Small Business Loan ABS

This chapter provides a guide to understanding the securitization of the unguaranteed portion of loans originated under section 7(a) as well as conventional small business loan securitizations. With the establishment of the Small Business Administration (SBA) and the 7(a) loan program, lenders were able to offer loans to borrowers that they may not have otherwise. While the underlying loans and structures of SBA and conventional small business transactions are generally the same, it is important to keep in mind some key differences. Geographic diversity, loan size, excess spread, and basis risk are likely the most notable differences and should be taken into context when assessing risk. While the timing of losses of small business loans is relatively consistent, severity of losses is typically dependent on macroeconomic cycles.