Advanced Commitment

CRF commits to buy a lender’s loan or loans before the loans are closed. You and CRF agree to underwriting and documentation criteria to cover a specific dollar amount of lending. Because these loans have not been seasoned, CRF may require sellers to retain a risk position in each loan, if the loan does not meet standard underwriting criteria listed on the term sheet. But the form and amount of risk sharing is tailored to your organization’s needs and circumstances.

Typical lender’s situation:

Funding needs exceed a current program’s capacity, so leveraging is needed.
Existing loans are not eligible for sale, or the pricing for the loans is unattractive.
Funding an ongoing loan program.

Key benefits:

Lender can leverage current capital with CRF’s funds.
Flexibility – CRF’s funding is more flexible than many governmental programs’ funding, such as Small Business Administration’s loans.
In some circumstances, additional leveraging is possible with state or federal matching programs.
Loan premiums can be retained by the lender, enhancing administrative dollars.

Restrictions:

Underwriting and repayment terms are agreed upon with CRF.
Risk-sharing is negotiated between CRF and lender.
Targeted minimum transaction for a program: $250,000; for a single loan: $50,000.

Costs:

Transaction costs on advances.

Example 1:

Lender A has a program for helping businesses expand, but cannot meet the needs without additional resources. CRF and Lender A agree to the underwriting standards for loans that CRF will buy. Lender A will fund 20% of each loan, and CRF will fund the remaining 80% of the loan. CRF agrees to buy up to $2 million of these loans over the next year. In the first six months, Lender A originates 8 loans worth a total of $1 million, $800,000 of which is provided by CRF.

Example 2:

Lender B would like to fund a $100,000 project, but does not have any additional resources to commit. As a solution, Lender B invites CRF to fund 100% of the loan. After CRF and Lender B agree to underwriting and documentation criteria, CRF funds the $100,000 project.