THIS  PLACEMENT  MEMORANDUM IS NOT TO BE SHOWN OR GIVEN TO ANY PERSON OTHER THAN
THE PERSON  WHOSE  NAME  APPEARS  BELOW AND IT IS NOT TO BE COPIED OR  OTHERWISE
REPRODUCED IN ANY MANNER  WHATSOEVER.  FAILURE TO COMPLY WITH THIS DIRECTIVE CAN
RESULT IN A VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT").

                           BUSINESS LOAN CENTER, INC.

       BUSINESS LOAN CENTER SBA LOAN-BACKED ADJUSTABLE RATE CERTIFICATES,
                                  SERIES 1998-1

                       $24,316,729.85 Class A Certificates

                        CONFIDENTIAL PLACEMENT MEMORANDUM

                                December 28, 1998

The United States Small Business  Administration  (the "SBA") neither guarantees
the Certificates  offered hereby, the beneficial ownership interest in the Trust
Fund  represented  thereby or the  Unguaranteed  Interest  in the SBA Loans that
constitute  the assets of such Trust  Fund,  nor does the SBA have any direct or
indirect obligation to the Trust Fund or the Certificateholders. The SBA has not
approved or disapproved of the  Certificates and the SBA has not passed upon the
accuracy or adequacy of this Confidential Placement Memorandum.

This  numbered  copy is for the  exclusive  use of the person named  below,  and
should be returned to Rothschild Inc. immediately upon request.

-------------------------                           -----------------------
         Name                                       Copy No. (Shown in Red)

If the above  number does not appear in red,  there is a  presumption  that this
Placement  Memorandum has been improperly  reproduced and  circulated,  in which
case Rothschild Inc. and Business Loan Center,  Inc. disclaim any responsibility
for its contents and use.

No  person  has  been  authorized  to  give  any  information  or  to  make  any
representations  other than those contained in this Placement Memorandum and, if
given or made, such information or representations  must not be relied upon. The
delivery  of this  Placement  Memorandum  at any time  does not  imply  that the
information  contained  herein is correct as of any time subsequent to its date,
or that there has been no change in the matters discussed herein.

The Class A  Certificates  are being  offered by the  Placement  Agent only to a
limited number of "Qualified Institutional Buyers" as defined in Rule 144A under
the Securities Act and institutional  "Accredited  Investors" as defined in Rule
501(a)(1)-(3)  or (7) under the  Securities  Act,  that are  willing and able to
conduct an independent investigation of the risks involved with ownership of the
Class A Certificates.

The information  contained  herein is confidential  and may not be reproduced in
whole or in part.  Rothschild  Inc. and Business Loan Center,  Inc.  will,  upon
request, make available such other information as may be reasonably requested.

                                 ROTHSCHILD INC.
                                 Placement Agent



<PAGE>


                        CONFIDENTIAL PLACEMENT MEMORANDUM

                           BUSINESS LOAN CENTER, INC.

       BUSINESS LOAN CENTER SBA LOAN-BACKED ADJUSTABLE RATE CERTIFICATES,
                                  SERIES 1998-1

                       $24,316,729.85 Class A Certificates

                  The  Class  A  Certificates   offered  hereby  (the  "Class  A
Certificates") evidence the senior beneficial ownership interest in a trust fund
(the "Trust Fund")  created by Business Loan Center,  Inc. (the  "Seller").  The
Trust  Fund  consists  primarily  of the  right to  receive  payments  and other
recoveries  attributable to certain  unguaranteed  interests (the  "Unguaranteed
Interests")  in a pool of  loans  (collectively,  the  "SBA  Loans")  which  are
partially guaranteed by the U.S. Small Business  Administration (the "SBA"). The
Unguaranteed  Interests in additional SBA Loans (the "Subsequent SBA Loans") may
be  purchased  by the Trust from the  Seller  from time to time on or before the
close of  business  on March 26,  1999 from  funds,  if any,  on  deposit in the
Pre-Funding  Account. On the Closing Date (as defined herein), an aggregate cash
amount  of  approximately  $5,000,000  will be  deposited  into the  Pre-Funding
Account.

                  Except for less than  approximately  1.0% of the SBA Loans (by
principal  balance of Unguaranteed  Interests as of the Statistical  Calculation
Date),  each SBA Loan  was,  and  each  Subsequent  SBA  Loan  will  have  been,
originated by the Seller in accordance with the Seller's  underwriting  criteria
described in this Placement  Memorandum  under "The SBA Loan Lending  Program of
the Seller-Underwriting  Criteria for SBA ss. 7(a) Loans." The SBA Loans will be
serviced by the Seller (in such capacity, the "Servicer").

                  In  addition  to the Class A  Certificates,  the Trust Fund is
issuing Class B Certificates  (the "Class B Certificates"  and together with the
Class A Certificates,  the "Certificates").  The Class B Certificates  initially
will be transferred to and held by a special  purpose entity owned by the Seller
and are not being offered  hereby.  The Class B Certificates  are subordinate to
the Class A Certificates to the extent described herein.

                  The  Certificates  will be issued  pursuant  to a Pooling  and
Servicing  Agreement,  dated as of December 23, 1998 (the "Agreement"),  between
the Seller and Marine  Midland Bank, as trustee (the  "Trustee").  Interest will
accrue on the Certificates at an adjustable rate as described herein.

                  SEE "RISK FACTORS" HEREIN FOR A DESCRIPTION OF CERTAIN FACTORS
THAT  SHOULD BE  CONSIDERED  IN  CONNECTION  WITH AN  INVESTMENT  IN THE CLASS A
CERTIFICATES.


                  This  Placement  Memorandum  has been  prepared  by the Seller
solely for the purpose of offering the Class A  Certificates  described  herein,
and has been  reviewed  and  approved by the Seller.  Rothschild  Inc.  makes no
representation  as to its  accuracy  or  completeness.  Except  as  specifically
indicated,  no information is included  herein that relates to events  occurring
after the date hereof. The information  contained herein is confidential and may
not be  reproduced  in whole or in part.  The Seller will,  upon  request,  make
available such other information as may be reasonably requested.



                                      -2-
<PAGE>



                  No person has been  authorized to give any  information  or to
make any representations other than those contained in this Placement Memorandum
and, if given or made, such  information or  representations  must not be relied
upon.  This  Placement  Memorandum  does  not  constitute  an offer to sell or a
solicitation  of an offer to buy the Class A  Certificates  to any person in any
state or other jurisdiction in which such offer would be unlawful.  The delivery
of this Placement  Memorandum at any time does not imply that information herein
is correct as of any time subsequent to its date.

                  THE CLASS A  CERTIFICATES  DO NOT  REPRESENT AN INTEREST IN OR
OBLIGATION OF THE SELLER OR ANY OF ITS AFFILIATES. THE CLASS A CERTIFICATES WILL
NOT BE SAVINGS  ACCOUNTS OR DEPOSITS AND, EXCEPT FOR THE EXCESS SPREAD,  NEITHER
THE CLASS A CERTIFICATES  NOR THE UNDERLYING  UNGUARANTEED  INTERESTS OF THE SBA
LOANS WILL BE INSURED OR  GUARANTEED BY THE SBA, THE FEDERAL  DEPOSIT  INSURANCE
CORPORATION  OR ANY OTHER  GOVERNMENTAL  AGENCY.  NEITHER  THE SBA NOR ANY OTHER
GOVERNMENTAL AGENCY HAS PASSED UPON THE ACCURACY OF THE INFORMATION CONTAINED IN
THIS PLACEMENT MEMORANDUM.

                  THE   OBLIGATIONS   OF  THE   PARTIES   TO  THE   TRANSACTIONS
CONTEMPLATED  HEREIN ARE SET FORTH IN AND WILL BE GOVERNED BY CERTAIN  DOCUMENTS
DESCRIBED HEREIN, AND ALL OF THE STATEMENTS AND INFORMATION CONTAINED HEREIN ARE
QUALIFIED  IN THEIR  ENTIRETY BY  REFERENCE TO SUCH  DOCUMENTS.  THIS  PLACEMENT
MEMORANDUM  CONTAINS  SUMMARIES,  WHICH THE SELLER  BELIEVES TO BE ACCURATE,  OF
CERTAIN OF THESE  DOCUMENTS,  BUT FOR A COMPLETE  DESCRIPTION  OF THE RIGHTS AND
OBLIGATIONS  SUMMARIZED  THEREIN,   REFERENCE  IS  HEREBY  MADE  TO  THE  ACTUAL
DOCUMENTS, COPIES OF WHICH ARE AVAILABLE FROM ROTHSCHILD INC.

                  THE CLASS A CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE  COMMISSION,  ANY STATE SECURITIES  COMMISSION OR
ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS
PLACEMENT MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

                  THIS  MEMORANDUM  DOES  NOT  CONSTITUTE  AN OFFER TO SELL OR A
SOLICITATION  OF AN  OFFER  TO  BUY  ANY  SECURITIES  OTHER  THAN  THE  CLASS  A
CERTIFICATES  OFFERED  HEREBY,  OR AN OFFER OF SUCH CLASS A CERTIFICATES  TO ANY
PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER WOULD BE UNLAWFUL.

                  IT IS EXPECTED THAT INVESTORS INTERESTED IN PURCHASING CLASS A
CERTIFICATES WILL CONDUCT THEIR OWN INDEPENDENT INVESTIGATION OF THE RISKS POSED
BY AN INVESTMENT IN THE CLASS A CERTIFICATES.

                  THE CLASS A  CERTIFICATES  WILL BE OFFERED ONLY TO  "QUALIFIED
INSTITUTIONAL  BUYERS"  (AS  DEFINED IN RULE 144A UNDER THE  SECURITIES  ACT) OR
OTHER  INSTITUTIONAL  INVESTORS THAT ARE  "ACCREDITED  INVESTORS" (AS DEFINED IN
RULE  501(a)(1)-(3)  OR (7) UNDER  THE  SECURITIES  ACT) TO WHOM THIS  PLACEMENT
MEMORANDUM HAS BEEN FURNISHED,  AND WILL NOT BE REGISTERED  UNDER THE SECURITIES
ACT OR ANY STATE SECURITIES OR "BLUE SKY" LAWS AND ARE BEING OFFERED AND SOLD IN


                                      -3-
<PAGE>

RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION  REQUIREMENTS OF THE SECURITIES
ACT AND SUCH  LAWS,  IN  PARTICULAR  THAT  PROVIDED  BY  SECTION  4(2) UNDER THE
SECURITIES  ACT. EACH PURCHASER OF A CLASS A CERTIFICATE  WILL BE DEEMED TO HAVE
MADE CERTAIN REPRESENTATIONS AND AGREEMENTS AS DESCRIBED HEREIN UNDER "NOTICE TO
INVESTORS." THERE IS NO MARKET FOR THE CLASS A CERTIFICATES BEING OFFERED HEREBY
AND THERE IS NO ASSURANCE THAT ONE WILL DEVELOP. RESALES OF CLASS A CERTIFICATES
MAY BE MADE  ONLY  (1) IN  CERTIFICATED  FORM (A) TO A  PERSON  THAT THE  SELLER
REASONABLY  BELIEVES IS A QUALIFIED  INSTITUTIONAL BUYER AS DEFINED IN RULE 144A
UNDER THE  SECURITIES  ACT THAT  PURCHASES FOR ITS OWN ACCOUNT OR THE ACCOUNT OF
ANOTHER QUALIFIED  INSTITUTIONAL  BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE,
PLEDGE OR  TRANSFER  IS BEING  MADE IN  RELIANCE  ON RULE  144(A),  OR (B) TO AN
INSTITUTIONAL  "ACCREDITED  INVESTOR"  AS DEFINED IN RULE  501(a)(1)-(3)  OR (7)
UNDER THE SECURITIES ACT, IN EACH CASE,  SUBJECT TO THE  REQUIREMENTS  DESCRIBED
HEREIN  CONCERNING THE DELIVERY TO THE TRUSTEE OF A CERTIFICATION  OR OPINION OF
COUNSEL,  (2) PURSUANT TO ANOTHER  EXEMPTION  AVAILABLE UNDER THE SECURITIES ACT
AND IN ACCORDANCE WITH ANY APPLICABLE  STATE SECURITIES LAWS, OR (3) PURSUANT TO
A VALID  REGISTRATION  STATEMENT.  ALL TRANSFERS OF THE CLASS A CERTIFICATES ARE
SUBJECT TO CERTAIN OTHER RESTRICTIONS AS DESCRIBED HEREIN.

                  THIS PLACEMENT MEMORANDUM IS DELIVERED ON A CONFIDENTIAL BASIS
FOR USE SOLELY IN CONNECTION WITH AN OFFERING EXEMPT FROM REGISTRATION UNDER THE
SECURITIES  ACT  AND  ANY  APPLICABLE  STATE  SECURITIES  LAWS,  AND  MAY NOT BE
REPRODUCED OR USED,  IN WHOLE OR IN PART,  FOR ANY OTHER PURPOSE OR FURNISHED TO
ANY OTHER PERSON.

                  PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS
PLACEMENT  MEMORANDUM OR ANY PRIOR OR SUBSEQUENT  COMMUNICATIONS FROM THE TRUST,
THE SELLER, ANY AFFILIATE THEREOF OR ANY OF THEIR OFFICERS,  EMPLOYEES OR AGENTS
AS INVESTMENT, LEGAL, ACCOUNTING,  REGULATORY OR TAX ADVICE. PRIOR TO PURCHASING
ANY CLASS A  CERTIFICATE,  A PROSPECTIVE  PURCHASER  SHOULD CONSULT WITH ITS OWN
LEGAL,  BUSINESS,  ACCOUNTING,  REGULATORY  AND TAX  ADVISERS TO  DETERMINE  THE
APPROPRIATENESS AND CONSEQUENCES OF AN INVESTMENT IN THE CLASS A CERTIFICATES IN
ITS  SPECIFIC  CIRCUMSTANCES  AND  ARRIVE AT AN  INDEPENDENT  EVALUATION  OF THE
INVESTMENT  BASED  ON,  AMONG  OTHER  THINGS,  ITS  OWN  VIEWS  AS TO THE  RISKS
ASSOCIATED  WITH THE SBA  LOANS,  WHICH  WILL  AFFECT  THE RETURN ON THE CLASS A
CERTIFICATES.

                  NOTICE TO NEW  HAMPSHIRE  RESIDENTS:  NEITHER  THE FACT THAT A
REGISTRATION  STATEMENT OR AN  APPLICATION  FOR LICENSE HAS BEEN FILED UNDER NEW
HAMPSHIRE REVISED STATUTES ANNOTATED, CHAPTER 421-B ("RSA 421-B") WITH THE STATE
OF NEW  HAMPSHIRE  NOR THE FACT THAT A SECURITY IS  EFFECTIVELY  REGISTERED OR A
PERSON IS LICENSED IN THE STATE OF NEW  HAMPSHIRE  CONSTITUTES  A FINDING BY THE
SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE  THAT ANY DOCUMENT  FILED UNDER
RSA 421-B IS TRUE,  COMPLETE AND NOT  MISLEADING.  NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS  THAT THE  SECRETARY  OF STATE HAS  PASSED  IN ANY WAY UPON THE  MERITS OR
QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,  SECURITY OR


                                      -4-
<PAGE>

TRANSACTION.  IT IS UNLAWFUL TO MAKE,  OR CAUSE TO BE MADE,  TO ANY  PROSPECTIVE
PURCHASER,   CUSTOMER  OR  CLIENT  ANY  REPRESENTATION   INCONSISTENT  WITH  THE
PROVISIONS OF THIS PARAGRAPH.

