Small Business Equipment Finance Loans Description of Product Small business equipment finance loan packages available for purchase by member banks from Tennessee Commerce Bank, a member business bank. Loans and/or leases within the package are originated or acquired by Tennessee Commerce Bank and held in portfolio for a minimum of six months before packaging for sale. In addition to seasoning the loans, Tennessee Commerce Bank offers a credit enhancement by retaining the first 10% risk of actual net loss resulting from default in loans/leases within the package. Tennessee Commerce retains any residual risk/reward on underlying fully-paid lease contracts. Characteristic of the small business equipment finance industry, transactions included in each package are underwritten based on a credit scoring system in lieu of a full financial analysis. Underwriting criteria includes: minimum beacon score, time in business, home ownership, type of equipment being financed, state of operation, maximum term and PayNet score. Equipment finance loan packages are targeted in size at $1 million with a yield of 100 basis points over prime fixed at the date of purchase of the package. The package is treated as a single fully-amortizing loan by the purchasing bank with a monthly amortization schedule provided at funding of the package. At or shortly after funding, the purchasing bank will receive a complete copy of the credit/underwriting file for each lease/loan within the package. The maximum target maturity is 60 months though current offerings average 40 months. Underlying loans and leases have a maximum target size of $150,000 each though current offerings average approximately $50,000 per loan/lease. Generally, each package contains approximately 20 individual loans/leases. Potential Applications
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