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SBA and USDA Guaranteed Loan Investing

Guaranteed loans can grow your outstanding portfolio, and earnings, without taking on principal risk.

SBA guaranteed loans and USDA guaranteed loan investments appeal to credit unions faced with slack member loan volume, or who are concerned about credit quality if they concentrate solely on member auto, consumer and MBLs. SBA-USDA guarantees are a low risk way to move credit risk off the balance sheet but garner a much greater return than with corporate share drafts or other investments.

USDA and SBA guaranteed loans go on the LOAN side of your portfolio, and they are fully guaranteed as to principal and accrued interest by USDA or SBA both of which are government corporations. So the asset is considered low risk. The guaranteed portions are regulated by FINRA as securities, but they appear as loans on the balance sheet.

The GUARANTEED portions of the loans do not count against the 12.5% cap on commercial MBL. If the loan defaults, USDA or SBA repurchases your participation at par including all accrued but unpaid interest. So it's a good way to add loans, though the yield is not as high, without any credit risk.