hard · Asset-Backed Securities
In the SBA 7(a) secondary market, a pool consists of the 'guaranteed portion' of small business loans.
Why does this pool carry essentially zero credit risk for the investor?
- The full faith and credit of the U.S. government guarantees timely principal and interest.
- The loans are 100% collateralized by cash held in escrow.
- The borrowers are required to have AAA personal credit scores.
- The banks originating the loans are required to hold 50% risk retention.
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