Understanding the Weighted Average Maturity of a Pool Certificate [Business Credit and Assistance]
Definition & Meaning
The weighted average maturity of a pool certificate refers to the average time until the loans in a pool are expected to be repaid, weighted by the amount of each loan. This calculation considers the remaining term of each loan and its proportion of the total principal within the pool. As loans are paid off, defaulted, or prepaid, the weighted average maturity can change over time.
Legal Use & context
This term is primarily used in the context of business loans, particularly those guaranteed by the Small Business Administration (SBA). It is relevant in financial and investment sectors, especially when evaluating the risk and return of loan pools. Users may encounter this term when dealing with SBA loan programs, and they can utilize legal forms to navigate related processes effectively.
Real-world examples
Here are a couple of examples of abatement:
For instance, if a pool contains three loans with remaining terms of 12, 24, and 36 months, and their outstanding principals are $10,000, $20,000, and $30,000 respectively, the weighted average maturity would be calculated based on these values. (Hypothetical example.)
Relevant laws & statutes
According to 13 CFR 120.1700, this term is defined within the SBA regulations concerning loan pools. No other specific laws directly govern this term.