The Georgia Loan Participation Program

The Small Business Jobs Act of 2010 (the "Act") became law in the fall of 2010. The Act created the State Small Business Credit Initiative, funded with $1.5 billion to strengthen state lending programs that support small businesses and manufacturers. Of that total amount allocated, Georgia was allocated $47,808,507.


The Georgia Department of Community Affairs (DCA) has been approved for a modification from the U.S. Treasury to add the Georgia Loan Participation Program (GA LPP) to its existing State Small Business Credit Initiative (SSBCI) Programs. This type of program has been very successful over the last year in North Carolina, South Carolina and other states. The Georgia Loan Participation Program will enable lenders to provide more loans to businesses since the lender is able to diversify its risk by sharing exposure with the State.


GA LPP with SSBCI funding will be used to purchase a portion of a loan originated by a lender to a small business borrower. Interest rates, maturity, collateral and other loan terms are negotiated between the borrower and the lender. The primary lender conducts all of the customer interaction, including payment processing and loan workouts.


Corporations, partnerships, and sole proprietorships are eligible, as well as non-profits and cooperatives. SSBCI programs target an average borrower size of 500 employees or less, but the business cannot exceed 750 employees. Business purposes include start-up costs, working capital, franchise fees, equipment, inventory, as well as the purchase, construction, renovation, or tenant improvements of an eligible place of business that is not for passive real estate investment purposes.


Operating Mechanics of GA LPP -

  • The primary lender originates the loan, and Georgia through GA LPP will purchase up to 25% of the loan.
  • DCA will purchase from enrolled lenders a participation in loans ranging from $100,000 to $5,000,000.
  • Underwriting is performed by the primary lender that is shared with DCA to streamline the approval process of the purchased participation.
  • A Master Loan Participation Agreement is executed between the primary lender and DCA.
  • The lender closes the loan and sells a position to DCA.
  • The lender keeps all its standard fees. There are no additional fees to use the GA LPP.
  • Loan servicing is performed by the primary lender, which shares proportional debt payments with DCA.
  • DCA will be in a subordinate lien position, and the primary lender will have first claim to all recoveries until its losses are covered.
  • Rates, fees and terms are determined by the primary lender.
  • DCA may provide a lower interest rate than the primary lender for a limited period of time in order to improve the borrower's debt coverage ratio.
  • The primary lender has the unconditional right to repurchase the participation sold in the original loan to DCA at any time.

Downloads

GA LPP Participating Lender Application (DOC)

Draft Master Loan Participation Agreement (MLPA) for GA LPP (PDF)