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2
Goals• Affirm the connection between
policy and portfolio management
• Continue the discussion on sustainable loan program management
• Reframe underwriting practices for guarantors and direct lenders
3
The Policy Conversation
When was your policy developed?
When did you last perform a
comprehensive review of your
policy?
4
Policy Considerations
Policy impacts:
– Daily lending practices
– Ability to grow in the future
Developing supportive policy
– RESNA/NATTAP as a resource
– Other non-bank lenders
5
Policy Considerations
Is it categorically organized?
– Mission and Program Description
– Products and Services
• Eligibility Criteria
• Summary of Loan Terms and Conditions
6
Policy Considerations
Loan Review Process– Application Requirements– Fees– Loan Review and Approval– Underwriting Criteria– Loan Denials
7
Policy Considerations
Loan Monitoring, Services, Collections– Responsibility of Bank (Guaranteed Loans)– Responsibility of AFP
Portfolio Management Policies– Capital Structure– Equity– Liquidity Reserves– Diversification– Reserving for Loan Loss– Risk Rating
8
Underwriting Conversation
Who determines underwriting criteria?
What impacts underwriting criteria?1.
2.
3.
9
Underwriting Notes
Credit History Current Debt to Income Current Monthly Income to Expenses
– Sources of income– Deposit relationships
Other Resources Appropriateness of AT
Q: Do specific AT loan categories require special underwriting?
10
Portfolio Management Capital Structure
– Capitalization• Grants• Contributions• Net Earnings• Program Related Investments• Loans
– Equity• Net Worth Goal
– 25%
– Liquidity Reserves• Goal
– Minimum 10%
– Diversification• Sources of Capital
11
Sustainability
Sustaining the OrganizationSustaining the Mission
– Assessing the Community We Serve– Aligning Loan Products/Services– Facilitating the Availability of Credit
↓
Maximizing Existing Loan Capital Diversification of New Loan Capital
12
Sources of Loan Capital
Adequate Capitalization vs. Funding with Available VR $$
Equity Grants– Leverage other financing– Should require some client participation– May provide for different levels of
assistance depending on policy decisions: Iowa’s First Step Program
Loans– Microloans and other non-bank loans/grants– Traditional bank financing
• SBA Guarantees
13
Tracking & Monitoring
Intense start-up monitoring– Month 1 = Weekly
• Use business plan as implementation guide
– Months 2 & 3 = Every 2 Weeks– Months 4 – 12 = Monthly
• Listen for TA needs• Track financial progress
Review for appropriate closure
14
Resources & Supports
Identifying local service providers– The Abilities Fund links with microenterprise technical
and financial assistance providers– Online Services– Small Business Development Centers (SBA funded)– Independent service providers
Identifying financial resources– Banks– Non-banks: microloan programs, CDFI’s, local
consortiums– Guarantors: SBA – Ticket to Work– SSA PASS $$