Harvest Small Business Finance is selling $93.1 million in securitized bonds secured by a pool of rights to receive payments from loans originated as a result of section 7(a) of the Small Business Act.
The 306 loans are primarily first-lien, small balance business loans secured by commercial real estate properties, and other collateral related to the mortgage property, according to Morningstar DBRS.
While sponsoring the transaction, Harvest Small Business Finance also originated the loans and will service them, according to DBRS. Performance Trust Capital Partners is the initial note purchaser and arranger on the deal, DBRS said, adding that the deal is slated to close on September 30.
The notes will begin repaying investors on a monthly basis beginning October 26, and they have a maturity date of Jan. 25, 2053, DBRS said.
Known as HSLT 2026-1, the deal will sell notes through classes A, B, C and D notes which will pay adjustable rates. The notes, DBRS said, will pay the Prime Rate minus a spread; the 30-day Secured Overnight Financing Rate, or the Benchmark Replacement Rate plus spread; and the Net Weighted Average Coupon (WAC) whichever is smallest.
Overcollateralization, subordination and excess spread will provide credit enhancement to the notes, DBRS said. Also, there is a non-declining reserve account balance, equal to 1.50% of the pool balance as of the closing date, in place to also add credit enhancement, the rating agency said.
The structural elements, DBRS said, are enough to support its stressed cumulative net loss (CNL) hurdle rate assumptions of 22.24%, 16.57%, 12.99% and 10.06%, respectively, for classes A, B, C and D, respectively, which carry respective ratings of (P) AA (sf), (P) A (low) (sf), (P) BBB (low), and (P) BB (sf).
HSLT 2026-1's underlying loans have an outstanding unguaranteed balance of $270,896, according to the rating agency. On a WA basis, borrowers have a FICO score of 735, with a WA loan-to-value (LTV) ratio of 79.29%.
Typically, Harvest Small Business Finance's SBA 7(a) loans are first-lien loans on commercial real estate properties. They have 25-year, fully amortizing terms, and all properties are at least 51% occupied, DBRS noted.
