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Bulletin No.: 2018-22
October 15, 2018

TO: MEMBERS

SUBJECT: New Small Business Development Program to Roll out in 2019

The Federal Home Loan Bank of Dallas (Bank) is pleased to introduce the upcoming launch of Small Business Boost (SBB) in January 2019. SBB is a loan program that will strengthen the local economies in the communities our members serve by helping to create and retain jobs. Members are encouraged to utilize the new program for financing qualified small business transactions that would not otherwise meet member loan underwriting criteria. SBB funds are awarded to small businesses and disbursed through the member as a secondary loan. As small businesses grow and repay the SBB loan, the Bank will recycle the funds back into the program to help finance future small business transactions.

An initial $1.5 million will be offered through SBB beginning January 22, 2019, followed by another $1.5 million funding round in July 2019. The funds will be available on a first-come, first-served basis. As a result of the SBB launch, the grant component of the Economic Development Program (EDP) – EDPPlus –  will be retired by December 31, 2018. Members will still have access to EDP advances.

SBB Benefits for Members

  • Serves as gap financing to make small business deals bankable
  • Integrates with existing commercial underwriting; no additional underwriting required
  • Creates new business relationships and cross-selling opportunities
  • Provides additional fee income on the SBB loan
  • Qualifies for Community Reinvestment Act credit

SBB Benefits for Small Businesses

  • Receives loan that would not otherwise be approved
  • Increases initial cash flow because there are no repayments in the first year
  • No application fees or prepayment penalties
  • Can be used with other financing sources
  • Helps create and retain jobs

     

Eligibility and Requirements

SBB funds may be used for building purchases, land acquisition and construction, facility expansion, machinery and equipment purchases, leasehold improvements, permanent working capital and closing costs. The transaction must meet the following requirements to be eligible for assistance:

  • Borrower must be qualified as a small business based on Small Business Administration standards
  • Member must provide at least 40 percent of the total financing
  • The maximum SBB loan amount is $100,000 or 50 percent of the member loan to the small business
  • At least one full-time equivalent job must be created or retained for every $50,000 in SBB funding
  • Member must demonstrate that the loan does not meet their underwriting criteria without the SBB funds
  • The small business may only obtain one SBB loan
  • If the transaction involves real estate, at least 51 percent of the real estate must be occupied by the small business
  • In transactions involving refinancing, at least 33 percent of the total business deal must be made up of new money
The SBB loan terms are as follows:
  • If financing equipment and/or working capital, the term can extend to the lesser of seven years or member loan term
  • If financing of real estate is greater than 50 percent of the project costs, the term will be the lesser of 10 years or member loan term
  • The amortization of program funds has a limit of 15 years for transactions involving real estate and 10 years for other transactions
  • Beginning in year two, members may add a reasonable spread, up to 300 basis points, to the rate charged on the SBB loan
How Repayment Works

The Bank will provide an amortization schedule to the member for the SBB loan. The member will collect repayments from the small business in accordance with this schedule. Principal and interest payments collected on the SBB loan will be remitted to the Bank annually. SBB loans are repaid to the Bank only if the small business has the ability to make these payments to the member. SBB repayment terms are as follows:

Year

1

Payments to Bank

No Repayment

Net Payments to Member

No Payments

2 Principal amortization begins Up to 300 basis points
3 and thereafter Principal amortization plus 3 percent Up to 300 basis points

 

Enrollment

Members must be enrolled in the program prior to submitting a request for SBB funds. Please plan to attend one of the following scheduled webinars as a requirement to participate in the 2019 enrollment process. Register online at fhlb.com/events. Please contact Community Investment at 800.362.2944 or sbb@fhlb.com if you have questions.

Thursday, November 1 at 2:00 p.m.

Tuesday, November 6 at 3:00 p.m.
Wednesday, December 5 at 10:00 a.m.

Thursday, December 13 at 2:00 p.m.

 

Sincerely,

 

 

Sanjay K. Bhasin
President and Chief Executive Officer