                  No  election  will be made to treat the Trust Fund as a REMIC.
It is expected that the Trust Fund will be  classified as a "grantor  trust" for
federal  income tax purposes.  See "Material  Federal  Income Tax  Consequences"
herein.

                  The Class A  Certificates  are offered  subject to prior sale,
withdrawal,  cancellation or modification  without notice.  It is a condition to
their offering that the Class A Certificates  receive the rating set forth under
"SUMMARY OF MEMORANDUM - Rating" herein and that certain other legal  conditions
are met.

                  THERE MAY BE RESTRICTIONS ON THE ABILITY OF CERTAIN INVESTORS,
INCLUDING DEPOSITORY INSTITUTIONS, EITHER TO PURCHASE CLASS A CERTIFICATES OR TO
PURCHASE CLASS A CERTIFICATES  REPRESENTING MORE THAN A SPECIFIED  PERCENTAGE OF
THE  INVESTOR'S  ASSETS.  INVESTORS  SHOULD  CONSULT THEIR OWN LEGAL ADVISORS IN
DETERMINING WHETHER AND TO WHAT EXTENT THE CLASS A CERTIFICATES CONSTITUTE LEGAL
INVESTMENTS FOR SUCH INVESTORS.

                  It is expected  that  delivery  of the Class A  Certificates
will be made in certificated form on or about December 30, 1998.



                                      -5-
<PAGE>



                              AVAILABLE INFORMATION

         To  permit  compliance  with  Rule 144A  under  the  Securities  Act in
connection  with the sales of the Class A  Certificates,  the  Servicer  will be
required under the Pooling and Servicing  Agreement,  for so long as any Class A
Certificate  is a  "restricted  security"  within the meaning of Rule  144(a)(3)
under the  Securities  Act,  to provide,  upon  request of a holder of a Class A
Certificate,  to such  holder and a  prospective  purchaser  designated  by such
holder,  the information which is required to be delivered under Rule 144A(d)(4)
under the Securities Act.


                           Business Loan Center, Inc.

                                December 28, 1998



                                      -6-
<PAGE>


                                TABLE OF CONTENTS

                                                               Page

SUMMARY OF MEMORANDUM......................................       8

RISK FACTORS...............................................      28

USE OF PROCEEDS............................................      34

THE SBA LOAN POOL..........................................      34

THE SBA LOAN PROGRAM.......................................      57

YIELD, MATURITY AND PREPAYMENT CONSIDERATIONS..............      58

THE SELLER.................................................      61

THE SBA LOAN LENDING PROGRAM OF THE SELLER.................      62

DESCRIPTION OF THE AGREEMENT AND THE CERTIFICATES..........      69

THE TRUSTEE................................................      88

CERTAIN LEGAL MATTERS RELATING TO THE SBA LOANS............      89

MATERIAL FEDERAL INCOME TAX CONSEQUENCES...................      93

ERISA CONSIDERATIONS.......................................      98

PLACEMENT..................................................     102

NOTICE TO INVESTORS........................................     102

LEGAL INVESTMENT...........................................     104

RATING.....................................................     104

LEGAL MATTERS..............................................     104

FINANCIAL INFORMATION......................................     104

INDEX OF PRINCIPAL TERMS...................................     106

CERTAIN DEFINITIONS........................................     110





                                       -7-
<PAGE>





                              SUMMARY OF MEMORANDUM

                  The  following  summary is  qualified  in its entirety by more
detailed  information   appearing  elsewhere  in  this  Confidential   Placement
Memorandum (the "Memorandum").  Capitalized terms used but not defined elsewhere
in this  Memorandum  have the  meanings  assigned to such terms  under  "Certain
Definitions." Unless otherwise noted, all statistical percentages and all dollar
amounts in this Memorandum are measured by the aggregate  principal  balances of
the SBA Loans, the Unguaranteed  Interests or the Guaranteed  Interests (each as
defined below under "--Trust Fund Assets"),  as the case may be, at the close of
business on the  Statistical  Calculation  Date (as defined below under "--Trust
Fund Assets").

Securities..................     Business Loan Center SBA Loan-Backed Adjustable
                                 RateCertificates,  Series 1998-1,  Class A (the
                                 "Class   A   Certificates)."    The   Class   A
                                 Certificates  will be  issued  in an  aggregate
                                 initial  principal amount (the "Initial Class A
                                 Certificate Principal Amount") of approximately
                                 $24,316,729.85.

                                 In  addition to the Class A  Certificates,  the
                                 Trust Fund is issuing Class B Certificates (the
                                 "Class B  Certificates"  and together  with the
                                 Class A Certificates,  the  "Certificates")  in
                                 the  aggregate  initial  principal  amount (the
                                 "Initial   Class  B   Principal   Amount")   of
                                 approximately   $2,114,498.25.   The   Class  B
                                 Certificates  initially  will be transferred to
                                 and held by a special  purpose  entity owned by
                                 the  Seller and are not being  offered  hereby.
                                 Any information contained herein concerning the
                                 Class  B  Certificates   is  included  only  to
                                 provide a better  understanding  of the Class A
                                 Certificates.

                                 The Class B Certificates are subordinate to the
                                 Class A  Certificates  in the right to  receive
                                 payments  of  interest   and   principal.   See
                                 "Description   of   the   Agreement   and   the
                                 Certificates--Flow of Funds" herein.

                                 The    Certificates    represent   the   entire
                                 beneficial  ownership  interest in a trust fund
                                 (the "Trust Fund") formed pursuant to a Pooling
                                 and  Servicing   Agreement  (the   "Agreement")
                                 between  Business Loan Center,  Inc., as seller
                                 and   servicer   of  the  SBA  Loans  (in  such
                                 capacities  the  "Seller"  and the  "Servicer,"
                                 respectively),  and  Marine  Midland  Bank,  as
                                 trustee (the "Trustee").

Denominations.................   The  Class A  Certificates  will be  issued  in
                                 minimum   denominations  of  $100,000  original
                                 principal  amount  and  integral  multiples  of
                                 $1,000 in excess thereof, except that one Class
                                 A   Certificate   may   be   in   a   different
                                 denomination   so   that   the   sum   of   the
                                 denominations   of  all  outstanding   Class  A
                                 Certificates  shall equal the Original  Class A
                                 Certificate   Principal   Balance.    Class   A
                                 Certificates  will be issued in physical  form.
                                 See  "Description  of  the  Agreement  and  the


                                       -8-
<PAGE>

                                 Certificates--Registration     of    Class    A
                                 Certificates" herein.

Trust Fund Assets............    The Trust Fund will  consist  primarily  of the
                                 right  to  receive  all   payments   and  other
                                 recoveries  attributable  to  the  Unguaranteed
                                 Interests (as defined below) in a pool of loans
                                 (the "SBA Loan  Pool")  made to small  business
                                 concerns  pursuant to Section 7(a) of the Small
                                 Business  Act, as amended,  and Title 13 of the
                                 Code  of   Federal   Regulations,   as  amended
                                 ("SBAss.7(a)").  Such  Loans  are  referred  to
                                 herein as either the "SBAss. 7(a) Loans" or the
                                 "SBA   Loans."   The  SBAss.   7(a)  Loans  are
                                 partially guaranteed by the U.S. Small Business
                                 Administration  (the "SBA") pursuant to a Small
                                 Business Administration Loan Guaranty Agreement
                                 (Deferred  Participation) (SBA Form 750), dated
                                 March  27,  1997 and a  Supplemental  Guarantee
                                 Agreement  Preferred  Lender  Program (SBA Form
                                 1347), dated August 1, 1997, (SBA Form 1347) by
                                 and  between  the  Seller  and  the  SBA,   and
                                 pertinent  SBA  regulations  found at 13 C.F.R.
                                 Part 120.

                                 As to any SBA  ss.  7(a)  Loan,  the  right  to
                                 receive the guaranteed portion of the principal
                                 balance thereof  together with interest thereon
                                 at a per annum rate in effect from time to time
                                 (which  rate is less  than the rate paid by the
                                 obligor on the  related  SBA ss. 7(a) Loan (the
                                 "Obligor"))  and  the  fee  (the  "FTA's  Fee")
                                 payable to the SBA's fiscal and transfer  agent
                                 (the  "FTA")  is  referred  to  herein  as  the
                                 "Guaranteed  Interest." With respect to SBA ss.
                                 7(a) Loans for which the  Guaranteed  Interests
                                 were sold in the  secondary  market on or after
                                 September  1, 1993  (unless the related SBA ss.
                                 7(a) Loan was  approved  by the SBA on or after
                                 October  12,  1995)  and  SBA  ss.  7(a)  Loans
                                 approved  by the SBA on or  after  October  12,
                                 1995,  regardless  of whether they were sold in
                                 the secondary  market (the  "Additional Fee SBA
                                 Loans"),  a fee equal to 40 basis  points or 50
                                 basis  points,  respectively,  per annum on the
                                 outstanding  balance of the Guaranteed Interest
                                 of  such   Additional   Fee  SBA   Loans   (the
                                 "Additional Fee") is required to be paid by the
                                 Seller to the SBA. Although such Additional Fee
                                 is  the   responsibility  of  the  Seller,  the
                                 Additional Fee will be funded from the interest
                                 from the  related  Obligor on the SBA ss.  7(a)
                                 Loans.  Accordingly,  any such  Additional  Fee
                                 will  reduce  the  Excess  Spread  (as  defined
                                 herein) on the  related  SBA Loan  which  would
                                 otherwise   have  been   available   as  credit
                                 enhancement   for   the    Certificates.    The
                                 Guaranteed  Interest  varies  from SBA ss. 7(a)
                                 Loan to SBA ss. 7(a) Loan,  is not  included in
                                 the Trust Fund and  Certificateholders  have no
                                 right or interest therein. As described herein,


                                       -9-
<PAGE>

                                 the portion of the principal  guaranteed by the
                                 SBA for each SBA ss. 7(a) Loan varies depending
                                 upon the program  under which such SBA ss. 7(a)
                                 Loan was originated. However, the SBA imposes a
                                 maximum per borrower guaranty of $750,000.  See
                                 "The SBA Loan Program."

                                 Pursuant to policies of the SBA,  the  Servicer
                                 is  required  to retain  for each SBA ss.  7(a)
                                 Loan an amount  equal to 0.60% per annum on the
                                 outstanding  balance of the related  Guaranteed
                                 Interest  (such amount is referred to herein as
                                 the  "Premium  Protection  Fee" for the related
                                 SBA ss. 7(a) Loan). The Premium  Protection Fee
                                 is  not   included   in  the  Trust   Fund  and
                                 Certificateholders  have no right  or  interest
                                 therein.

                                 The  "Unguaranteed  Interest"  will  equal  all
                                 payments and other  recoveries  on such SBA ss.
                                 7(a)  Loan  not   constituting  the  Guaranteed
                                 Interest or the Premium Protection Fee therein.
                                 As stated  above,  the interest  accrued on the
                                 guaranteed  portion of the principal balance of
                                 each SBA ss.  7(a) Loan  exceeds the sum of the
                                 interest   payable   to  the   holder   of  the
                                 Guaranteed Interest, the FTA's Fee, the Premium
                                 Protection   Fee  and,   with  respect  to  the
                                 Additional Fee SBA Loans,  the Additional  Fee.
                                 Such excess  (the  "Excess  Spread"),  which is
                                 guaranteed  by the  SBA  for up to 120  days of
                                 accrued   interest,    is   included   in   the
                                 Unguaranteed  Interest and will be available to
                                 pay interest and principal on the Certificates,
                                 the  Servicing  Fee to the Servicer and to fund
                                 the Spread Account (as defined under  "--Spread
                                 Account"  herein) as described  under "--Spread
                                 Account" herein.

                                 The  "Unguaranteed  Percentage"  will equal the
                                 fraction,   expressed  as  a  percentage,   the
                                 numerator of which is the principal  portion of
                                 the  Unguaranteed  Interest  as of the  Cut-Off
                                 Date  and  the  denominator  of  which  is  the
                                 outstanding  principal  balance of such SBA ss.
                                 7(a)  Loan  as  of  the   Cut-Off   Date.   The
                                 Unguaranteed Percentage for any given loan will
                                 not change over time.

                                 The  "Cut-Off  Date" is (i) with respect to the
                                 Unguaranteed  Interests  relating  to  the  SBA
                                 Loans  transferred  to the Trust on the Closing
                                 Date,  December  23, 1998 and (ii) with respect
                                 to the Unguaranteed  Interests  relating to the
                                 Subsequent Loans, the first day of the month in
                                 which   such    Unguaranteed    Interests   are
                                 transferred  to the Trust (each,  a "Subsequent
                                 Transfer Date").

                                 As of the  close  of  business  on the  Cut-Off
                                 Date,  the  aggregate  principal  amount of the
                                 Unguaranteed  Interests  of the  SBA  ss.  7(a)


                                      -10-
<PAGE>

                                 Loans  expected to be  delivered to the Trustee
                                 on  the  Closing  Date  equaled   approximately
                                 $21,431,228.10  (the  "Original  Pool Principal
                                 Balance").

Seller......................     Business Loan Center,  Inc. (the "Seller") is a
                                 Delaware  corporation with  headquarters in New
                                 York,   New   York.   Except   for  less   than
                                 approximately   1.0%  of  the  SBA   Loans  (by
                                 principal balance of Unguaranteed  Interests as
                                 of the Statistical  Calculation  Date),  all of
                                 the SBAss.  7(a) Loans were  originated  by the
                                 Seller or its  predecessors.  The  Seller  will
                                 deposit  into  the  Trust  Fund  the  right  to
                                 receive the Unguaranteed  Interests (net of the
                                 related   servicing   fee)  in  the  SBA  Loans
                                 originated  or  acquired  by it and  will  make
                                 representations  and warranties with respect to
                                 such SBA Loans.

Servicer....................     Business Loan Center, Inc. will service the SBA
                                 Loans  in  accordance  with  the  terms  of the
                                 Agreement and the SBA Rules and Regulations and
                                 the  Multi-Party  Agreement  (as defined  below
                                 under "--Multi-Party Agreement").

Trustee......................    Marine    Midland   Bank,   a   trust   company
                                 headquartered in Buffalo, New York, will be the
                                 Trustee.  In the  Agreement,  the Trustee  will
                                 agree  to  act  as  successor  servicer  if the
                                 Servicer can no longer serve in such capacity.

Document Custodians..........    The  promissory  notes  evidencing  the SBA ss.
                                 7(a) Loans (the  "Notes") will be held by SBA's
                                 fiscal and transfer agent (the "FTA")  pursuant
                                 to the Multi-Party  Agreement.  The FTA will be
                                 liable  solely to the SBA for the  FTA's  gross
                                 negligence or malfeasance.

