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C-Suite Wednesday — What Percentage of SBA 7(a) Secondary Market Premiums Should the BDO Receive?

October 21, 2015

By Bob Coleman
Editor, C-Suite Wednesday

C-Suite Wednesday — What Percentage of SBA 7(a) Secondary Market Premiums Should the BDO Receive?

I received this question and am turning it over to the industry in the form of a poll. Please take a minute and I’ll publish the results next week.

Take the Survey Here.

Thanks!

Do you think it is reasonable to pay business development officers based on a percentage of the secondary market premium collected. (For example, give them a base salary of $75,000 plus incentive pay of 20% of the secondary market premium.)

Yes
No

If yes, what percentage should the BDO receive from Secondary Market Sales?

(Open Ended)

For $10 million annual production with an average secondary market premium of 110 and an average SBA 7(a) guarantee amount of 75% that would translate into gross premiums collected of $750,000, of which 20%, or $150,000, goes to the BDO as incentive pay.

This is reasonable
This is too high
This is too low

I know premium splitting is prohibited with brokers, but I don’t think this measure applies to employees.

True
False

Alternatively, if loans aren’t sold pay the BDO’s a part of the interest collected every month, say 10%, for the life of the loan. For $10 million annual production with an average interest rate of 5% that mean gross interest collected of $500,000 (I am oversimplifying here) with 10%, or $50,000, going to incentive pay to the BDO. However with the same production the following year the incentive goes up to $100,000 (ignoring amortization for the moment) and a similar increase in the following years until loans are paid off or the BDO exits. What do you think of this method?

This is reasonable
This is too high
This is too low

And do you think it is ever reasonable for BDO’s to go without salaries and just go on straight incentive?

Yes
No

Any additional comments?

Take the Survey Here.

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