MATCHED FUNDS PROGRAM
MINIMUM $ 500.000
This program provides borrower wiyh a collateral
instrument having a present value and face amount equal
to the amount of the loan. This collateral is purchased
from the lending bank by a Collateral Provider ; This
provides the lending bank with the funds it uses to make
This collateral is transferred to the Borrower. At loan
closing, Borrower provides the Lender with collateral,
the CD that lender has just jussed. This CD has a present
value equal to the amount of the loan and fully secures
the loan principal in the event of default by Borrower.
Since the CD has been iussed by the lender, there is no
problem with acceptability of the collateral.
The Borrower, obligated to make interest payments to the
lender, must convince lender that sufficient cash will be
generated from the business project to make interest
payments on the loan.
requires for project
Provider buys collateral from lending bank, at a
receives from Lender
retains for project
pays to Collateral Provider
|In addition the Collateral
Purchaser receives at the closing a Certificate
that contains the irrevocable promise by the
Lending Bank to pay the annual interest on the
total amountof the CD.
|Note: all figure are approximate
MATCHED FUNDS PROGRAM ADVANTAGES
TO LENDING BANK
1. Loss of loan principal is eliminated.
In event of default by Borrower, Lending Bank is fully
2. Lending Bank is exposed to loss of only one interest
Any interest payment unpaid by Barrower could be repaid
by a security interest the Lending Bank will have in the
assets of the Borrower.
3. In event of default by Borrower, Lending Bank may
re-lend funds repaid from CD.
The funds recovered from the liquidation of the CD that
secures the loan principal may be used to accomodate new
lenders. The new loans will generate sufficient interest
income to offset the continuing obligation of the Landing
Bank to pay interest on the CD
4. Funds for the loan are provided by the sale of the CD.
As a result of the sale of the CD to the Borrower the
funds from the Sale of the CD are used to make the loan
eliminating the need for the Lending Ban to use its own
5. Collateral for Loan is guaranteed tp be acceptable.
The sale of the CD by the Lending Bank and its subsequent
use as Collateral for the Loan eliminates the need to
question the validity of the Collateral.
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