                                 All  other  documents  to be  delivered  by the
                                 Seller  with  respect  to the SBA Loans will be
                                 delivered  to and held by the Trustee  pursuant
                                 to  the  Agreement.  See  "Description  of  the
                                 Agreement and the Certificates" herein.

Interest Accrual Period......    With  respect  to  each   Remittance  Date  (as
                                 defined below under  "--Remittance  Date"), the
                                 "Interest  Accrual  Period"  will be the period
                                 commencing   on  the  15th  day  of  the  month
                                 preceding  such  Remittance  Date and ending on
                                 the  14th day of the  month of such  Remittance
                                 Date.   However,   for  the   Remittance   Date
                                 occurring in January  1999,  (which will be the
                                 first  Remittance  Date) the  Interest  Accrual
                                 Period  will be the  period  commencing  on the
                                 Closing Date and ending on January 14, 1999.

Pre-Funding Account...........   On the Closing  Date,  cash in an amount not to
                                 exceed     approximately     $5,000,000    (the
                                 "Pre-Funded  Amount")  will be deposited on the
                                 Closing  Date  into  the  Pre-Funding  Account.


                                      -11-
<PAGE>

                                 Amounts in the Pre-Funding  Account may be used
                                 only (i) to acquire the Unguaranteed  Interests
                                 (net  of  the  related  Servicing  Fee)  in the
                                 Subsequent   SBA   Loans   and   (ii)  to  make
                                 accelerated   payments  of   principal  on  the
                                 Certificates.  During the period (the  "Funding
                                 Period")   from  the  Closing  Date  until  the
                                 earliest of (i) the date on which the amount on
                                 deposit  in the  Pre-Funding  Account,  is less
                                 than $100,000,  (ii) the date on which an Event
                                 of Default  occurs under the Agreement or (iii)
                                 the  close  of  business  on  March  26,  1999,
                                 amounts  will,  from time to time, be withdrawn
                                 from the  Pre-Funding  Account to purchase  the
                                 Unguaranteed  Interests in the  Subsequent  SBA
                                 Loans in  accordance  with the  Agreement.  Any
                                 Pre-Funded  Amount  remaining at the end of the
                                 Funding   Period  will  be   distributed  as  a
                                 principal  prepayment  on the  next  Remittance
                                 Date   to  the   Certificates.   However,   any
                                 Pre-Funded  Amount  remaining  at the  close of
                                 business on March 26, 1999 will be  distributed
                                 as a  principal  prepayment  on March 30,  1999
                                 (the   "Special   Remittance   Date")   to  the
                                 Certificates on a pro rata basis.

Capitalized Interest
Account..................        On the Closing Date,  the Seller also will make
                                 a cash deposit in an account (the  "Capitalized
                                 Interest   Account")   to  be  pledged  to  the
                                 Trustee.    The   amount   deposited   in   the
                                 Capitalized  Interest  Account  will be used by
                                 the Trustee on the Remittance  Dates  occurring
                                 in January  1999,  February 1999 and March 1999
                                 to fund the  excess,  if any, of (i) the amount
                                 of interest  accrued  for each such  Remittance
                                 Date at the weighted  average Class A and Class
                                 B  Remittance  Rates  on  the  portion  of  the
                                 Certificates    having    principal    balances
                                 exceeding   the   principal   balances  of  the
                                 Unguaranteed  Interests over (ii) the amount of
                                 any  earnings  on  funds  in  the   Pre-Funding
                                 Account  that are  available to pay interest on
                                 the  Certificates on each such Remittance Date.
                                 Any  amounts   remaining  in  the   Capitalized
                                 Interest Account on the Special Remittance Date
                                 and not used for such  purposes are required to
                                 be paid  directly to the Seller on such Special
                                 Remittance Date.

Available Funds..............    With  respect  to  each  Remittance  Date,  the
                                 "Available Funds" will equal the sum of (i) the
                                 Unguaranteed    Percentage   of   all   amounts
                                 (including any Excess Spread) received from any
                                 source  by  the  Servicer  or  any  Subservicer
                                 during  the  preceding   calendar   month  with
                                 respect to  principal  and  interest on the SBA
                                 Loans (net of the amount  payable to the holder
                                 of the Guaranteed Interest,  the FTA's Fee, the
                                 Premium  Protection Fee, the Additional Fee and
                                 the    Servicing    Fee   (as   defined   under
                                 "--Servicing  Fee"  herein)),  (ii) advances by
                                 the Servicer,  (iii) amounts to be  transferred


                                      -12-
<PAGE>

                                 from   the   Pre-Funding    Account   and   the
                                 Capitalized  Interest  Account  with respect to
                                 the Remittance Dates in January 1999,  February
                                 1999 and March 1999, (iv) amounts in the Spread
                                 Account  and  (v)  with  respect  to the  first
                                 Remittance  Date sixteen  days  interest on the
                                 Original Pool Principal Balance.

Interest...................      To the  extent  there are funds  available  for
                                 distribution,   and   prior  to   payments   of
                                 principal to the Class A Certificateholders, on
                                 each    Remittance    Date    the    Class    A
                                 Certificateholders   (and  after   payments  of
                                 principal to the Class A Certificateholders and
                                 the funding of the Spread  Account,  as defined
                                 below) the Class B Certificateholders,  in that
                                 order,  will be  entitled  to receive  interest
                                 accrued for the related Interest Accrual Period
                                 at the adjustable  rate described  below on the
                                 Class A or Class B Certificate  Balance, as the
                                 case   may  be   (each   as   defined   below),
                                 outstanding    immediately    prior   to   such
                                 Remittance  Date. If, on any  Remittance  Date,
                                 the  Class  A or  Class B  Certificates  do not
                                 receive  the full  amount of  interest to which
                                 they  are  entitled,   such   shortfall,   plus
                                 interest thereon compounded monthly at the then
                                 applicable  Class A or Class B Remittance  Rate
                                 (each as defined  below),  will be added to the
                                 amount of interest they are entitled to receive
                                 on succeeding  Remittance Dates and paid in the
                                 priorities set forth under  "Description of the
                                 Agreement and the Certificates--Flow of Funds."
                                 The  aggregate  amounts of interest  payable to
                                 the  Class A and Class B  Certificates  on each
                                 Remittance  Date are  referred to herein as the
                                 "Class A Interest  Distribution Amount" and the
                                 "Class   B   Interest   Distribution   Amount,"
                                 respectively.

                                 Interest will accrue on the Certificates on the
                                 basis of a 360-day  year  consisting  of twelve
                                 30-day months at a per annum rate (the "Class A
                                 Remittance Rate" and "Class B Remittance Rate,"
                                 respectively) equal to:

                                 Class A:  During the initial  Interest  Accrual
                                 Period, 6.75% per annum. During each subsequent
                                 Interest  Accrual  Period,  the Prime  Rate (as
                                 defined  below)  in  effect  on  the  preceding
                                 Adjustment Date (as defined below) minus 1.00 %
                                 per annum, subject to the adjustments described
                                 under  "Description  of the  Agreement  and the
                                 Certificates--Class  A  and  Class  B  Interest
                                 Distribution Amounts" herein.

                                 Class B:  During the initial  Interest  Accrual
                                 Period, 6.95% per annum. During each subsequent
                                 Interest  Accrual  Period,  the  Prime  Rate in
                                 effect on the preceding  Adjustment  Date minus
                                 0.80% per  annum,  subject  to the  adjustments
                                 described  under  "Description of the Agreement


                                      -13-
<PAGE>

                                 and  the  Certificates--Class  A  and  Class  B
                                 Interest Distribution Amounts" herein.

                                 The Prime  Rate will  equal  the  lowest  prime
                                 lending  rate as  published  in the Money  Rate
                                 Section  of The  Wall  Street  Journal  for the
                                 applicable Adjustment Date.

                                 For the Interest Accrual Periods  commencing in
                                 February,  March  and  April,  the  "Adjustment
                                 Date"  will be the  first  Business  Day of the
                                 preceding  January.  For the  Interest  Accrual
                                 Periods  commencing in May, June and July,  the
                                 "Adjustment  Date"  will be the first  Business
                                 Day of the  preceding  April.  For the Interest
                                 Accrual Periods commencing in August, September
                                 and October,  the "Adjustment Date" will be the
                                 first  Business Day of the preceding  July. For
                                 the  Interest  Accrual  Periods  commencing  in
                                 November, December and January, the "Adjustment
                                 Date"  will be the  first  Business  Day of the
                                 preceding October.

                                 As stated above, the amount of interest paid on
                                 the  Certificates  on each  Remittance  Date is
                                 based  upon the amount of  interest  due on the
                                 SBA   Loans  in  the   month   preceding   such
                                 Remittance Date. For each such monthly payment,
                                 the   related   SBA  Loan   Interest   Rate  on
                                 substantially  all of the SBA Loans is based on
                                 the Prime  Rate in effect  for such SBA Loan in
                                 the  month  preceding  the month  such  monthly
                                 payment  is  due.  For  example,   the  monthly
                                 payment  due on  substantially  all of the  SBA
                                 Loans in  February  1999 will be based upon the
                                 Prime  Rate in  effect  for  such  SBA  Loan in
                                 January  1999 (which,  for SBA Loans  adjusting
                                 quarterly,  generally will be the Prime Rate in
                                 effect  on  October  1,  1998).   This  monthly
                                 payment     will     be      distributed     to
                                 Certificateholders  on the  Remittance  Date in
                                 March  1999.  However,  for  the  January  1999
                                 Remittance  Date,  interest  on the Class A and
                                 Class B Certificates will accrue based upon the
                                 Prime Rate in effect on the first  Business Day
                                 of December 1998.

                                 Except for approximately 4.95% of the SBA Loans
                                 (by principal balance of Unguaranteed Interests
                                 as of the Statistical  Calculation  Date) which
                                 adjust  monthly,   each  SBA  Note  will,  with
                                 respect to principal payments, adjust quarterly
                                 and provide for a schedule of Monthly  Payments
                                 which are, if timely paid,  sufficient to fully
                                 amortize the principal balance of such SBA Note
                                 on its maturity  date. As a result,  the actual
                                 amount   of   interest   distributed   to   the
                                 Certificateholders each month may be subject to
                                 the adjustments described under "Description of


                                      -14-
<PAGE>

                                 the Agreement and the Certificates--Class A and
                                 Class B Interest Distribution Amounts" herein.

                                 As  of  any  date,  the  "Class  A  Certificate
                                 Balance"  will  equal the  Class A  Certificate
                                 Balance  on the  Closing  Date  reduced  by all
                                 amounts  previously   distributed  to  Class  A
                                 Certificateholders  and allocable to principal.
                                 The  "Class  B  Certificate  Balance"  will  be
                                 calculated in a similar manner.

Principal................        To the extent there are funds  remaining  after
                                 payment of interest on the Class A Certificates
                                 as described  above, on each  Remittance  Date,
                                 holders  of  the  Class  A  Certificates   will
                                 receive  an amount  equal to the  lesser of (A)
                                 such remaining  Available Funds and (B) the sum
                                 of  (i)  the  Class  A  Principal  Distribution
                                 Amount (as defined  below) and (ii) the Class A
                                 Carry-Forward Amount (as defined below).

                                 To the extent of the Available  Funds remaining
                                 after   payment  of  interest  and  payment  of
                                 principal on the Class A Certificates, payments
                                 into the Spread Account (as defined below), and
                                 payments   of   interest   on   the   Class   B
                                 Certificates,    holders   of   the   Class   B
                                 Certificates  will  receive an amount  equal to
                                 the  lesser  of (A)  such  remaining  Available
                                 Funds  and  (B)  the  sum of (i)  the  Class  B
                                 Principal   Distribution   Amount  (as  defined
                                 below)  and  (ii)  the  Class  B  Carry-Forward
                                 Amount (as defined below).

                                 With  respect  to  each  Remittance  Date,  the
                                 "Class A Principal Distribution Amount" and the
                                 "Class B Principal  Distribution  Amount"  will
                                 equal  the  Class A  Percentage  or the Class B
                                 Percentage (each as defined below), as the case
                                 may  be,  multiplied  by the  total  of (i) the
                                 Unguaranteed  Percentage  of all  payments  and
                                 other  recoveries  of  principal of an SBA Loan
                                 (net of amounts  reimbursable  to the  Servicer
                                 pursuant  to  the  Agreement)  received  by the
                                 Servicer or any  Subservicer in the immediately
                                 preceding  calendar  month (with respect to any
                                 Remittance  Date, the "Due Period"),  excluding
                                 amounts  received  relating  to SBA Loans which
                                 have  been  delinquent  24  months or have been
                                 determined to be uncollectible,  in whole or in
                                 part,  by the  Servicer  to the extent that the
                                 Class  A  Certificateholders  or  the  Class  B
                                 Certificateholders,  as the case  may be,  have
                                 previously  received the Class A Percentage  or
                                 the Class B Percentage,  as the case may be, of
                                 the  principal   portion  of  the  Unguaranteed
                                 Interest of such SBA Loans;  (ii) the principal
                                 portion of any Unguaranteed  Interest  actually
                                 purchased  by the  Seller or the  Servicer  and
                                 actually  received  by  the  Trustee  as of the
                                 related    Determination    Date;   (iii)   any
                                 adjustments  with respect to  substitutions  of
                                 SBA Loans for which the Seller  has  breached a


                                      -15-
<PAGE>

                                 representation  or  warranty  deposited  in the
                                 Principal and Interest  Account and transferred
                                 to the  Certificate  Account as of the  related
                                 Determination   Date;  (iv)  the   Unguaranteed
                                 Percentage  of all  losses on SBA  Loans  which
                                 were finally  liquidated  during the applicable
                                 Due Period; (v) the Unguaranteed  Percentage of
                                 the then outstanding  principal  balance of any
                                 SBA  Loan  which,  as of the  first  day of the
                                 related Due Period,  has been delinquent for 24
                                 months   or   has   been   determined   to   be
                                 uncollectible,  in  whole  or in  part,  by the
                                 Servicer;  and (vi) amounts,  if any,  released
                                 from the  Pre-Funding  Account  on the  January
                                 1999,  February 1999 and March 1999  Remittance
                                 Date.

                                 With  respect  to  each  Remittance  Date,  the
                                 "Class A Carry-Forward Amount" and the "Class B
                                 Carry-Forward  Amount" will equal the aggregate
                                 amount,  if  any,  by  which  (i)  the  Class A
                                 Principal  Distribution  Amount  or the Class B
                                 Principal  Distribution Amount, as the case may
                                 be, with  respect to any  preceding  Remittance
                                 Date  exceeded  (ii) the  amount of the  actual
                                 principal   distribution   to   the   Class   A
                                 Certificates  or the Class B  Certificates,  as
                                 the case may be, on such Remittance Date.

                                 With  respect  to  each  Remittance  Date,  the
                                 "Class A Percentage"  will equal  approximately
                                 92%,   representing  the  beneficial  ownership
                                 interest  of the  Class A  Certificates  in the
                                 Trust Fund.

                                 With  respect  to  each  Remittance  Date,  the
                                 "Class B Percentage"  will equal  approximately
                                 8%,   representing  the  beneficial   ownership
                                 interest  of the  Class B  Certificates  in the
                                 Trust Fund.

