NEW YORK--(BUSINESS WIRE)--An innovative securitization platform launched by Momentus Securities is opening the doors for lenders to sell the unguaranteed portions of their U.S. Small Business Administration 7(a) loans — by simplifying the securitization process and making it more accessible, efficient and cost-effective. The resulting balance sheet flexibility will further enable smaller, community-focused lenders to increase their lending efforts.

7(a) loans are the SBA’s primary business loan program for providing financial assistance to America’s small businesses. However, mission-based lenders often run into scale and liquidity limitations. They need to move loans off their balance sheets, creating more liquidity so that they can make more loans to help the communities they serve.

While these lenders have been able to sell the guaranteed portions of their 7(a) loans, it has been cost-prohibitive to securitize the unguaranteed portions. That option has instead mostly been available only for larger lenders due to the significant fixed expenses involved. Up until now, the single-lender securitization process has only been worthwhile for lenders with large pools of 7(a) loans; for example, recent transactions averaged $100 million in size.

As an investment bank with a social purpose, Momentus Securities is intensely focused on the impact that can be created by lowering transaction costs. Lowering the cost of securitizing these loans, then, is a game-changer — it opens the market up to lenders with smaller portfolios, especially community-focused and mission-driven lenders.

“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,” said Jaime Aldama, President of Momentus Securities. “By emphasizing purpose over profit, we can expand the work of the small-balance, community-centric lenders that help drive economic growth nationwide.”

“The SBA recognizes the importance of expanding the ability for smaller lenders, including mission-driven organizations, to secure more funding for their efforts,” said Katie Frost, Associate Administrator of the U.S. Small Business Administration's Office of Capital Access. “We are committed to ensuring that these vital community-focused lenders have the liquidity needed to provide loans. Helping them access the necessary capital to serve their communities is a top priority for us.”

Momentus Securities’ platform employs a Master Trust structure that will issue distinct Series Trusts for each participating lender. This approach ensures legal separateness while simplifying, streamlining and standardizing documentation. As a result, each securitization is completed faster, more efficiently and at a lower cost compared to traditional methods.

Guidehouse — a global consultancy providing advisory, digital, and managed services to the commercial and public sectors — will act as the platform’s administrator, back-up servicer and custodian.

“In working with Momentus Securities on this transformative program, Guidehouse leverages our unique expertise across commercial and public markets while expanding our role in the securitization ecosystem,” said Paul Burke, Head of Securitization at Guidehouse. “Guidehouse is excited to continue supporting the mission of the SBA through ongoing capital markets innovation, like Momentus Securities’ single-lender platform, that helps increase liquidity options for lenders of all sizes. This is another great example of the SBA enabling lenders and capital markets partners to facilitate new financing solutions for the lenders accessing their financial support and related administrative platform.”

Katten Muchin Rosenman acted as legal counsel to Momentus Securities on the program’s development.

An initial transaction using the platform has received SBA approval and is expected to close in the first quarter of 2025.

How Momentus Securities Connects Mission-Driven Lenders With Institutional Investors

Momentus Securities is an investment bank with a social purpose, an SEC-registered broker-dealer, FINRA/MSRB/SIPC member, and an approved SBA 7(a) loan pool assembler.

Momentus Securities works to remove the logjam that mission-driven lenders such as Community Development Financial Institutions (CDFIs), Community Development Corporations (CDCs), Minority Depository Institutions (MDIs), and community banks often run into. These lenders want to support more small businesses and community development efforts. Yet they can’t scale up unless they have more liquidity. And they can’t get more liquidity unless they move loans off their balance sheets.

Momentus Securities is helping to create more of that liquidity by:

• Creating warehousing lines within four key themed areas – affordable housing, healthcare, education and small businesses.
• Aggregating portfolios of loans, including mission-driven loans, throughout America.
• Helping its clients raise debt capital via bond and note issuances, private placements, and structured credit transactions.
• Providing public and private placement services for municipal issuers, public agencies, private developers, nonprofit organizations, and other mission-driven borrowers.
• Providing secondary market liquidity for community-centric organizations focused on America’s underserved communities.

This means that institutional investors will have the opportunity to invest in those products — and therefore support communities — at a scale that has not previously been available.

Momentus Securities also:

• Provides capital raising services to help its clients grow by leveraging an extensive network with impact-driven institutional investors and foundations.
• Offers credit rating advisory services in all ratings considerations, including first-time ratings, rating upgrade/defense, capital structure optimization, and debt capacity analysis.
• Provides liability management and capital advisory services to help clients optimize their capital structure and improve their financial strengths.

Momentus Securities is part of the Momentus Capital branded family of organizations, which also include, among other organizations, Capital Impact Partners (a nonprofit Community Development Financial Institution, or CDFI) and CDC Small Business Finance (a leading SBA Community Advantage Small Business Lending Company, or CA SBLC).

Learn more at MomentusSecurities.com.

Important Information

THIS COMMUNICATION IS PROVIDED FOR INFORMATION PURPOSES ONLY AND IT IS SUBJECT TO CHANGE. IT IS INDICATIVE ONLY AND IS NOT BINDING.

Momentus Securities is not offering to sell or seeking offers to buy any product or enter into any transaction. Momentus Securities does not provide, and has not provided, any investment advice or personal recommendation to you in relation to the transaction and/or any related securities described herein. This document is being directed at persons who are professional investors and is not intended for retail client use. Not for further distribution or distribution to retail clients. For discussion purposes only. Read full disclaimer language here.