NEW WAVE MARKET MAKERS

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NEW WAVE MARKET MAKERS
TM
NEW WAVE MARKET MAKERSTM
We Make Markets for SBA Tails™
Confidential – Not for Further Distribution
SBA TAILS “SELLER’S BRIEF” FOR COMMUNNITY BANKS
Opportunity: For community banks that sell the 75% federal government guaranteed portion of SBA loans, the option to
sell an additional 15% (or 60% of the retained portion) of the non-federal government guaranteed portion into a newly
structured secondary market consisting of federal and state credit unions:
• At substantial premiums – 103% to 105%, net of selling and structuring expenses
o That is $30,000 to $50,000 per million dollars, depending on the spread over the Prime Rate, the
premium amortization over the life of the loans and a charge off adjustment based on the NAICS
codes.
• On a non-recourse basis as loan participations
• With servicing fee retained – 1.00%
• With complete control of collection and recovery activities
• Without the prior approval of the regulators for the selling banks or the purchasing credit unions!
Overview of SBA Tails: SBA Tails are the non-federal government guaranteed portion of the SBA loan and represent the
60% of the 25% retained by SBA Lenders – or 15% of the original SBA loan balance. Buyers of SBA Tails own 60% of the
non-guaranteed portion of the loans. The guaranteed 75% portions are regularly sold into the secondary market at
112%-115% premiums. Even though not guaranteed, credit losses have been historically low and are shared on a
prorated basis. As a 15% owner, collections and recoveries are shared on a 60%/40% split after the guarantee is applied.
Types of SBA Loan Participations Sold:
• 7(a) Up to 25-Year Commercial Mortgages - Variable Rate – usually 2.00% or more over the Prime Rate
• 7(a) 10-Year Equipment & General Purpose Loans
Key Advantages for the Selling Community Banks:
• Originate 60% more SBA loans with the same capital, or
• Reduce the exposure to charge offs by 60% - the SBA bank retains only 10% of the SBA loans originated
• Continue to earn the 1.00% servicing fee
• An additional means of generating substantial fee income that becomes retained earnings and in turn core
capital – the 3% to 5% net gain on sale
• Remain in complete control of servicing, collections and recovery activities with the purchasing credit union
sharing in the collection expenses and recoveries – a 15% pro rata participation
Program Administrator & Expenses:
• The Program Administrator is NEW WAVE MARKET MAKERS™, who is responsible for prearranging for the sale
of SBA Tails by banks and the purchase by credit unions through the conduit structure, as well as establishing a
“fair and balanced” seller’s premium and buyer’s adjusted gross yield, using a patent application pending model
and proprietary formulas. In short, we are the “market makers” for SBA Tails.
Page 1
New Wave Market Makers™ and We Make Markets for SBA Tails™ are registered trademarks of eChain Community Club, Inc., a Georgia corporation.
Copyrighted © 2014 eChain Community Club, Inc. The Pricing Calculator™ and related calculators, Patent Pending #62008810
•
Program Expenses – Like with premium sharing with the SBA, there are related fees to organize the buy-sell
transactions. The expected net premium is 103% to 105%, based on the pools of SBA Tails’ loan interest rates
achieving a 4.00% adjusted gross yield to the purchasing credit union, including adjustments for:
o The premium being amortized over the life of the loan, typically 5 to 8 years – “The Premium
Amortization”, and to earn the 1.00% servicing fee
o An additional means of generating substantial fee income that becomes retained earnings and in turn
core capital – the 3% to 5% net gain on sale
o Remain in complete control of servicing, collections and recovery activities with the purchasing credit
union sharing in the collection expenses and recoveries
Regulatory Considerations:
• For Selling Banks – The sale of the non-government guaranteed loan participations are subject to the same rules
and regulations as for the government guaranteed portion, except the buyers are different.
• For Purchasing Credit Unions – Due to uniquely flexible Georgia state regulations, the purchase of SBA Tails is
accomplished through a “conduit structure”, whereby Georgia chartered credit unions can purchase SBA Tails
directly from the originating banks for their own account and/or resell them to federal credit unions –
nationwide, and state chartered credit unions in other states with the buying credit union:
o NOT needing the prior approval of the NCUA
o With no field of membership requirements
o Up their regulatory limits for commercial loans
Legal & Regulatory Review: This “sales model” meets legal and regulatory criteria so long as the selling banks retain a
minimum of 10% of the original SBA loan balance and that the purchasing federally insured credit union does not exceed
its limitation for commercial loans and net worth restrictions, and is, or becomes, a “participating lender” by filing a
Form 750 with the local SBA office and be approved before closing a purchase.
Program Administrator & Expenses:
• The Program Administrator is NEW WAVE MARKET MAKERS™, who is responsible for prearranging for
the sale of SBA Tails by banks and the purchase by credit unions through the conduit structure, as well
as establishing a “fair and balanced” seller’s premium and buyer’s adjusted gross yield, using a patent
application pending model and proprietary formulas. In short, we are the “market makers” for SBA Tails.
• Program Expenses – Like with premium sharing with the SBA, there are related fees to organize the buysell transactions. The expected net premium is 103% to 105%, based on the pools of SBA Tails’ loan
interest rates achieving a 4.00% adjusted gross yield to the purchasing credit union, including
adjustments for:
o The premium being amortized over the life of the loan, typically 5 to 8 years – “The Premium
Amortization”, and
o Charge offs based on the national average report by NAICS Code – “The Charge Off Adjustment”
Note: While believed to be reasonable readings of the relevant state and federal regulations, participating banks and credit unions
are responsible for conducting their own reviews and for making their own independent legal and regulatory determinations.
Page 2
New Wave Market Makers™ and We Make Markets for SBA Tails™ are registered trademarks of eChain Community Club, Inc., a Georgia corporation.
Copyrighted © 2014 eChain Community Club, Inc. The Pricing Calculator™ and related calculators, Patent Pending #62008810

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