                                 On  each  Remittance   Date,   Available  Funds
                                 remaining   after   payment  of  interest   and
                                 principal to the Class A  Certificates  will be
                                 deposited  in the Spread  Account  and,  to the
                                 extent  amounts  in the  Spread  Account  would
                                 exceed  the then  applicable  Specified  Spread
                                 Account   Requirement,   such  excess  will  be
                                 distributed,  to pay interest and  principal to
                                 the Class B Certificates,  to pay the Trustee's
                                 fees and  expenses,  to pay the  Servicer up to
                                 the  Reimbursable  Amounts,  and  then  to  the
                                 Spread  Account  Depositor  (as  defined  under
                                 "--Spread  Account").  See  "--Spread  Account"
                                 herein.

                                 The aggregate amount of principal  payable with
                                 respect to each Class of  Certificates  on each
                                 Remittance  Date as described  above,  together
                                 with   interest  as   calculated   above  under
                                 "--Interest,"    constitutes   the   "Class   A
                                 Remittance  Amount" and the "Class B Remittance
                                 Amount,"   as  the  case   may  be,   for  such
                                 Remittance Date.

                                      -16-
<PAGE>

Subordination of Class B
  Certificates............       The  rights  of  the  holders  of the  Class  B
                                 Certificates  to  receive   distributions  with
                                 respect  to  interest  and  principal  will  be
                                 subordinated  to such  rights of the holders of
                                 the  Class  A   Certificates   to  the   extent
                                 described  above  under   "--Securities."  This
                                 subordination   is   intended  to  enhance  the
                                 likelihood of regular receipt by holders of the
                                 Class A  Certificates  of the  full  amount  of
                                 their  scheduled  monthly  payments of interest
                                 and principal, and to afford the holders of the
                                 Class A  Certificates  a measure of  protection
                                 against losses  resulting  from  liquidated SBA
                                 Loans   equal  to  (i)  the   amount  of  funds
                                 remaining in the Spread  Account  after payment
                                 of  interest  on the Class A  Certificates  and
                                 (ii) the then  outstanding  Class B Certificate
                                 Balance.

Remittance Date..........        Distributions  to  Certificateholders  will  be
                                 made on the 15th day of each month, or, if such
                                 day is not a business  day,  on the  succeeding
                                 business  day,   commencing  January  15,  1999
                                 (each,  a "Remittance  Date").  Any  Pre-Funded
                                 Amount  remaining  at the close of  business on
                                 the March  1999  Determination  Date  (together
                                 with accrued interest thereon at the applicable
                                 Remittance  Rates) will be distributed by or on
                                 behalf of the Trustee on the Special Remittance
                                 Date to the Class A and Class B Certificates on
                                 a pro rata  basis.  Such  distribution  will be
                                 made  to  each   persons   in   whose   name  a
                                 Certificate   of  the   applicable   Class   is
                                 registered on February 28, 1999.

                                 The  last  scheduled  Remittance  Date  for the
                                 Certificates  is January  2025.  It is expected
                                 that the actual last  Remittance  Date for each
                                 Class of Certificates will occur  significantly
                                 earlier than such  scheduled  Remittance  Date.
                                 See   "Yield,    Maturity,    and    Prepayment
                                 Considerations" herein.

Record Date..............        Distributions on the Certificates  will be made
                                 by  or  on  behalf  of  the   Trustee  on  each
                                 Remittance  Date to each person in whose name a
                                 Certificate  is  registered  on the last day of
                                 the  preceding   calendar  month  (the  "Record
                                 Date").

Closing Date..............       December 30, 1998

Spread Account............
                                 Business  Loan  Center  Financial  Corp.  II, a
                                 special  purpose,  bankruptcy  remote  Delaware
                                 corporation  (the "Spread  Account  Depositor")


                                      -17-
<PAGE>

                                 will  establish a reserve  account (the "Spread
                                 Account") with the Trustee.  The Spread Account
                                 will not be a part of the  Trust  Fund but will
                                 be pledged to the Trustee as  security  for the
                                 obligations  of the  Spread  Account  Depositor
                                 under the  Agreement  pursuant to an  agreement
                                 (the "Spread  Account  Agreement")  between the
                                 Spread Account Depositor and the Trustee.

                                 On  the  Closing  Date,   the  Spread   Account
                                 Depositor  will make an  initial  cash  deposit
                                 into the Spread  Account in an amount  equal to
                                 2.5% of the  Original  Pool  Principal  Balance
                                 (the "Initial  Deposit").  Thereafter,  on each
                                 Remittance  Date the Trustee  will deposit into
                                 the Spread Account the cash, if any,  remaining
                                 after  payment of interest and principal to the
                                 holders   of  the  Class  A   Certificates   as
                                 described   above   under    "--Interest"   and
                                 "--Principal,"  until the aggregate amount then
                                 on deposit in the Spread  Account  (the "Spread
                                 Balance")  equals  the  sum  of  (i)  the  then
                                 outstanding    principal    balance    of   the
                                 Unguaranteed  Interests  of all SBA  Loans  180
                                 days or more delinquent and (ii) the greater of
                                 (a)  5.0%  of the  then  outstanding  aggregate
                                 principal balance of the Unguaranteed Interests
                                 of  all  the  SBA  Loans,  or (b)  2.5%  of the
                                 Original  Pool  Principal  Balance;   provided,
                                 however,  that for  purposes of clauses (i) and
                                 (ii)(a),  there shall be excluded the principal
                                 portion  of the  Unguaranteed  Interest  of SBA
                                 Loans which have been  delinquent  24 months or
                                 have been  determined to be  uncollectible,  in
                                 whole  or in  part,  by  the  Servicer,  to the
                                 extent   that   the   Certificateholders   have
                                 previously  received the  principal  portion of
                                 the  Unguaranteed  Interest  of such SBA Loans;
                                 provided,  however,  that in no event shall the
                                 Spread   Account   Balance   exceed   the  then
                                 outstanding  Class A Certificate  Balance (such
                                 amount is referred to herein as the  "Specified
                                 Spread Account Requirement").

                                 Amounts,  if  any,  on  deposit  in the  Spread
                                 Account  will be  available  to be  applied  to
                                 payments of interest and principal on the Class
                                 A  Certificates  on  any  Remittance  Date.  In
                                 addition,  amounts  in excess of the  Specified
                                 Spread Account Requirement will be available to
                                 make distributions of interest and principal on
                                 the Class B  Certificates,  to pay the  Trustee
                                 fee and expenses, to pay the Servicer up to the
                                 Reimbursable  Amounts and any remaining amounts
                                 will  be   released   to  the  Spread   Account
                                 Depositor on any Remittance Date.

                                 The  Spread  Account   Depositor  will  not  be
                                 required  to  refund  any  amounts   previously
                                 properly   distributed  to  it,  regardless  of
                                 whether  there  are   sufficient   funds  on  a
                                 subsequent  Remittance  Date  to  make  a  full
                                 distribution   to   holders   of  the  Class  A
                                 Certificates on such Remittance Date.

                                 The  funding  and  maintenance  of  the  Spread
                                 Account is intended  to enhance the  likelihood
                                 of timely  payment of principal and interest to


                                      -18-
<PAGE>

                                 the  holders  of  the  Class  A   Certificates;
                                 however,  if  the  SBA  Loan  Pool  experiences
                                 levels  of   delinquencies   and  losses  above
                                 certain scenarios,  the Spread Account could be
                                 depleted,  and  shortfalls  could  result.  See
                                 "Risk Factors--Spread Account," "Description of
                                 the  Agreement  and  the   Certificates--Spread
                                 Account" and "Ratings" herein.

The SBA Loan Pool.............
                                 The statistical  information  presented in this
                                 Confidential  Placement  Memorandum  concerning
                                 the   SBA   Loan   Pool   is   based   on   its
                                 characteristics  as of  October  31,  1998 (the
                                 "Statistical   Calculation  Date").  The  Loans
                                 transferred  to the Trust  Fund on the  Cut-Off
                                 Date will include certain other SBA Loans, some
                                 of   which   may  be   originated   after   the
                                 Statistical Calculation Date but on or prior to
                                 the  Cut-Off   Date.   While  the   statistical
                                 distribution  of the final  characteristics  of
                                 all Loans  transferred to the Trust Fund on the
                                 Cut-Off  Date will  vary  from the  statistical
                                 information   presented  in  this  Confidential
                                 Placement  Memorandum,   the  Seller  does  not
                                 believe that the  characteristics  of the Loans
                                 as of the  Cut-Off  Date will  vary  materially
                                 from  the  information  presented  herein  with
                                 respect  to the  Loans  as of  the  Statistical
                                 Calculation  Date.  The Loans as of the Initial
                                 Cut-Off  Date  will  meet  certain  eligibility
                                 criteria  specified  herein.  See "The SBA Loan
                                 Pool"    herein.    Except    for   less   than
                                 approximately   1.0%  of  the  SBA   Loans  (by
                                 principal balance of Unguaranteed  Interests as
                                 of the Statistical  Calculation  Date),  all of
                                 the  SBAss.7(a)  Loans were  originated  by the
                                 Seller  in  accordance  with  the  underwriting
                                 criteria  described under "The SBA Loan Lending
                                 Program  of the  Seller--Underwriting  Criteria
                                 for SBAss. 7(a) Loans." None of the SBAss. 7(a)
                                 Loans  are  balloon  loans  and  each is  fully
                                 amortizing in accordance  with its terms. As of
                                 the   Statistical   Calculation   Date,  it  is
                                 expected  that the Trust Fund will  contain the
                                 Unguaranteed   Interest  in  approximately  101
                                 SBAss.  7(a) Loans,  approximately 59% of which
                                 SBAss.  7(a) Loans (by principal balance of the
                                 Unguaranteed  Interests) are secured  primarily
                                 by first liens on commercial real property used
                                 by  the  borrower  or  its  affiliates  in  the
                                 conduct of their  business.  The  remainder  of
                                 SBAss.  7(a)  Loans are  secured  primarily  by
                                 second liens on commercial properties, by first
                                 and second liens on personal  real estate,  and
                                 by a  combination  of first and second liens on
                                 equipment,  inventory and accounts receivables.
                                 As of the  Statistical  Calculation  Date,  the


                                      -19-
<PAGE>

                                 SBAss. 7(a) Loans were originated to businesses
                                 located  in 20  states  plus  the  District  of
                                 Columbia,  with  approximately  16.94%,  7.33%,
                                 23.11%,  5.76%,  9.71%  and 5.76% (in each case
                                 measured by principal  balance of  Unguaranteed
                                 Interests  as of  the  Statistical  Calculation
                                 Date)  originated  to  businesses   located  in
                                 Virginia,  New  York,  Florida,   Georgia,  New
                                 Jersey and Oklahoma, respectively. See "The SBA
                                 Loan Program" herein.

                                 As of the Statistical Calculation Date, (i) the
                                 aggregate and average unpaid principal  portion
                                 of   the   Unguaranteed    Interests   of   the
                                 preliminary pool of the SBA ss. 7(a) Loans were
                                 approximately    $19,491,552    and   $192,986,
                                 respectively,  (ii) the  aggregate  and average
                                 unpaid  principal  portion  of  the  Guaranteed
                                 Interests  of the  preliminary  pool of the SBA
                                 ss. 7(a) Loans were  approximately  $50,169,644
                                 and $496,729,  respectively,  (iii) the maximum
                                 and minimum original  principal  portion of the
                                 Unguaranteed  Interests of the preliminary pool
                                 of the SBA ss.  7(a) Loans  were  approximately
                                 $744,000 and $5,000, respectively, and (iv) the
                                 maximum and minimum original  principal portion
                                 of the Guaranteed  Interests of the preliminary
                                 pool   of  the   SBA  ss.   7(a)   Loans   were
                                 approximately     $750,000     and     $45,000,
                                 respectively. As of the Statistical Calculation
                                 Date, the aggregate  original principal portion
                                 of   the   Unguaranteed    Interests   of   the
                                 preliminary  pool of the SBA ss. 7(a) Loans was
                                 approximately  $19,603,987  and  the  aggregate
                                 original  principal  portion of the  Guaranteed
                                 Interests  of the  preliminary  pool of the SBA
                                 ss. 7(a) Loans was approximately $50,570,671.

                                 As of the  Statistical  Calculation  Date,  the
                                 preliminary pool of the SBA ss. 7(a) Loans bore
                                 interest at rates  (each,  a "Note Rate") which
                                 ranged  from 10.25% to 11.25% per annum and the
                                 weighted  average  Note Rate was  approximately
                                 10.96%  per  annum.   As  of  the   Statistical
                                 Calculation  Date, the preliminary  pool of the
                                 SBA ss.  7(a) Loans had a weighted  average age
                                 of   approximately   6.27  months,  a  weighted
                                 average original term of  approximately  278.98
                                 months,  a  weighted  average  gross  margin of
                                 approximately   2.70%,   a   weighted   average
                                 combined current  Loan-to-Value  Ratio based on
                                 undiscounted  collateral  value  (as  described
                                 under  "The SBA  Loan  Lending  Program  of the
                                 Seller")  of  approximately   65%.  As  of  the
                                 Statistical   Calculation  Date,  the  weighted
                                 average  Guaranteed  Percentage of  preliminary
                                 pool   of  the   SBA   ss.   7(a)   Loans   was
                                 approximately  70.33%.  As of  the  Statistical
                                 Calculation  Date, the weighted  average Excess
                                 Spread,   expressed  as  a  percentage  of  the
                                 principal    balances   of   the   Unguaranteed


                                      -20-
<PAGE>

                                 Interests,  was  approximately  3.09% as of the
                                 Statistical   Calculation   Date.  Such  Excess
                                 Spread is in addition to the Extra Interest (as
                                 defined under "Description of the Agreement and
                                 the  Certificates--Class A and Class B Interest
                                 Distribution  Amounts"  herein)  available from
                                 the unguaranteed portion of preliminary pool of
                                 the SBA ss.  7(a)  Loans.  100% of SBA ss. 7(a)
                                 Loans (by  principal  balance  of  Unguaranteed
                                 Interests  as of  the  Statistical  Calculation
                                 Date) do not have a lifetime interest rate cap.
                                 See "The SBA Loan Pool" herein.  The Subsequent
                                 SBA Loans in the aggregate  will conform in all
                                 material   respects   to  the   characteristics
                                 described  herein  under  "The  SBA  Loan  Pool
                                 Subsequent SBA Loans."

Transfer of  Assets.........
                                 Each Note  will be  endorsed  by the  Seller by
                                 means of an allonge  (i.e., a separate piece of
                                 paper  attached to the Note) and  delivered  to
                                 the FTA. On or before the Closing  Date (or the
                                 related  Subsequent  Transfer Date with respect
                                 to   Subsequent   SBA  Loans),   the  FTA  will
                                 acknowledge  receipt of each such Note for each
                                 SBA  Loan in the SBA Loan  Pool  and that  each
                                 such Note has been endorsed as follows: "Pay to
                                 the  order  of  Marine  Midland  Bank,  and its
                                 successors  and assigns,  as trustee under that
                                 certain  Pooling and Servicing  Agreement dated
                                 as of December 23, 1998, for the benefit of the
                                 United States Small Business Administration and
                                 holders of Business Loan Center SBA Loan-Backed
                                 Certificates,  Series 1998-1, Class A and Class
                                 B, as their  respective  interests  may appear,
                                 without recourse."

