Loan Participation Program

The Alaska SSBCI Loan Participation Program provides both side-by-side loans originated by the lenders and loan purchase options to support loan participation for qualifying small businesses. By providing loan participations through this program, businesses that traditionally do not qualify for commercial loans can get access to capital to start or grow their businesses.

This program enables lenders to deploy capital to higher risk industries and businesses using the financial security of the Alaska SSBCI program to offset their exposure and meet their internal fiduciary requirements.

Lenders must execute a Master Participation Agreement with the Alaska SSBCI Program to be listed as a SSBCI lender and utilize the program. In addition, a purchase contract and servicing agreement between the lender and the Alaska SBDC is executed for each loan in the program that verifies the criteria for the lender is met and the borrower is eligible to participate.

The program has two options:

• Loan purchase option: The Alaska SBDC purchases a portion of a loan from a private lending institution after the loan has closed and funded to an eligible borrower. The Loan Participation Program will purchase up to 50 percent of the total loan, with a maximum of $10 million of Alaska SSBCI funds available.
• Subordinated loan option: The Alaska SBDC will purchase a subordinate loan from the lender. The subordinated loan will provide below market interest rates never to exceed the National Credit Union Administration’s (NCUA) interest rate ceiling for loans made by federal credit unions as described in 12 U.S.C. § 1757(5)(A)(vi)(I) and set by the NCUA board.

The Alaska SSBCI program staff will not re-underwrite the loans in this program, but rather will review the bank’s lending assessment to determine if the participation support request is reasonable and conforms to the program restrictions and requirements. The lead bank is responsible for servicing, collections, and liquidation, with the Alaska SBDC receiving monthly, annual and delinquency reports. In the event of default, the Alaska SBDC will not recover any collateral or other assets associated with the loan; this would be the sole responsibility of the lender.

Loans supported through this program are expected to range in size from $500,000 to $1,500,000 on average. The Alaska SSBCI Loan Participation program funding amounts are estimated to average about 50% of the total loan, with loans to socially and economically disadvantaged individual owned businesses (SEDI) and very small businesses (VSBs), as defined by the Department of Treasury, given priority in the application process. The majority of loans will average a three-year repayment schedule.