How does CSP work?
Lenders submit an application to participate in the program. Commerce then approves the application and sends the Institution an agreement with Commerce to be signed and returned in triplicate which allows the institution to become a program participant and start enrolling loans.
To enroll an individual loan, the approved lender provides a completed loan enrollment form and leverage spreadsheet to Commerce. Commerce reviews and approves/denies the package (based upon SSBCI criteria and available program funds). Commerce is also able to provide 90 day pre-approvals when not all supporting documentation is available. Upon approval the lender pays a program fee to Commerce (this fee is generally financed in the loan) based on the bridge term and collateral deposit amount being requested. Commerce then opens a certificate of deposit at the participating institution to act as cash collateral for the term of the bridge loan. The requested CD term must match the proposed bridge loan term. The CD is owned by Commerce, but the lender can make a “claim” against the funds to cover losses on the enrolled loan. Claims can be made after a loan is written off and primary collateral collection has been completed.
Benefits for lenders:
- Expand your small business base
- Loan enrollment approvals are fast
- The certificate of deposit to supplement bridge loan collateral stays on account with the lender
- Reporting requirements are minimal
- Commerce takes no collateral position on enrolled loans
Who can participate in CSP?
Banks, credit unions, savings associations, Community Development Financial Institutions (CDFI) and certain other federally insured business lenders.
What types of loans qualify?
SBA 504 qualified loans of up to $5 million, which may be used for a “business purpose”, including:
- Heavy Equipment
- Acquisition of a place of business
- Construction or renovation of a place of business
Other Bridge loans whose terms do not exceed 18 months and who have a high probability of full repayment at the end of the loan term. Uses can include:
- Working capital
- Acquisition, construction or renovation of a place of business
- Franchise fees
Are there types of loans that do not qualify?
There are a few purposes that make a loan or line of credit ineligible for enrollment in the CSP, including certain speculative activities, passive real estate investment, and outright purchase of a business, repayment of delinquent taxes unless a payment plan is in place with the taxing authority, reimburse any funds owed to the owner or equity injections by investees. Please contact the Program Manager for more details.
Why do lenders choose to participate?
- Lender determines the source of the program fees funds (e.g., can be recouped from the borrower).
- Lenders can maintain valued customer relationships and provide businesses with essential loans that their customers might have otherwise had to take elsewhere.
- Allows borrower with solid credit to obtain SBA 504 loans when collateral valuation may have otherwise presented a problem.
- Broad eligibility. Most businesses that qualify for an SBA 504 loan will qualify for some level of CSP support when collateral is an issue.
- Lenders can close more deals with added security.
What are the lenders reporting requirements?
- Lenders will provide quarterly figures to Commerce of total Program funds used, and total “Claims” made.
- Annually lenders will provide Commerce with a short report on their CSP portfolio. A template of this report is available to lenders upon request.
Frequently asked questions
Q: What is the application process?
- You must complete and return a financial institution application to Commerce.
- You will apply for Statewide Vendor Number (SWV#) if you don’t already have one.
- Once you receive approval you will be sent a program agreement and certification for your review and signature (triplicate). Please return originals to Commerce.
- Commerce will send you a confirmation letter welcoming you to the Program.
- Your organization is now ready to enroll loans!
Q: What are the Program terms and fees?
Fees range from 2-3% and are determined by the term of the approved bridge loan. 2% for a term of 6 months or less, 2.5% for a term between 6 and 12 months, and 3% for a term between 12 and 18 months.
- No CSP terms are available above 18 months. Fees are calculated from the amount requested of CSP funds by the lender to help support the loan request.