                                 With  respect  to each SBA Loan in the SBA Loan
                                 Pool,  the Seller  will be  required to deliver
                                 the following  additional  documentation to the
                                 Trustee  at or  prior to the  Closing  Date (or
                                 with respect to a Subsequent  SBA Loan,  in the
                                 case of (a) below,  at or prior to the  related
                                 transfer date):

                                 (a) For  each SBA Loan  secured  by  commercial
                                 real property or residential real property:

                                 (1)  Original  recorded  Mortgage,  or  if  the
                                 original  is   unavailable,   a  copy   thereof
                                 certified to be true and complete by the Seller
                                 or as otherwise permitted by the Agreement.

                                 (2)  Certified  copy of the  Assignment  of the
                                 Mortgage  endorsed as follows:  "Marine Midland
                                 Bank,  ("Assignee") its successors and assigns,
                                 as  trustee  under the  Pooling  and  Servicing
                                 Agreement   dated  as  of  December  23,  1998,
                                 subject to the  Multi-Party  Agreement dated as
                                 of December 23, 1998." The original assignments
                                 will be transmitted by the Seller for recording
                                 promptly  following  the Closing Date (or, with



                                      -21-
<PAGE>



                                 respect  to  the  Subsequent  SBA  Loans,   the
                                 related transfer date).

                                 (3) Original recorded intervening  assignments,
                                 if  any,  or if the  original  is  unavailable,
                                 copies  thereof  certified  by the Seller to be
                                 true and complete.

                                 (4) Originals or certified  copies of all title
                                 insurance  policies  or other  evidence of lien
                                 position,  including  but not limited to Policy
                                 Insurance  Record of Title  ("PIRT")  policies,
                                 limited liability reports and lot book reports,
                                 to the extent the Seller  obtains such policies
                                 or  other   evidence   of  lien   position   in
                                 accordance with the criteria described herein.

                                 (b) For all SBA Loans:

                                 (1)  Blanket   assignment  of  all   collateral
                                 securing  the  SBA  Loan,   including   without
                                 limitation,   all   rights   under   applicable
                                 guarantees and insurance policies.

                                 (2) Irrevocable power of attorney of the Seller
                                 to the  Trustee to  execute,  deliver,  file or
                                 record and otherwise  deal with the  collateral
                                 for  the  SBA  Loans  in  accordance  with  the
                                 Agreement.   The  power  of  attorney  will  be
                                 delegable  by the Trustee to the  Servicer  and
                                 any  successor  servicer  and will  permit  the
                                 Trustee or its delegate to prepare, execute and
                                 file or record  UCC  financing  statements  and
                                 notices to insurers.

                                 (3) Blanket  Uniform  Commercial  Code  ("UCC")
                                 UCC-1 financing statements  identifying by type
                                 all  collateral  for the SBA  Loans  in the SBA
                                 Loan Pool and  naming  the  Trustee  as Secured
                                 Party and the Seller as the  Debtor.  See "Risk
                                 Factors--Unperfected   Security   Interests  in
                                 Certain Collateral" herein.

                                 The  Trustee  will be  required  to  provide an
                                 interim certification as to the receipt of such
                                 documents within 90 days after the Closing Date
                                 and to provide a final certification within one
                                 year after the Closing Date.

Multi-Party Agreement.......
                                 The Seller, the Servicer,  the Trustee, the FTA
                                 and  the  SBA  will  enter  into a  Multi-Party
                                 Agreement,  dated as of December  23, 1998 (the
                                 "Multi-Party Agreement"),  which will set forth
                                 the relationship of the parties with respect to
                                 the SBA ss. 7(a) Loans and the proceeds thereof
                                 and the consent of the SBA to the  transactions
                                 contemplated by the Agreement.


                                      -22-
<PAGE>


Servicing of the
 SBA Loans..................
                                 Business Loan Center, Inc. will service the SBA
                                 Loans in accordance with the Agreement, the SBA
                                 Rules  and   Regulations  and  the  Multi-Party
                                 Agreement,  and will  cause the SBA Loans to be
                                 serviced  with the same care as it  customarily
                                 employs  and   exercises   in   servicing   and
                                 administering  small business loans for its own
                                 account,   giving  due  consideration  for  the
                                 reliance of the Trustee on the  Servicer.  Such
                                 servicing  includes,  without  limitation,  the
                                 right to release and/or  substitute  collateral
                                 for an SBA Loan.

Monthly Advances............
                                 The  Servicer  is  required  to  remit  to  the
                                 Trustee  no later than the third  Business  Day
                                 prior  to the  Remittance  Date  each  month (a
                                 "Determination   Date")  for   deposit  in  the
                                 Certificate  Account the amount  (the  "Monthly
                                 Advance"),  if  any,  by  which  (i)  30  days'
                                 interest at a rate equal to the then applicable
                                 weighted average Class A and Class B Remittance
                                 Rates plus the rate used in determining certain
                                 expenses of the Trust Fund (the  "Adjusted  SBA
                                 Loan Remittance Rate") on the aggregate Class A
                                 and  Class  B  Principal  Balances  immediately
                                 prior to the  related  Remittance  Date (as the
                                 amount  calculated  pursuant to this clause (i)
                                 may be adjusted in  accordance  with the limits
                                 described  under  "Description of the Agreement
                                 and  the  Certificates--Class  A  and  Class  B
                                 Interest  Distribution Amounts" herein) exceeds
                                 (ii) the amount  received by the Servicer as of
                                 the related  Record Date in respect of interest
                                 on the SBA Loans minus the interest  payable to
                                 the  holders of the  Guaranteed  Interest,  the
                                 Additional Fee, the Premium Protection Fee, and
                                 the  fee  payable  to the  FTA  (plus,  for the
                                 Remittance Dates in January 1999, February 1999
                                 and  March  1999 the sum of (a) all funds to be
                                 transferred to the Certificate Account from the
                                 Capitalized    Interest    Account   for   such
                                 Remittance  Date  and  (b)  certain  investment
                                 earnings on amounts in the Pre-Funding  Account
                                 for  the  applicable   Remittance   Date).  The
                                 Servicer  is  not   required  to  make  monthly
                                 advances  which it  determines,  in good faith,
                                 would be  nonrecoverable  from amounts received
                                 in respect of the SBA Loans.

                                 Monthly  Advances are reimbursable in the first
                                 instance  from late  collections  of  interest,
                                 Liquidation  Proceeds,  Insurance  Proceeds and
                                 proceeds received by the Servicer in connection
                                 with condemnation,  eminent domain or a release
                                 of   lien   ("Released    Mortgaged    Property
                                 Proceeds")   collected   with  respect  to  the
                                 related  SBA  Loan  as  to  which  the  Monthly
                                 Advances  were made.  The  Servicer's  right to
                                 reimbursement  for such  advances  in excess of
                                 such amounts is limited to late  collections of
                                 interest  received on the SBA Loans  generally;
                                 provided, however, that the Servicer's right to


                                      -23-
<PAGE>

                                 such reimbursement is subordinate to the rights
                                 of the  Certificateholders,  the  holder of the
                                 Premium  Protection  Fee and the holders of the
                                 Guaranteed   Interest.   Monthly  Advances  are
                                 intended  to provide  sufficient  funds for the
                                 payment of interest  to the  Certificateholders
                                 at the  then  applicable  Class  A or  Class  B
                                 Remittance Rate, plus an additional  amount, if
                                 any,  required to pay the fees and  expenses of
                                 the Trustee.

Compensating Interest.........
                                 Not later than each  Determination  Date,  with
                                 respect   to  each  SBA  Loan  as  to  which  a
                                 principal  prepayment  in full or a Curtailment
                                 was received during the related Due Period, the
                                 Servicer is  required to remit to the  Trustee,
                                 from amounts  otherwise payable to the Servicer
                                 as    servicing    compensation,    an   amount
                                 ("Compensating  Interest")  equal to any excess
                                 of (a) 30 days'  interest  on the  Unguaranteed
                                 Percentage of the related  principal balance at
                                 the Adjusted SBA Loan  Remittance Rate over (b)
                                 that portion of the amount of interest actually
                                 received on the  Unguaranteed  Interest of each
                                 SBA  Loan  for  such  Due  Period,  net  of the
                                 Servicing  Fee and the fees and expenses of the
                                 Trustee allocable to such Unguaranteed Interest
                                 and    available    to   be    paid    to   the
                                 Certificateholders.

Servicing Advances.........
                                  The Servicer will be entitled to reimbursement
                                  for  amounts   advanced  by  it   constituting
                                  "out-of-pocket" costs and expenses relating to
                                  (i) the  preservation  and  restoration of any
                                  related    Mortgaged    Property    or   other
                                  collateral,   (ii)  enforcement   proceedings,
                                  including foreclosures and (iii) certain other
                                  customary  amounts described in the Agreement.
                                  Such  advances   ("Servicing   Advances")  are
                                  generally  reimbursable  to the Servicer  from
                                  Liquidation   Proceeds,   Released   Mortgaged
                                  Property Proceeds, Insurance Proceeds and such
                                  other  amounts  as  may  be  collected  by the
                                  Servicer   from  the   related   Borrower   or
                                  otherwise  relating to the SBA Loan in respect
                                  of which  such  amounts  are  owed;  provided,
                                  however,  that Servicing Advances in excess of
                                  such  amounts  are  reimbursable  to the  same
                                  extent  and from the same  sources  as Monthly
                                  Advances.

Servicing Fee..............
                                 The  Servicer is  entitled  to a servicing  fee
                                 (the "Servicing Fee") of 0.40% per annum of the
                                 unpaid  principal  balance  of each  SBA  Loan,
                                 calculated  and paid  monthly from the interest
                                 portion   of  monthly   payments,   Liquidation
                                 Proceeds and certain other proceeds  collected.
                                 See  "Description  of the  Agreements  and  the
                                 Certificates--Servicing  and Other Compensation
                                 and Payment of Expenses" herein.

                                      -24-
<PAGE>

Optional Purchase...........
                                 The  Servicer  has  the  right,   but  not  the
                                 obligation,   to  purchase   the   Unguaranteed
                                 Interest  of any  Defaulted  SBA  Loan  for the
                                 purchase  price  and  in the  manner  described
                                 under  "Description  of the  Agreement  and the
                                 Certificates--Representations and Warranties of
                                 the  Seller."  In no  event,  however,  may the
                                 aggregate principal balance of the Unguaranteed
                                 Interests  of  Defaulted  SBA  Loans  purchased
                                 pursuant to this  provision  exceed 5.0% of the
                                 sum of (i) the Original Pool Principal  Balance
                                 and  (ii)  the  initial  Pre-Funded  Amount.  A
                                 "Defaulted  SBA  Loan"  is any  SBA  Loan as to
                                 which the  related  Obligor  has failed to make
                                 payment  in full of three  or more  consecutive
                                 monthly payments.


Optional Termination by
  the Servicer..............
                                 The Servicer,  at its option,  may,  subject to
                                 meeting certain  requirements  described below,
                                 terminate  the  Agreement  on any date on which
                                 the  then   outstanding   aggregate   principal
                                 balance of the  Unguaranteed  Interests is less
                                 than  10% of the sum of (i) the  Original  Pool
                                 Principal   Balance   and  (ii)   the   Initial
                                 Pre-Funded  Amount by  purchasing,  on the next
                                 succeeding   Remittance   Date,   all   of  the
                                 Unguaranteed  Interests and any other assets in
                                 the Trust  Fund at a price  equal to the sum of
                                 (i)  100% of the then  outstanding  Class A and
                                 Class B Principal  Balances,  and (ii) 30 days'
                                 interest thereon at the then applicable Class A
                                 and Class B Remittance Rates (the  "Termination
                                 Price").  See "Description of the Agreement and
                                 the Certificates--Termination;  Purchase of SBA
                                 Loans" herein.

Tax Considerations .........
                                 No  real  estate  mortgage  investment  conduit
                                 ("REMIC")  election  will be made for the Trust
                                 Fund.  Stroock & Stroock & Lavan  LLP,  special
                                 Federal tax counsel  ("Federal  Tax  Counsel"),
                                 will give its opinion  that the Trust Fund will
                                 be classified as a "grantor  trust" for federal
                                 income tax  purposes.  See "Federal  Income Tax
                                 Consequences" herein.

                                 It  is  not   anticipated   that  the  Class  A
                                 Certificates  or the Class B Certificates  will
                                 be  treated  as  issued  with  original   issue
                                 discount ("OID").

ERISA Considerations..........
                                 Fiduciaries of employee benefit plans and other
                                 retirement  plans and  arrangements,  including
                                 individual  retirement accounts,  certain Keogh
                                 plans,   and   collective   investment   funds,
                                 separate accounts and insurance company general
                                 accounts  in  which  such  plans,  accounts  or
                                 arrangements are invested,  that are subject to
                                 the Employee  Retirement Income Security Act of
                                 1974, as amended ("ERISA"),  or Section 4975 of


                                      -25-
<PAGE>

                                 the  Code  (each  a  "Plan")  should  carefully
                                 review with their legal  advisors to  determine
                                 whether an investment in the Certificates  will
                                 cause  the  assets  of  the  Trust  Fund  to be
                                 considered  plan assets under the Department of
                                 Labor regulation set forth in 29 C.F.R. Section
                                 2510.3-101   (the  "Plan  Asset   Regulation"),
                                 thereby subjecting the Trustee and the Servicer
                                 to the fiduciary  investment standards of ERISA
                                 and whether the  purchase,  holding or transfer
                                 of Certificates give rise to a transaction that
                                 is  prohibited  under  ERISA or  subject to the
                                 excise tax  provisions  of Section  4975 of the
                                 Code,  unless a  Department  of  Labor  ("DOL")
                                 administrative  exemption  applies.  Prohibited
                                 Transaction Exemption 95-59, 60 Fed. Reg. 35938
                                 (July  12,  1995)  may  be  applicable  to  the
                                 purchase,  holding or  transfer  of the Class A
                                 Certificates  but will not be applicable to the
                                 purchase,  holding or  transfer  of the Class B
                                 Certificates.   However,   if   the   Class   B
                                 Certificates are sold in the future, Prohibited
                                 Transaction  Class Exemption  95-60,  Fed. Reg.
                                 35925 (July 12, 1995) may be  applicable to the
                                 purchase,  holding or  transfer  of the Class B
                                 Certificates to or by certain insurance company
                                 general accounts,  but the Class B Certificates
                                 may not  otherwise be purchased by or on behalf
                                 of  other  Plans.  See  "ERISA  Considerations"
                                 herein.

Legal Investment.............
                                 No representation will be made as to whether or
                                 the  extent to which  the Class A  Certificates
                                 constitute legal investments for investors.

