for sale under SBA's new secondary market program. Bank of America's purchase of these loans allows loan originators to make more credit available to small businesses.

Through the first-mortgage pooling program, Bank of America initially purchased $27.2 million in SBA-504 loans and created an SBA guaranteed pool of $25.6 million for distribution to investors. The SBA-504 program is intended to provide financing for the purchase of fixed assets, such as real estate, buildings and equipment. Bank of America was the largest bank 504 lender last year.

"The secondary market for SBA-504 loans has been nearly frozen for two years," said Kurt Chilcott, president of CDC Small Business Finance, the largest CDC SBA-504 lender in the U.S. "We appreciate Bank of America's leadership and effort to work through the complexities associated with this new program. We're confident this action will kick-start SBA's secondary market, generating new liquidity for banks so they can expand small business lending, help stimulate growth and support new job creation."

Kirk Meyers, Director, Structured Financial Advisory Services at Bank of America, said: "We are pleased to work with CDC on this program and to help loan originators ultimately extend more credit to small businesses, whose growth will be vital to the ongoing economic recovery."

For this pool, a total of $32 million of SBA-504 1st liens were divided pro-rata among Bank of America and the Seller/Servicer. Following the creation of the $25.6 million pool for investors, Bank of America will retain the remaining unguaranteed $1.6 million of the initial purchase while the Seller/Servicer will retain a $4.8 million unguaranteed pro-rata portion.

Banks that participate in the first-mortgage pooling program sell 85 percent of the value of each first mortgage, retaining 15 percent of each loan in their portfolio. Eligible loans are pooled and then sold to investors.

In addition to generating transactions for pooling, CDC is educating banks about the first-mortgage pooling program, providing underwriting support and verifying credit information and program eligibility. The SBA announced the new secondary market program in October 2009.

In a 504 loan, which small businesses use to buy commercial real estate or large equipment, the transaction has three elements: a first mortgage from a bank for 50 percent of the project cost; a second mortgage from a Certified Development Company (CDC) covering up to 40 percent of the cost and backed with a SBA guarantee; and a 10 percent down-payment from the small business borrower.

CDC Small Business Finance

CDC Small Business Finance is the nation's largest SBA-504 lender and is involved in various other community lending programs. CDC's 504 loan portfolio is comprised of over 3,800 loans, totaling more than $2 billion. CDC is a leading innovator in providing solutions to its banking partners and small business borrowers.

Bank of America

Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with 5,900 retail banking offices, more than 18,000 ATMs and award-winning online banking with 29 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.

Contact Information

  • Reporters May Contact:
    Jefferson George
    Bank of America
    Email Contact

    Larry Nuffer
    CDC Small Business Finance
    Email Contact