Momentus Securities has launched a groundbreaking platform that streamlines and reduces the cost of securitizing the unguaranteed portion of SBA 7(a) loans. This opens up the process to smaller, mission-driven lenders who previously found it cost-prohibitive.
The platform and a new impact investment initiative with RBC Global Asset Management enable community-focused lenders to sell their loans on the secondary market, freeing up capital to make more loans and amplify their impact in underserved communities.
Momentus Securities and RBC GAM are bridging the gap between institutional investors seeking impact investments and mission-driven lenders operating in underserved communities. This provides a new avenue for investors to support economic development in these areas.
Momentus Securities' Single-Lender Securitization Platform
- Aims to democratize the securitization process for the unguaranteed portion of SBA 7(a) loans.
- Employs a Master Trust structure with distinct Series Trusts for each lender, simplifying and standardizing documentation.
- Reduces costs and increases efficiency compared to traditional methods, making it accessible to lenders with smaller portfolios.
- First transaction expected to close in Q1 2025.
"We are committed to ensuring that these vital community-focused lenders have the liquidity needed to provide loans."
- Katie Frost, Associate Administrator, SBA Office of Capital Access
Impact Investment Initiative with RBC Global Asset Management:
- Launches a separately managed account (SMA) focused on pools of government-guaranteed small-business loans in underserved communities.
- Provides impact-driven investors with direct access to these loan pools.
- Leverages Momentus Securities' expertise in sourcing loans from smaller, mission-driven lenders.
- RBC GAM's BlueBay Fixed Income platform brings 26 years of experience managing impact investments in the U.S.
- Creates an efficient and reliable secondary market for mission-driven lenders to sell loans and recycle capital.
Benefits for Mission-Driven Lenders
Increased liquidity enables them to originate more loans and deepen their impact in underserved communities.
"The innovative approach from Momentus Securities means that we have been able to get a better premium... We can recycle these additional returns into providing more loans to our borrowers and creating an even greater impact.”
- Rohan Kalbag, Interim CEO, Main Street Launch
Benefits for Institutional Investors
Access to a new asset class of government-guaranteed small-business loans with positive social impact.
Opportunity to support economic development in underserved communities across the United States.
"This single-lender platform is a turning point that democratizes the securitization process — allowing lenders to access liquidity that has historically been out of reach.”
“Our mission is to drive positive social change by connecting institutional investors to community lenders, creating greater access to capital for underserved communities."
- Jaime Aldama, President, Momentus Securities
"This expanded access can boost lending capacity, leading to more loans and better terms for borrowers in underserved communities."
- Ron Homer, Chief Strategist of U.S. Impact Investing, RBC Global Asset Management
Overall, these initiatives represent a significant step forward in expanding access to capital for underserved communities and enabling mission-driven lenders to scale their impact.
Our Opinion
The democratization of securitization for SBA 7(a) loans is a significant development for smaller lenders facing liquidity issues. The Master Trust structure offers practical innovation, potentially transforming community lending by reducing traditional securitization costs.
However, the Q1 2025 timeline for the first transaction may face delays due to regulatory and technical challenges. The partnership with RBC GAM raises questions about risk assessment, but BlueBay's impact investment experience adds credibility. Market feedback, like Rohan Kalbag's comments on better premiums, validates the approach, addressing liquidity concerns for community lenders.
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