Restrictions on Transfer......
                                 The Class A  Certificates  are being offered to
                                 "Qualified  Institutional  Buyers"  within  the
                                 meaning of and in  reliance  on Rule 144A under
                                 the  Securities  Act and to a limited number of
                                 institutional  "accredited  investors"  (within
                                 the meaning of Rule  501(a)(1)-(3) or (7) under
                                 the  Securities  Act)  pursuant to an exemption
                                 from  the   registration   provisions   of  the
                                 Securities Act and may not be resold except (i)
                                 in  certificated  form (A) to a person whom the
                                 seller  reasonably   believes  is  a  Qualified
                                 Institutional  Buyer as  defined  in Rule  144A
                                 under the Securities Act that purchases for its
                                 own account or the account of another Qualified
                                 Institutional  Buyer  to whom  notice  is given
                                 that the  resale,  pledge or  transfer is being
                                 made in  reliance  on Rule  144A,  or (B) to an
                                 institutional  "Accredited Investor" as defined
                                 in  Rule   501(a)(1)-(3)   or  (7)   under  the
                                 Securities  Act,  in each case,  subject to the
                                 requirements  described  herein  concerning the
                                 delivery to the Trustee of a  certification  or
                                 opinion of  counsel,  (ii)  pursuant to another
                                 exemption  available  under the  Securities Act
                                 and in  accordance  with any  applicable  state
                                 securities  laws, or (iii)  pursuant to a valid
                                 registration statement.

                                      -26-
<PAGE>

                                 Each  purchaser  of the  Class  A  Certificates
                                 offered  by  means of this  Memorandum  will be
                                 deemed to have made certain representations and
                                 agreements   as  set  forth  under  "Notice  to
                                 Investors" herein.

Rating ....................
                                 It is a condition  to their  issuance  that the
                                 Class A  Certificates  be rated "AAA" by Duff &
                                 Phelps  Credit Rating Co.  ("DCR").  A security
                                 rating is not a recommendation  to buy, sell or
                                 hold  securities and may be subject to revision
                                 or   withdrawal  at  any  time.  No  person  is
                                 obligated   to  maintain   the  rating  on  any
                                 Certificate. See "Rating" herein.

Registration of the
  Class A Certificates.......
                                 The Class A  Certificates  will be delivered as
                                 definitive  certificates  in  fully  registered
                                 form.




                                      -27-
<PAGE>
                                  RISK FACTORS

                  Investors should consider,  among other things,  the following
factors in addition to the other  information  set forth in this  Memorandum  in
connection with the purchase of Class A Certificates.

Risks Associated with Year 2000 Compliance

                  The Servicer, the Seller and the Trustee utilize a significant
number of  computer  software  programs  and  operating  systems  and are highly
dependent on computer systems  operated by third parties which include,  but are
not  limited  to,  their  suppliers,  customers,  brokers  and  agents  and  the
telephone,  electric  and utility  companies.  To the extent  that any  computer
system  relied  upon by the  Servicer,  the Seller and the  Trustee or any third
party,  has software  applications  and contains source codes that are unable to
appropriately   interpret  the  upcoming  calendar  year  2000,  some  level  of
modification  or replacement of such  applications or hardware may be necessary.
The year 2000 issue is the result of prior computer programs being written using
two digits,  rather than four digits,  to define the applicable year. Any of the
Servicer's,   the  Seller's  or  the  Trustee's   computer  programs  that  have
time-sensitive  software may recognize a date using "00" as the year 1900 rather
than the year 2000. Any such occurrence  could result in a major computer system
failure or miscalculations.  Several federal regulatory agencies,  including the
Commission,  require the  entities  that they  regulate to take steps to address
problems which may arise in relation to the year 2000.

                  The  Servicer,  the  Seller  and  the  Trustee  are  currently
assessing the impact of modifications or replacements required to adjust for the
year 2000. The Servicer,  the Seller and the Trustee are utilizing both internal
and external resources to identify, correct or reprogram, and test their systems
for year 2000 compliance.  It is anticipated that all reprogramming  efforts and
necessary  testing will be completed  prior to the year 2000. The Servicer,  the
Seller and the Trustee have  initiated  formal  communications  with those third
parties on whom they will rely to  determine  the extent to which the  Servicer,
the Seller and the Trustee are  vulnerable to the failure of these third parties
to remediate their own year 2000 issue. However,  there can be no assurance that
the systems of third  parties on which the systems of the  Servicer,  the Seller
and the Trustee rely will be converted in a timely fashion, or that a failure to
convert by a third party, or a conversion that is incompatible  with the systems
of the Servicer, the Seller and the Trustee, would not have an adverse effect on
the business,  financial condition or results of operations of the Servicer, the
Seller and the Trustee.  The total year 2000 project costs and estimates for the
Servicer,  the Seller  and the  Trustee  include  the  estimated  costs and time
associated with the impact of a third party's year 2000 issue,  and are based on
presently  available  information.  The costs allocated to the year 2000 project
are  significant.  The costs of the project and the dates on which the Servicer,
the Seller and the Trustee plan to complete  their year 2000  modifications  are
based on their best estimates, which were derived utilizing numerous assumptions
of future  events  including the continued  availability  of certain  resources,
third  party  modification  plans and other  factors.  However,  there can be no
assurance that these  estimates will be achieved and actual results could differ
materially from such estimates.  Specific factors that might cause such material
differences  include,  but are not limited to: (i) the  availability and cost of
personnel  trained in this area,  (ii) the  ability  to locate and  correct  all
relevant computer codes and (iii) similar uncertainties.

                  No  assurances  can be given  that  any or all of the  systems
discussed  above,  including  the  systems of the  Servicer,  the Seller and the
Trustee,  are or will be year  2000  compliant  or that the  costs  required  to
address  year 2000  issues will not  adversely  affect the  business,  financial
condition or results of operations of the respective party or the performance of
their obligations  under the Agreement.  As a result of this potential affect on
performance  under  the  Agreement,   the  timely  receipt  of  payment  by  the
Certificateholders may also be adversely affected.


                                      -28-
<PAGE>

Limited Liquidity

                  The Class A Certificates  have not been  registered  under the
Securities  Act and there is no undertaking to register the Class A Certificates
hereafter.  No market for the Class A  Certificates  currently  exists.  Class A
Certificateholders  must be  prepared  to hold the Class A  Certificates  for an
indefinite period of time. Class A Certificateholders may not resell or transfer
their  Class A  Certificates  unless  such resale or transfer is exempt from the
registration  requirements  of  the  Securities  Act  and  satisfies  the  other
conditions to transfer in the Agreement.

                  The Securities  and Exchange  Commission has adopted Rule 144A
("Rule  144A") under the  Securities  Act which  provides an exemption  from the
registration requirements of the Securities Act for resale of certain restricted
securities  by persons  other than an issuer to a purchaser  that is a Qualified
Institutional Buyer. The Class A Certificates are restricted securities eligible
for  resale  under Rule 144A.  Any  resale of the Class A  Certificates  made in
reliance on Rule 144A (or any  amendment  thereto)  must satisfy the  applicable
conditions  of Rule  144A.  The  Class A  Certificates  may also be  resold to a
purchaser  that is an  institutional  "Accredited  Investor"  as defined in Rule
501(a)(1)-(3) or (7) under the Securities Act.

Limited Liability

                  The Class A  Certificates  do not evidence  obligations of the
Seller, the Servicer or the Trustee or any of their respective  affiliates.  The
Certificates  are not insured or guaranteed  by the Seller,  the Servicer or the
Trustee or any of their  respective  affiliates and, except for a portion of the
Excess Spread, are not insured or guaranteed by the United States Small Business
Administration or any other governmental agency or private insurer.

Legal Investment

                  To the  extent  that a holder of a Class A  Certificate  is an
entity whose investments are regulated by statute or  administrative  rule, such
as a federal or state chartered bank, savings institution,  insurance company or
credit union,  there is no assurance that the Class A Certificates will be among
the types of  investments  permitted  under the  applicable  regulatory  scheme.
Prospective   investors   are  advised  to  consult  their  own  counsel  as  to
qualification of the Class A Certificates as appropriate  investments  under any
laws, regulations, rules and orders applicable to them. The Certificates are not
"mortgage  related  securities"  for purposes of the Secondary  Mortgage  Market
Enhancement Act of 1984 ("SMMEA").

Nature of Security

                  As of the Statistical Calculation Date,  approximately 94% (by
principal balance of the Unguaranteed Interests) of the SBA Loans are secured by
first  and  second  liens on  commercial  real  property  generally  used by the
borrower or its affiliates in the conduct of their business.  An overall decline
in the market  value of  commercial  real  estate,  the general  condition  of a
Mortgaged  Property,  or general economic conditions in the related market area,
could  adversely  affect the value of such  Collateral  consisting  of Mortgaged
Properties  such that the outstanding  balances of the SBA Loans,  together with
any senior  liens on such  Collateral,  could  equal or exceed the value of such
Collateral.  The Seller can neither  quantify the impact of any recent  property
value  declines  on the SBA Loans nor  predict  whether,  to what  extent or, if
values decline, how long such declines may continue. In periods of such decline,


                                      -29-
<PAGE>

the  actual  rates of  delinquencies,  foreclosures  and losses on the SBA Loans
could be higher  than those  historically  experienced  in  connection  with SBA
Loans.

                  In  addition,   for  those  SBA  Loans  secured  primarily  by
equipment,  inventory and/or accounts  receivable,  there are also certain risks
associated  with such  Collateral.  Because the market  value of  equipment  and
inventory  generally  declines with age or  obsolescence,  such equipment and/or
inventory may not provide  adequate  security in the event it is repossessed and
sold. Some of the equipment,  such as computers,  also may be subject to sudden,
significant declines in value because of technological  advances.  Other factors
that may affect the ability of the Trustee to realize the full amount due on the
Certificates  include any  depreciation,  damage or loss to the equipment and/or
inventory securing an SBA Loan.  Further, to the extent an Obligor experiences a
decline  in its  business,  the  amount of  inventory  and  accounts  receivable
generated  by such  Obligor  would  likely also  decline,  thereby  reducing the
Collateral for the related SBA Loan.

                  The net  charge-off  experience  of the Seller with respect to
SBA Loans in its servicing portfolio, as a percentage of the principal amount of
the  Unguaranteed  Interests  of the  loans  in such  servicing  portfolio,  was
approximately  0.42%,  1.14% and 1.44 % for the years ended  December  31, 1995,
1996 and 1997 respectively.

                  General  economic  conditions have an impact on the ability of
borrowers  to repay SBA  Loans.  Loss of  earnings,  illness  and other  similar
factors may lead to an  increase  in  delinquencies  and  bankruptcy  filings by
borrowers.  In the event of  bankruptcy  of a borrower,  it is possible that the
Trust Fund could  experience a loss with  respect to such  borrower's  loan.  In
conjunction  with a borrower's  bankruptcy,  a  bankruptcy  court may suspend or
reduce the  payments of  principal  and interest to be paid with respect to such
SBA Loan or  permanently  reduce the  principal  balance of such SBA Loan,  thus
either  delaying or permanently  limiting the amount  received by the Trust Fund
with  respect  to such SBA  Loan.  Moreover,  in the  event a  bankruptcy  court
prevents the transfer of the related collateral to the Trust Fund, any remaining
balance on such SBA Loan may not be recoverable.  In addition,  other collateral
securing  the  SBA  Loans  may  become  impaired.  For  example,  poor  economic
conditions may make recovery on guarantees difficult and machinery and equipment
may significantly depreciate or lose value.

                  Even assuming that the Collateral  provides  adequate security
for the SBA Loans,  substantial  delays could be encountered in connection  with
the liquidation of defaulted SBA Loans and  corresponding  delays in the receipt
of related proceeds by the Class A or Class B Certificateholders could occur. An
action to foreclose on the Collateral securing an SBA Loan is regulated by state
statutes  and rules and is subject to many of the delays and  expenses  of other
lawsuits  if defenses  or  counterclaims  are  interposed,  sometimes  requiring
several  years to  complete.  In the event of a  default  by a  borrower,  these
restrictions,  among other  things,  may impede the  ability of the  Servicer to
foreclose on or sell the  Collateral or to obtain  Liquidation  Proceeds (net of
expenses)  sufficient  to repay all  amounts  due on the  related  SBA Loan.  In
addition,  before  foreclosing on  Collateral,  the Servicer and the SBA may, in
certain circumstances, collectively decide upon a plan for liquidating the loan,
which may  result in  delays.  The  Servicer  will be  entitled  to deduct  from
Liquidation  Proceeds  certain  expenses  reasonably  incurred in  attempting to
recover  amounts  due on the  related  Liquidated  SBA Loan and not yet  repaid,
including payments to prior  lienholders,  legal fees and costs of legal action,
real estate taxes, and maintenance and preservation  expenses. If the Collateral
fails to provide  adequate  security  for the related SBA Loans or  insufficient
funds  are  available  from  the  Spread  Account,   the  Class  B  or  Class  A
Certificateholders could experience a loss on their investment.

                                      -30-
<PAGE>

                  Liquidation  expenses  with  respect  to  defaulted  SBA Loans
generally do not vary directly  with the  outstanding  principal  balance of the
loan at the time of default.  Therefore,  assuming that a servicer took the same
steps in collecting upon a defaulted SBA Loan having a small remaining principal
balance  as it  would  in the  case of a  defaulted  SBA  Loan  having  a larger
principal  balance,  the amount realized after expenses of liquidation  would be
smaller as a percentage of the outstanding  principal balance of the smaller SBA
Loan than would be the case with a larger SBA Loan.

Unperfected Security Interests in Certain Collateral

                  For each SBA Loan secured by real property, assignments of the
related  Mortgages  will be  transmitted  by the Seller for  recording  promptly
following the Closing Date. Also, the Seller will deliver to the Trustee blanket
assignments of all other  collateral  securing the SBA Loans. In connection with
originating SBA Loans secured by collateral  other than real estate,  the Seller
obtains and files UCC financing  statements naming the related Obligor as debtor
where  such  action  is  necessary  to  perfect  a  security  interest  in  such
collateral.  Because  of the  administrative  burden and  expense  that would be
entailed in so doing, these UCC financing  statements will not be re-assigned to
the Trustee. The Trustee will have the benefit of the Seller's security interest
in the collateral related to such SBA Loans. However, since assignments will not
be  recorded in the name of the  Trustee,  if the Seller were to become a debtor
under the Federal  bankruptcy code or similar  applicable state laws, a creditor
or trustee in bankruptcy thereof, or the Seller as a debtor-in-possession, might
be  able  to  defeat  the  Trustee's   security  interest  in  such  collateral.
Additionally, certain judgment creditors of, or tax and other liens against, the
Seller or its property may have priority over the Trustee's security interest.

Geographic Concentration

                  As of the Statistical Calculation Date,  approximately 23.11%,
16.94%,  5.76%, 7.33%, 9.71% and 5.76% (by principal balance of the Unguaranteed
Interests) of the SBA Loans were  originated  to businesses  located in Florida,
Virginia,  Georgia,  New York,  New Jersey and  Oklahoma,  respectively.  If the
Florida, Virginia, Georgia, New York, New Jersey and Oklahoma regions experience
weaker  economic  conditions  than the United  States  generally,  such regional
concentrations of the SBA Loans may adversely affect the Certificateholders to a
greater  degree than if the SBA Loans were made to  borrowers  located in a more
geographically diverse area.

