Understanding Guaranteed Portion [Business Credit And Assistance] in SBA Loans
Definition & Meaning
The term "guaranteed portion" refers to the part of an SBA 7(a) loan that is sold in a secondary market transaction. This portion is backed by a guarantee from the U.S. government, which means that the government assures the payment of this loan segment. Once sold, the guaranteed portion is certificated, granting the holder the right to receive payments associated with it. This mechanism is designed to enhance the liquidity of SBA loans and encourage lending to small businesses.
Legal Use & context
The guaranteed portion is primarily used in the context of small business financing. It plays a crucial role in the SBA 7(a) loan program, which aims to support small businesses by providing access to capital. Legal practitioners may encounter this term when dealing with loan agreements, secondary market transactions, and financial regulations. Users can manage related forms and procedures through resources like US Legal Forms, which offer templates for SBA loan documentation.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A small business owner secures a $200,000 SBA 7(a) loan. The SBA guarantees 75% of this loan, meaning that $150,000 is the guaranteed portion. This portion can then be sold in the secondary market to investors.
Example 2: An investor purchases the guaranteed portion of an SBA loan. They receive monthly payments based on the loan's repayment schedule, backed by the U.S. government's guarantee. (hypothetical example)