SBA Loan Fund

Investment Objective

The Fund seeks to provide current income that is consistent with the returns available in adjustable-rate, government guaranteed financial products by investing in Community Development Loans guaranteed by the Small Business Administration (SBA). Community Development Loans are loans to small businesses located in Low and Moderate Income areas or that employ Low and Moderate Income persons.

Investment in the Fund can be counted for either Community Development Lending Test or Investment Test credit within the CRA. As of December 31, 2023, the Fund had over $800 million of gross assets and over 120 funded investors.

SBA Loan Fund Investors

  • Financial institutions seeking targeted Community Reinvestment Act (CRA) Community Development credit
  • Financial institutions and other institutions seeking risk-adjusted returns for investing in a diversified pool of government guaranteed securities
  • Rated Aaa-bf by Moody’s Investor Services, highest possible credit quality rating
  • Impact Management Assessment Certified by Aeris

Asset Class

The Fund is rated Aaa-bf (“triple A bond fund”) by Moody’s Investor Services, the highest possible credit quality rating. The Fund primarily invests in the federally guaranteed portion of SBA 7(a) loans that adjust quarterly or monthly and are indexed to the Prime Rate.

The SBA Loan Fund is only available for qualified institutional buyers or accredited investors.

IMPACT

Since inception, the Fund has supported the creation and/or retention of over 75,000 jobs as of September 30, 2023.

*Past performance is no guarantee of future results and future returns are not guaranteed. While every investor has received positive CRA consideration from their regulator thus far, this is no guarantee of future results and future exam results are not guaranteed. The Fund has not been approved by any regulatory agency.

Investment benefits

CRA Benefits

  • Community Development Investment or Lending Test eligible*
  • Targeted CRA credit within an investor’s assessment area
  • Quantifiable impact data: jobs created and/or retained
  • A CDFI Fund designated Community Development Entity (CDE)
  • Impact Management Assessment Certified by Aeris Insight

Risk Mitigation Features

  • Primary asset class is federally guaranteed and variable rate
  • Diversified portfolio with over 1,000 loans currently in the Fund, “SBA Mega-Pool”
  • Monthly liquidity
  • Rated Aaa-bf by Moody’s Investor Services for high credit quality

Fund Service Providers

  • U.S. Bank N.A. – Fund Custodian
  • CohnReznick LLP – Auditor
  • U.S. Bancorp Fund Services, LLC – Fund Administrator

Investor Subscription Process

Minimum investment in the Fund is $2,000,000. An investor commits to the Fund by executing a non-binding subscription agreement which details the investment commitment amount and in what, if any, CRA geographical area the SBA loans need to be located.

The Fund Manager will attempt to acquire SBA loans that meet the investment criteria of the investor. Upon successful acquisition of “substantially all” (85%) of the loans in the investor’s “Targeted Region,” the investor will wire funds to an investment custody account maintained by the SBA Loan Fund with U.S. Bank’s Trust Securities Services.

The investor will then receive quarterly distributions and statements from the Fund Manager, via U.S. Bancorp Fund Services, and will be able to redeem its investment on a monthly basis with 30 days’ notice, subject to the terms of the Fund’s Private Placement Memorandum and Operating Agreement, which are available upon request.

COIN Qualified Investment

SBA Loan Fund has been certified as a COIN Qualified Investment Fund. The California Organized Investment Network (COIN) serves as a national model that provides leadership in increasing insurance industry investment in underserved and rural communities throughout California.  Its mission is to guide insurers on making safe and sound investments that yield environmental benefits throughout California and/or social benefits within the State’s underserved communities. To earn this certification, the Fund demonstrated that it provides a positive environmental impact to low-to-moderate income households or areas, as well as rural and reservation based communities in California.

Community Reinvestment Act

The Community Reinvestment Act is a federal law enacted in 1977 that encourages financial institutions to help meet the credit needs of borrowers in all segments of their communities including low and moderate income neighborhoods. The act applies to depository institutions that carry FDIC deposit insurance and is enforced by federal regulatory agencies examining banks for CRA compliance. This information is taken into consideration when approving applications for new bank branches or mergers.

Loan Profiles

The loans profiled on this website are current or former holdings of the SBA Loan Fund. The loans highlighted may not be the highest performing loans in the Fund, but a sampling of small business loans with an impact story. The loans mentioned do not necessarily represent all of the loans held in the Fund and investor should not assume that the loans identified and profiled were or will be profitable. A complete list of holdings for the Fund can be provided by contacting Solomon Hess Capital Management.

The Solomon Hess SBA Loan Fund LLC attempts to provide its investors with CRA credit related to their participation in the Fund. Investment decisions are not always exclusively based on the economic characteristics or investment merit of a specific asset. Certain CRA eligible securities sought by the Fund in specific geographies may not provide as great an economic benefit to the Fund as the same securities located in non-CRA geographies. The Fund may engage in transactions at times for reasons related to CRA considerations that may not be desirable from an investment standpoint. If one or multiple federal banking regulators, such as the OCC, FDIC or the Federal Reserve Board, were to deem an investment in the Fund as not qualifying for CRA credit, the impact to Fund investors could be material.

MANAGING GOOD CAPITAL WELL