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Terms & Conditions for Intermediaries
An intermediary may not borrow more than $750,000 in the first year of participation in the program. In later years, the intermediary's obligation to SBA may not exceed an aggregate of $5 million, subject to statutory limitations on the total amount of funds available per state.
During the first year of the loan, an intermediary is not required to make any payments, but interest accrues from the date that SBA disburses the loan proceeds to the intermediary. After that, SBA will determine the periodic payments. The loan must be repaid within 10 years.
The interest rate charged to the intermediary is equal to the rate applicable to five – year obligation of the United States Treasury, adjusted to the nearest one-eighth percent, less a buy down of 1.25 or 2.0 percent, based on the annual average loan size. Intermediaries that maintain an average loan size of $10,000 or less are known as Specialized Intermediaries and maintain the rate applicable to five – year obligations of the United State Treasury, adjusted to the nearest ne-eight percent, less 2.0 percent. Portfolios are evaluated annually to determine the applicable rate.
Intermediary Lender's Financial Contribution
The intermediary must contribute from non-Federal sources an amount equal to 15 percent of any loan that it receives from SBA. The contribution may not be borrowed. For purposes of this program, Community Development Block Grants are considered non-Federal sources.
As security for repayment of the SBA loan, an intermediary must pledge to SBA a first lien position in the Micro-loan Revolving Fund (see below), Loan Loss Reserve Fund (see below), and all notes receivable from micro-loans.
SBA does not charge intermediaries any fees for loans under this program. An intermediary may, however, pay minimal closing costs to third parties, such as filing and recording fees.
Micro-loan Revolving Fund
The Micro-loan Revolving Fund (MRF) is an interest-bearing deposit account into which an intermediary must deposit the proceeds from SBA loans, its contributions from non-Federal sources, and payments from its micro-loan borrowers. An intermediary may only withdraw from this account the money needed to establish the Loan Loss Reserve Fund, to make micro-loans to borrowers, and to repay SBA.
Loan Loss Reserve Fund
Loan Loss Reserve Fund (LLRF) is an interest-bearing deposit account that an intermediary must establish to pay any shortage in the MRF caused by delinquencies or losses on micro-loans. An intermediary must maintain the LLRF until it has repaid all obligations it owes SBA. An intermediary must maintain a balance on deposit in its LLRF equal to 15 percent of the outstanding balance of the notes receivable owed to it by its micro-loan borrowers (Portfolio).