Concentration of Mortgaged Properties in Various Industries

                  As of the Statistical  Calculation Date,  Mortgaged Properties
with  respect  to  approximately  44.46%,  12.82%  and  16.97% of SBA Loans were
comprised of hotel or motel complexes,  service stations/ convenience stores and
restaurants,  respectively.  See  the  "SBA  Loan  Pool."  Accordingly,  adverse
economic conditions or other factors particularly  affecting the hotel or motel,
service  station/convenience  store and/or restaurant industries could adversely
affect the ability of the related  Obligors to make payments under the SBA Notes
and could adversely affect upkeep and maintenance of such properties and thereby
lower the value of the collateral securing such SBA Loans.

The Status of SBA Loans in the Event of Bankruptcy of the Seller

                  The  Seller  believes  that  upon  the  sale  of the  Class  A
Certificates to an independent  third party for fair value and without recourse,
such sale will  constitute  an absolute and  unconditional  sale of such Class A
Certificates and the interests in the Unguaranteed  Interests evidenced thereby.
However,  in the event of the  bankruptcy of the Seller at a time when it or any
affiliate thereof holds any interest in the Unguaranteed Interests, a trustee in
bankruptcy or other  creditor  could attempt to  recharacterize  the sale of the
Unguaranteed  Interests as a borrowing by the Seller or any such  affiliate with


                                      -31-
<PAGE>

the result that  Certificateholders  are deemed to be creditors of the Seller or
such affiliate,  secured by a pledge of the Unguaranteed  Interests.  If such an
attempt  were  successful,  a trustee in  bankruptcy  could elect to  accelerate
payment of the Certificates  and liquidate the  Unguaranteed  Interests with the
Certificateholders  entitled to the then  outstanding  principal  amount thereof
together with accrued interest.  Thus, the holders of Class A Certificates could
lose the right to future  distributions of interest,  might suffer  reinvestment
loss in a lower interest rate environment and, if the Unguaranteed Interests are
sold for a price less than the then  outstanding  Class A and Class B  Principal
Balances, might suffer a loss of principal.

Legal Considerations

                  Applicable  state laws generally  regulate  interest rates and
other charges, require certain disclosures, and require licensing of the Seller.
In addition,  most states have other laws, public policy and general  principles
of  equity  relating  to the  protection  of  borrowers,  unfair  and  deceptive
practices  and  practices  which may  apply to the  origination,  servicing  and
collection of the SBA Loans.  Depending on the  provisions of the applicable law
and the specific  facts and  circumstances  involved,  violations of these laws,
policies and  principles may limit the ability of the Servicer to collect all or
part of the principal of or interest on the SBA Loans,  may entitle the borrower
to a refund of amounts  previously  paid and,  in  addition,  could  subject the
Servicer to damages and  administrative  sanctions.  See "Certain  Legal Matters
relating to the SBA Loans."

Unaudited Statements

                  On  each  Remittance  Date,  the  Trustee  will  mail  to each
Certificateholder  a  statement  setting  forth,  among  other  things,  certain
information as to the distribution  being made on such Remittance Date, the fees
to be paid to the Servicer and the Trustee and the loss and  delinquency  status
of the SBA Loans.  Although the information contained in such statements will be
prepared by the  Servicer,  neither  such  information  nor any other  financial
information furnished to Certificateholders  will be examined and reported upon,
and an opinion will not be expressed by, an independent public  accountant.  See
"Description of the Agreement and the  Certificates--Payments  on the SBA Loans;
Distribution on the Certificates" herein.

State Tax Considerations

                  In addition to the Federal income tax  consequences  described
in "Material Federal Income Tax Consequences" herein, potential investors should
consider the state income tax  consequences of the acquisition,  ownership,  and
disposition  of the  Class A  Certificates.  State  income  tax  law may  differ
substantially  from the corresponding  federal law, and this Memorandum does not
purport to describe  any aspect of the income tax laws of any state.  Therefore,
potential  investors  should  consult their own tax advisors with respect to the
various state tax consequences of an investment in the Class A Certificates.

Environmental Considerations

                  Under state and federal environmental legislation and case law
applicable  in  various  states,  a secured  party  that takes a deed in lieu of
foreclosure, acquires a mortgaged property at a foreclosure sale or which, prior
to  foreclosure,  has been  involved in  decisions  or actions  which either may
demonstrate  operational control of the borrower or may lead to contamination of
a  property,  may be liable for the costs of cleaning  up a  contaminated  site.
Although such costs could be  substantial,  it is unclear  whether they would be
imposed on a holder of a mortgage  note (such as the Trust Fund),  which,  under


                                      -32-
<PAGE>

the terms of the Agreement,  is not required to take an active role in operating
the  Mortgaged  Properties.  See  "Certain  Legal  Matters  Relating  to the SBA
Loans--Environmental Considerations" herein.

                  In the Agreement the Seller will represent and warrant that at
the time of origination of each SBA Loan,  each Mortgaged  Property which is the
primary  collateral  for the related SBA Loan was, at the time of origination of
such SBA Loan, and to the best of the Seller's knowledge,  is, as of the Cut-Off
Date,  free of  contamination  from toxic  substances or hazardous  wastes or is
subject  to  ongoing  environmental  rehabilitation  approved  by  the  SBA.  In
addition,  the Servicer will agree that it shall take into account the existence
of any  hazardous  substances,  hazardous  wastes or solid  wastes on  Mortgaged
Properties  in  determining  whether to foreclose  upon or otherwise  comparably
convert the ownership of such  Mortgaged  Property,  and will not foreclose on a
Mortgaged  Property where it has cause to believe such  substance  exists unless
(i) it had received a Phase I  environmental  report and such report  reveals no
environmental  problems  or  (ii)  such  Mortgaged  Property  is  subject  to an
environmental  rehabilitation  for which  the  Seller  is not  responsible.  See
"Description  of  the  Agreement  and  the   Certificates--Representations   and
Warranties of the Seller" herein.

Prepayment Considerations

                  None of the SBA  Loans  are  balloon  loans  and each is fully
amortizing in accordance with its terms. The SBA Loans may be prepaid in full or
in part at any time,  upon proper  notice,  without  penalty or fee. The rate of
prepayments  of the SBA Loans cannot be predicted  and may be affected by a wide
variety of economic,  social, and other factors,  including  prevailing interest
rates and the availability of alternative financing. Therefore, no assurance can
be given as to the level of prepayments that the Trust Fund will experience.

                  Prepayments  may  result  from  voluntary  early  payments  by
borrowers  (including  payments in connection  with  refinancings of the related
senior mortgage loan or loans),  sales of businesses  financed by the SBA Loans,
sales  of  Mortgaged   Properties   subject  to  "due-on-sale"   provisions  and
liquidations  due to default,  as well as the receipt of proceeds from insurance
policies. In addition, repurchases or purchases from the Trust Fund of SBA Loans
made by the Seller or the Servicer under the Agreement will have the same effect
on the Class A and Class B Certificateholders as a prepayment of the related SBA
Loans. See "Yield, Maturity and Prepayment Considerations" herein.

                  Collections  on the SBA  Loans  may vary due to the  level and
frequency of  delinquent  payments and of  prepayments.  Collections  on the SBA
Loans may also vary due to seasonal  business  patterns  and  payment  habits of
borrowers.

                  The  SBA  Loans  are  "simple  interest"  or  "date-of-payment
loans." See "The SBA Loan  Pool--Payments on the SBA Loans" herein. If a payment
is  received  on an SBA Loan later  than  scheduled,  a smaller  portion of such
payment  will be applied to principal  and a greater  portion will be applied to
interest  than would have been the case had the  payment  been  received  on its
scheduled due date, resulting in such SBA Loan having a longer average life than
would have been the case had the payment been made as scheduled.  Conversely, if
a  payment  on an SBA Loan is  received  earlier  than  scheduled,  more of such
payment will be applied to principal  and less to interest  than would have been
the case had the payment been received on its  scheduled due date,  resulting in
such SBA Loan  having a shorter  average  life than would have been the case had
the payment been made as scheduled.  However,  this effect is mitigated  because
the monthly  payment amount is  recalculated  periodically to reflect changes in
the interest  rate,  the then current  principal  balance and the then remaining
term to maturity.

                                      -33-
<PAGE>

Junior Liens

                  As of the Statistical  Calculation Date,  approximately 59% of
the SBA Loans are secured by a Commercial Property that constitutes a first lien
on the related Commercial Property. However, certain SBA Loans, which may or may
not be secured by a first lien on Commercial Property,  are secured by a lien on
business assets,  including equipment,  inventory or accounts receivable or by a
Residential  Property and/or Commercial  Property,  some of which may constitute
second or third liens on such Collateral.

                  The  primary  risk to holders  of SBA Loans  secured by junior
liens is the possibility  that adequate funds will not be received in connection
with a  foreclosure  of the related Prior Liens to satisfy fully both such Prior
Liens and the SBA Loan.  If a holder of a Prior Lien  forecloses  on a Mortgaged
Property,  the  proceeds of the  foreclosure  sale will be applied  first to the
payment of court costs and fees in connection  with the  foreclosure,  second to
real estate taxes, third in satisfaction of all principal,  interest, prepayment
or  acceleration  penalties,  if any,  and any  other  sums due and owing to the
holders of each Prior Lien. The claims of the holders of all Prior Liens will be
satisfied in full out of proceeds of the liquidation of the Prior Liens, if such
proceeds are sufficient,  before the Trust Fund receives any payments in respect
of the SBA Loan.

                  If the Servicer were to foreclose on any mortgage  securing an
SBA Loan,  it would do so  subject  to any  related  Prior  Liens.  For the debt
related  to the SBA  Loan to be paid in  full  at such  sale,  a  bidder  at the
foreclosure sale of the related  Mortgaged  Property would have to bid an amount
sufficient  to pay off all sums due under  the SBA Loan and the  Prior  Liens or
purchase the Mortgaged Property, for the full amount of the SBA Loan, subject to
the Prior Liens. Similarly, if the Servicer were to take possession of any other
Collateral, it would do so subject to any related Prior Lien.

Spread Account

                  As described herein, the Spread Account is intended to enhance
the  likelihood  of timely  payment of  principal  and  interest  on the Class A
Certificates. However, if the SBA Loan Pool experiences extremely high levels of
delinquencies  and losses,  the Spread  Account could be depleted,  resulting in
shortfalls in payments to the Class A  Certificateholders.  See  "Description of
the Agreement and the Certificates--Spread Account" herein.


                                 USE OF PROCEEDS

                  The net  proceeds  from the sale of the  Certificates  will be
used by the Seller for general  corporate  purposes,  including the repayment of
debt and the origination of additional SBA Loans.


                                THE SBA LOAN POOL
General

                  Unless otherwise  noted,  all statistical  percentages in this
Memorandum are approximately measured by the aggregate principal balances of the
SBA ss.  7(a)  Loans  in a  preliminary  pool  of SBA  ss.7(a)  Loans  as of the
Statistical  Calculation Date, and the Unguaranteed  Interests or the Guaranteed
Interests  therein,  as the  case  may  be,  at the  close  of  business  on the
Statistical  Calculation  Date and all dollar amounts are based on the principal
balances thereof at the close of business on the Statistical  Calculation  Date.
While the statistical  distribution of the characteristics of the actual pool of


                                      -34-
<PAGE>

SBA ss.7(a)  Loans  delivered  on the Closing Date will vary  somewhat  from the
statistical  distribution  of  such  characteristics  for the  preliminary  pool
presented in this Confidential Placement Memorandum, the Seller does not believe
that the  characteristics  of the Pool delivered on the Closing Date will differ
materially.  Prior  to  the  Cut-Off  Date  certain  Loans  may be  removed  and
additional  Loans  substituted   therefor.   Regularly  scheduled  payments  and
prepayments  of the  Loans  (which  are  prepayable  at any  time)  between  the
Statistical  Calculation  Date and the Cut-Off Date will affect the balances and
percentages set forth below. As used herein,  the term "Statistical  Calculation
Date" means October 31, 1998.

                  Except for less than  approximately  1.0% of the SBA Loans (by
principal  balance of Unguaranteed  Interests as of the Statistical  Calculation
Date),  all of the  preliminary  pool of the SBA ss. 7(a) Loans were, and all of
the Subsequent SBA Loans will be,  originated and underwritten by the Seller (or
its predecessors) in accordance with the underwriting  criteria  described under
"The SBA Loan Lending Program of the  Seller--Underwriting  Criteria for SBA ss.
7(a) Loans." The unpaid principal  portion of the Unguaranteed  Interests of the
SBA Loans aggregated approximately $19,491,552 as of the Statistical Calculation
Date. As of the Statistical  Calculation  Date, the SBA Loans were originated to
businesses located in 20 states, of which, the following states represented more
than 5% of the SBA Loan Pool:  Florida 23.11%;  Virginia 16.94%;  Georgia 5.76%;
New York 7.33%; New Jersey 9.71%, and Oklahoma 5.76%.

                  All  of the  SBA  Loans  are or  will  be  secured.  As of the
Statistical  Calculation  Date,  approximately  59% of the SBA Loans are secured
primarily by first liens on Commercial  Property (of which the unpaid  principal
portion of the  Unguaranteed  Interests as of the Statistical  Calculation  Date
aggregates to approximately  $11,416,160) generally used by the Obligor or their
affiliates in the conduct of their business.  As of the Statistical  Calculation
Date,  approximately  36% of the SBA Loans are secured primarily by second liens
on  Commercial   Property  (of  which  the  unpaid  principal   portion  of  the
Unguaranteed  Interests  as  of  the  Statistical  Calculation  Date  aggregates
approximately $6,975,495).  As of the Statistical Calculation Date, with respect
to  approximately  11 SBA Loans,  of which the unpaid  principal  portion of the
Unguaranteed   Interests   aggregates   approximately   $1,099,897,   additional
collateral  consisting  of senior and junior liens on personal real property and
other  commercial  real property was obtained.  The SBA Loans are also generally
secured by additional  collateral consisting of liens on machinery and equipment
and other business assets.  In addition,  each SBA Loan is secured by a personal
guarantee of a principal or principals of the related Obligor.


Payments on the SBA Loans

                  The SBA Loans have  payments of  principal  and  interest  due
throughout  the  month  with  interest  payable  in  arrears.  With  respect  to
substantially  all of the SBA Loans,  the  interest  due is based upon the Prime
Rate as of the first  Business  Day or, with  respect to certain SBA Loans,  the
first day of the related  calendar  quarter,  in each case plus the  appropriate
margin (subject to applicable lifetime floors and caps). For example,  the Prime
Rate on July 1st is used to determine  the interest  rate paid on  substantially
all of the SBA  Loans  for the  months  of July,  August  and  September.  Since
interest  is paid in  arrears,  interest  and  principal  for  these  months  is
scheduled to be received in August,  September  and October,  respectively.  The
monthly  payment  received is apportioned  between  interest and principal based
upon a "simple  interest"  basis,  which means that payments are applied as they
are  received  first to  accrued  interest,  then to  principal,  with  interest
calculated on the number of days between the current and previous payments. If a
monthly  payment is received prior to its due date, less of such payment will be
allocated to interest  than would be the case if such  payment were  received on


                                      -35-
<PAGE>

its due date.  Conversely,  if a monthly payment is received after its due date,
more of such payment  will be  allocated  to interest  than would be the case if
such payment were  received on its due date.  None of the SBA Loans is a balloon
loan and each is fully  amortizing in accordance  with its terms.  However,  the
monthly payments are  re-calculated  periodically to reflect changes in interest
rates,  the  then-current  principal  balance  and  the  then-remaining  term to
maturity.

