Commercial Loan Insurance - Traditional Application Process

FAME expands financial institutions’ ability to make business loans by providing insurance of up to 90%* of a loan to an eligible business. Insurance is provided by FAME to financial institutions that have signed a master Loan Insurance Agreement with FAME. Pro-rata and leveraged term loan insurance is available in one-, three- and five-year options. Pro-rata and leveraged line of credit loan insurance is available in one- and three year options. Pro-rata and leveraged line of credit loan insurance is available in one- and three-year options.

Eligibility

Any business or business project for any such business that is located in the state of Maine is eligible, except for businesses or uses as follows:

  • Religious or fraternal organizations;
  • Gambling or adult entertainment facilities;
  • Residential housing;
  • Investment real estate (50% or more non-owner occupied);
  • Personal, family or household expenses.

*Note: Up to 100% available for loans to veterans.

Insurance Types

1) Pro rata: Covers a percentage of lender’s loss after a default and liquidation, up to 100%.

2) Leveraged: Covers 100% of lender’s loss, up to 25% of the loan balance at the time of default.

See Pro-rata vs. Leveraged Insurance Example for comparison.

Loan Amount/FAME Insurance Exposure

  • Term Loans: up to 90% insurance of a lender’s loan on a pro-rata basis or up to 25% insurance on a leveraged basis (up to $1,000,000); 100% pro-rata insurance may be available for loans to veterans. FAME exposure to any one relationship may not exceed $5,000,000. (This amount is reviewed and set annually. Please verify this amount with FAME.)
  • Refinance of Existing Lender Debt: up to 40% insurance of a currently uninsured lender’s loan on a pro-rata basis. Certain criteria apply. See Special Credit Considerations below, and Guidelines for Refinancing Existing Lender Debt.
  • Working Capital Lines: up to 90% pro-rata insurance limited to $1,000,000 of FAME exposure, or up to 20% leveraged insurance limited to $500,000 of FAME exposure.

Blended Pro-Rata Insurance Percentage Example: Please see the table below, which describes a scenario in which the lending institution refinances uninsured debt currently held by said institution, and also incorporates new funds into the loan. Each allocation of monies can be insured up to the amounts outlined within the table. The total exposure may not exceed $5,000,000 to any one relationship.

Use of FundsAmountInsurance Percentage RequestedFAME Insured AmountMaximum
New Funds$100,00060%$60,00090% or 75% OLA
Refinance Existing Debt Held by Lender$75,00040%$30,00040%
Total Loan Request/Insured Amount$175,000$90,000
Blended Insurance Percentage51%

Interest Rate and Loan Term

Determined by lender. (Term should not exceed useful life of assets financed or serving as collateral.)

Security

All types of collateral are eligible, subject to review and acceptance by FAME. Lines of credit require first-priority lien on accounts receivable, and inventory.

Guarantees

Any individual or entity that owns 20% or more of the borrower, or owns 5% or more of the borrower and receives substantial income from the borrower, must guarantee the loan. All loans must be guaranteed by owners of at least 51% of the borrower in aggregate, except for nonprofit borrowers and borrowers owned by 20 or more shareholders. Exceptions to this policy must be approved by the FAME board.

Fees

Loan Insurance ProgramsFAME Exposure AmountCommitment FeeAnnual Insurance Fee3-Year Insurance Fee**5-Year Insurance Fee**
OLA Leveraged Term≤ $250M0.5%*2%5.75%7.95%
OLA Leveraged Line≤ $250M0.5%*2%5.75%N/A
OLA Pro-Rata Term≤ $375M0.5%*1%2.75%3.95%
OLA Pro-Rata Line≤ $375M0.5%*1%2.75%N/A
Leveraged Term≤ $1MM1%2%5.75%7.95%
Leveraged Line< $500M1%2%5.75%N/A
Pro-Rata Term< $1MM1%1%2.75%3.95%
Pro-Rata Line≤ $1MM1%1%2.75%N/A
Pro-Rata Term≥ $1MM1%***1.25%3.50%4.95%

*Commitment fee for OLA applications is waived until 3/31/2017.

**Once the multi-year term is over, the insurance will automatically continue on an annual basis unless the insurance is canceled or the lender reapplies for an additional multiyear term.

***There is an application fee of 1% of the FAME insurance being requested, due with the loan application for loans equal to or more than $1,000,000. This fee is partially refundable in the case of denial, but only after the cost of FAME’s due diligence is deducted. If the loan commitment is approved and accepted the application fee may be applied to the commitment fee.

Special Credit Considerations – Refinancing Existing Debt, Floor Plans, Construction Loans

Loan insurance for refinancing of seller debt, floor plan lending and construction lending has special credit considerations and limitations. Please contact a FAME commercial loan officer for additional details.

Process

The traditional application process requires the lender to submit a completed “paper” application accompanied by information and/or documentation sufficient to underwrite the loan request. The applications is then underwritten by FAME’s credit department and an insurance decision is made within two weeks, in most cases, and communicated to the lender. If insurance is approved, a Loan Insurance Authorization outlining the terms and conditions of insurance is issued.

Most loan insurance decisions are made at the staff level; however, decisions on FAME exposures of $1,000,000 or greater may have to be approved by the FAME board of directors.

Application

All of the following documents must be completed and returned to FAME in order to complete the traditional loan application process:

  • Loan Application
  • Personal Financial Statement (of all principal owners)
  • Environmental Questionnaire
  • Employment Plan (if business employs more than ten (10) employees)
  • Business Plan
  • Department of Environmental Protection Assessment Application (if loan amount is equal to or greater than $1,000,000)

Application Downloads

The documents above can be viewed using Adobe Acrobat. You may download a free copy of Adobe Acrobat Reader by clicking here.

The applications are in a PDF format, which can be completed on-line and must be printed and sent to FAME.

Contact

FAME