Harvest Small Business Finance, LLC Closes Its Second Securitization of Owner-Occupied First-Lien SBA 7(a) Unguaranteed Portions

Harvest Small Business Finance, LLC Closes Its Second Securitization of Owner-Occupied First-Lien SBA 7(a) Unguaranteed Portions

Harvest Small Business Finance, LLC (“HSBF”), one of the top non-bank originators of SBA 7(a) loans, closed its second securitization of the unguaranteed portions of primarily first-lien SBA 7(a) CRE loans. The $34.92 million Harvest SBA Loan Trust 2019-1 transaction was lead-managed by Credit Suisse Securities and co-managed by Capital One Securities.

S&P Global Ratings assigned a “BBB-” rating to the Class A Notes, while Kroll Bond Rating Agency (“KRBA”) assigned a “BBB” rating. The closing of this transaction represents the second securitization for HSBF in the last 18 months.

HSBF leaders Adam Seery, Evan Mitnick and Todd Massas echoed the same message, “HSBF has been one of top SBA 7(a) lenders across the nation since our inception in 2016. We take pride in our ability to provide much needed access to capital for growing small businesses. Our exceptional team cares deeply about our mission of ‘Funding the American Dream’ through commercial real estate ownership, creating jobs and furthering growth.”

Deal Characteristics

Harvest SBA Loan Trust 2019-1 is Harvest’s second SBA 7(a) securitization and the third Harvest issuance overall, including the recent Harvest Commercial Capital Loan Trust 2019-1 transaction. The deal structure features a payment waterfall whereby all collections after deal expenses and interest payments will pay down bond principal until the target advance rate of 63% is reached, at which time the remaining funds will continue to flow through the remaining priority of payments.

The transaction includes a 90-day prefunding period for up to an additional 20% of collateral. Once the 90-day prefunding period is complete, the transaction will have a static collateral pool. As of the November 30, 2019 cut-off date, the collateral consists of 136 SBA 7(a) loans with an unguaranteed principal balance of $33.66 million, which represents approximately 25% of the full outstanding principal balance of the SBA 7(a) loans. The collateral pool has an average full loan balance of approximately $1.01 million and a weighted average remaining term of 289 months. All of the loans are monthly pay, with an adjustable interest rate based on the Prime Rate, and most of the pool consists of 25-year, fully amortizing loans. The obligors have a weighted average FICO of 717 and the properties used to collateralize the loans are all commercial real estate with a weighted average LTV of 77.5%.  The average time in business of the underlying businesses is approximately 22 years.

Harvest Small Business Finance, LLC

Harvest Small Business Finance, LLC, a California limited liability company, was created to originate and service loans backed by owner-occupied, multi-purpose real estate, in accordance with the Small Business Administration’s (“SBA”) 7(a) loan program.  The Company is a significant originator in a number of major markets throughout the United States, pursuant to the authority of a Small Business Lending Company (“SBLC”) license that it acquired in March of 2016.  HSBF is majority owned by an affiliate of Medalist Partners, LP, an SEC registered investment manager with approximately $2.7 billion of net assets under management as of December 31, 2019, that invests predominantly in credit-based strategies. HSBF was founded in February 2016 and is based in Laguna Hills, California.