Certain Characteristics of the SBA Loan Pool

                  The  statistical  information  presented in this Memorandum is
based upon a preliminary  pool of SBA ss. 7(a) Loans expected to be delivered to
the Trustee on the Closing  Date.  Certain SBA ss. 7(a) Loans  contained in such
preliminary pool may be deleted from the final pool of ss. 7(a) Loans. While the
actual  characteristics  of the final pool of ss.  7(a) Loans  delivered  on the
Closing Date might vary somewhat from the characteristics  described herein, the
Seller does not believe that such differences will be material.

                  Set forth below is a description of certain characteristics of
the  preliminary  pool of the SBA ss. 7(a) Loans  expected to constitute the SBA
Loan Pool as of the  Statistical  Calculation  Date.  Certain of the  percentage
columns may not sum to 100.00% due to rounding.



                                      -36-
<PAGE>




                  The geographic distribution of the SBA ss. 7(a) Loans by state
as of the Statistical Calculation Date was as follows:

<TABLE>
<CAPTION>
                                          % of Statistical
                         Current           Calculation Date
                       Unguaranteed           Aggregate
 State                   (BLC)                 Principal            # of Loans
                    Principal Balance          Balance
----------------   ----------------------- ---------------------- --------------
                                          % of Statistical
                         Current           Calculation Date
                       Unguaranteed           Aggregate
 State                   (BLC)                 Principal            # of Loans
                    Principal Balance          Balance
----------------   ----------------------- ---------------------- --------------
<S>                    <C>                          <C>          <C>
Arizona                  $612,241.77              3.14%               2

Florida                  4,504,589.49             23.11%              28

Georgia                  1,122,818.61             5.76%               5

Indiana                    829,730.62             4.26%               5

Kansas                      48,611.86             0.25%               1

Massachusettes              46,084.26             0.24%               1

Maryland                   860,986.37             4.42%               5

North Carolina             408,309.91             2.09%               2

Nebraska                   238,670.14             1.22%               3

New Jersey               1,891,754.50             9.71%               11

New Mexico                 519,672.53              2.67%              3

New York                 1,429,528.54             7.33%               6

Ohio                       249,598.78             1.28%               1

Oklahoma                 1,122,488.02             5.76%               4

Pennsylvania               393,096.79             2.02%               2

South Carolina             722,543.61             3.71%               4

Tennessee                  363,810.46             1.87%               2

Texas                      737,862.14             3.79%               2

Virginia                 3,302,835.94            16.94%              13

Wisconsin                   86,317.18             0.44%               1

  Total                   $19,491,552             100%              101
============             ==============           ====              ===

</TABLE>
                                      -37-
<PAGE>



                  The interest  rates borne by the SBA Notes (the "Note  Rates")
were distributed as follows as of the Statistical Calculation Date:

<TABLE>
<CAPTION>

                                      Current       % of Statistical
                                      Unguaranteed    Calculation Date
                                      (BLC)           Aggregate
     Gross Coupon                     Principal       Principal          #
                                      Balance         Balance           of Loans
-------------------------------    ---------------   ---------------- ----------
<S>                      <C>           <C>               <C>              <C>

10.25% </= Gross        10.50%    $   713,155.30       3.66%               3
        Coupon <


10.50% </= Gross        11.00%      1,895,414.02      9.72%                5
       Coupon <


11.00% </= Gross        11.25%     16,078,724.70     82.49%                88
       Coupon <


11.25% </= Gross                      804,257.50      4.13%                5
        Coupon <

                          Total      19,491,552       100.00%              101
                        ======       ============      =======             ===
</TABLE>



                                      -38-
<PAGE>



                  The  Margins   added  to  the  Prime  Rate  on  each  Interest
Adjustment  Date to  determine  the new Note  Rates were  distributed  as of the
Statistical Calculation Date as follows:
<TABLE>
<CAPTION>

                                        Current      % of Statistical
                                      Unguaranteed   Calculation Date
                                          (BLC)       Aggregate
     Gross Margin                      Principal       Principal
                                         Balance        Balance       # of Loans
          <S>                   <C>          <C>           <C>              <C>

2.00% < Gross Margin                          --          0.00%            --


2.00% </= Gross                2.25%      713,155         3.66%            3
  Margin <


2.25% </= Gross                2.50%           --         0.00%            --
      Margin <


2.50% </= Gross                2.75%    1,982,914        10.17%            6
   Margin <


2.75% </= Gross                3.00%   16,795,482        86.17%            92
  Margin <


                Total:                  19,491,552       100.00%       101
                                        =========        ======    ==========


</TABLE>

                                      -39-
<PAGE>


         The  distribution of the original terms of the SBA ss. 7(a) Loans as of
the Statistical Calculation Date was as follows:
<TABLE>
<CAPTION>

                                Current        % of Statistical
                              Unguaranteed     Calculation Date
                                 (BLC)          Aggregate
Original Term                  Principal         Principal           # of Loans
                                Balance           Balance
<S>                           <C>                     <C>                  <C>

84    </= Original   108       $   0.00              --
          Maturity <

108   </= Original   132        575,686              2.95%              8
          Maturity <

132   </= Original   156           -                 0.00%              -
         Maturity <

156   </= Original   180           -                 0.00%              -
         Maturity <

180   </= Original   204        898,857              4.61%              8
         Maturity <

204    </= Original  228        360,303              1.85%              3
         Maturity <

228    </= Original  252      1,254,817              6.44%              7
         Maturity <

252    </= Original  276      1,440,826              7.39%              9
         Maturity <

276    </= Original  300      2,765,173             14.19%             15
         Maturity <

300    </= Original  324     12,195,889             62.57%             51
         Maturity <


           Total:           $19,491,552            100.00%            101
           =====            ============           =======            ===


</TABLE>



                                      -40-
<PAGE>


                  The distribution of the number of remaining months to maturity
of the SBA ss. 7(a) Loans as of the Statistical Calculation Date was as follows:


<TABLE>
<CAPTION>
                                                           % of
                                                           Statistical
                                           Current         Calculation
    Remaining Term                      (BLC) Principal    Aggregate
                                           Balance         Principal  # of Loans
                                                           Balance
        <S>      <C>     <C>           <C>                 <C>             <C>


 12        < Rem Term                         $       -        0.00%       -

 12      </= Rem Term <     24                        -        0.00%       -

 24      </= Rem Term <     36                        -        0.00%       -

 36      </= Rem Term <     48                        -        0.00%      -

 48      </= Rem Term <     60                        -        0.00%      -

 60      </= Rem Term <     74                 4,485.61        0.02%      2

 74      </= Rem Term <     86                        -        0.00%      -

 86      </= Rem Term <     96                        -        0.00%      -

 96      </= Rem Term <    108                        -        0.00%      -

108     </= Rem Term <     120               573,735.96        2.94%       7

120     </= Rem Term <     132                        -        0.00%       -

132     </= Rem Term <     144               114,211.68        0.59%       1

144     </= Rem Term <     156                        -        0.00%       -

156     </= Rem Term <     168                        -        0.00%       -

168     </= Rem Term <     180               609,871.08        3.13%       5

180     </= Rem Term <     192               286,450.93        1.47%       2

192     </= Rem Term <     204               229,052.87        1.18%       2

204     </= Rem Term <     215                        -        0.00%       -

215     </= Rem Term <     227               339,322.26        1.74%       3

227     </= Rem Term <     239               932,532.64        4.78%       4

239     </= Rem Term <     251               899,458.64        4.61%       5

251     </= Rem Term <     263               665,564.18        3.41%       5

263     </= Rem Term <     276               657,103.93        3.37%       5

                                      -41-
<PAGE>

276     </= Rem Term <     287             2,458,511.15        12.61%      10

287     </= Rem Term <     300            10,799,243.09        55.40%      44

300      </= Rem Term                        922,007.50        4.73%       6



               Total:                      $19,491,552.00     100.00%     101
               =====                       ===============     =======     ===

</TABLE>



                                      -42-
<PAGE>


         The  distribution of the number of months since  origination of the SBA
ss.7(a) Loans as of the Statistical Calculation Date was as follows:

<TABLE>
<CAPTION>

                                                    % of
                              Current            Statistical
                            Unguaranteed         Calculation
                               (BLC)                Date
          Age                 Principal            Aggregate         # of Loans
                               Balance             Principal
                                                    Balance
          <S>     <C>    <C>    <C>    <C>    <C>    <C>

12    < Age                16,507,454.00             84.69%             87

12  </= Age < 24           2,800,368.56              14.37%             10

24  </= Age < 36             65,031.67               0.33%              1

36  </= Age < 48             1,950.44                0.01%              1

48  </= Age < 60                 -                   0.00%              -

60  </= Age < 72                 -                   0.00%              -

72  </= Age < 84                 -                   0.00%              -

84  </= Age < 96                 -                   0.00%              -

96  </= Age < 107             114,211.68             0.59%              1

107  </= Age < 118            2,535.17               0.01%              1

118   </= Age

         Total:               19,491,552           100.00%             101
                              ==========            =====              ===                                      =======


</TABLE>
<PAGE>


                                      -43-
<PAGE>

                  The years in which the SBA ss. 7(a) Loans were  originated was
as follows:


<TABLE>
<CAPTION>
                                          % of
                                         Statistical
                        Current          Calculation
                     Unguaranteed            Date
                         (BLC)           Aggregate
Year of Origination     Principal        Principal           # of Loans
                         Balance            Balance
------------------- ----------------  --------------------  ----------------
<S>                       <C>             <C>               <C>

1989                     2,535.17           0.01%                1


1990                       -                  -                  -


1991                       -                  -                  -


1992                       -                  -                  -


1993                       -                  -                  -


1994                      1,950.44          0.01%                 1


1995                        -                 -                  -


1996                      65,031.67         0.33%                 1

1997                   3,454,242.44        17.72%                15

1998                  15,967,791.80        81.92%                83

Total:                   19,491,552       100.00%               101
                      ==============     ==========             ===


</TABLE>



                                      -44-
<PAGE>

                  The distribution of the original  balances of the SBA ss. 7(a)
Loans including the Guaranteed and Unguaranteed Portions was as follows:

<TABLE>
<CAPTION>
                                                       % of
                                                    Statistical
                                   Current           Calculation
                                  Unguaranteed           Date
                                     (BLC)            Aggregate
       Original Balance             Principal          Principal      # of Loans
                                     Balance            Balance
-------------------------------  ---------------      ----------    ----------
<S>                                <C>                     <C>          <C>

50,000 < Balance                     $     --         -         --


50,000  </= Balance       100,000     1,950.44               0.01%            1
                          <

100,000  </= Balance       125,000       -                   -                -
                          <

125,000  </= Balance       150,000     2,535.17               0.01%           1
                          <

150,000  </= Balance       200,000   133,615.66               0.69%           3
                          <

200,000  </= Balance       225,000   117,140.79               0.60%           3
                          <

225,000  </= Balance       250,000     -                     -                -
                          <

250,000  </= Balance       275,000    65,031.68               0.33%           1
                          <

275,000  </= Balance       300,000   138,368.99               0.71%           2
                          <

300,000  </= Balance       350,000   486,736.99               2.50%                5
                          <

350,000  </= Balance       400,000   769,785.35               3.95%           8
                          <

400,000  </= Balance       450,000   511,101.43               2.62%           5
                          <

450,000  </= Balance       500,000    350,940.35              1.80%           3
                          <

500,000  </= Balance       550,000   1,183,052.83             6.07%           9
                          <

550,000  </= Balance       600,000     565,432.65             2.90%           4
                          <

600,000  </= Balance       650,000     462,582.66             2.37%           3
                          <

650,000  </= Balance       700,000     498,635.57             2.56%           3
                          <

700,000  </= Balance       750,000     704,566.96             3.61%           4
                          <

750,000  </= Balance       800,000     566,947.52             2.91%           3
                          <

800,000  </= Balance       850,000   1,422,153.51             7.30%           7
                          <

850,000  </= Balance       900,000    218,063.37              1.12%           1
                          <

900,000  </= Balance       950,000    229,699.31              1.18%           1
                          <

950,000  </= Balance     1,000,000    243,087.79              1.25%           1
                          <

1,000,000  </= Balance     1,025,000 5,508,297.39             28.26%         22
                          <

1,025,000  </= Balance     1,050,000   275,007.50              1.41%          1
                          <

1,050,000  </= Balance     1,075,000   305,459.92              1.57%          1
                          <

1,075,000 </= Balance <    1,100,000   323,780.56              1.66%          1


1,100,000  </= Balance     1,125,000   708,695.21              3.64%          2
                          <

                                      -45-
<PAGE>

1,125,000  </= Balance     1,175,000             -                -           -
                          <

1,175,000  </= Balance     1,200,000             -                -           -
                          <

1,200,000  </= Balance                3,698,881.94            18.98%          6


Total:                                  19,491,552              100%         101
=====                                   ===========             ====         ===

</TABLE>




                                      -46-
<PAGE>




                  The distribution of the original  balances of the Unguaranteed
Interests was as follows:


<TABLE>
<CAPTION>
                                                       % of
                                                    Statistical
                                   Current           Calculation
                                  Unguaranteed           Date
    Original Unguaranteed           (BLC)            Aggregate
       Loan Principal               Principal          Principal      # of Loans
           Balance                   Balance            Balance
-------------------------------  ---------------      ----------      ----------
<S>                                <C>                     <C>          <C>

50,000 >/=  Balance                $      138,101.27        0.71%           5

50,000 </= Balance  100,000             1,279,983.78        6.57%          17
<
100,000 </= Balance 150,000             2,597,527.26        13.33%         21
<
150,000 </= Balance 200,000             2,542,812.71        13.05%         15
<
200,000 </= Balance 250,000             2,113,003.98        10.84%         10
<
250,000 </= Balance 300,000             5,783,304.89        29.67%         23
<
300,000 </= Balance 350,000               629,240.48         3.23%          2
<
350,000 </= Balance 400,000               708,695.21         3.64%          2
<
400,000 </= Balance 450,000                  -                   -         -
<
450,000 </= Balance 500,000               448,390.95         2.30%         1
<
500,000 </= Balance 550,000               520,806.33         2.67%         1
<
550,000 </= Balance 600,000                  -                   -         -
<
600,000 </= Balance 650,000               598,900.11         3.07%         1
<
650,000 </= Balance 750,000             2,130,784.55        10.93%         3
<

Total:                                  $19,491,552         100.00%        101
=====                                   ============       =======         ===


</TABLE>



                                      -47-
<PAGE>




                  The distribution of the principal balances of the Unguaranteed
Interests of the SBA ss. 7(a) Loans as of the Statistical  Calculation  Date was
as follows:

<TABLE>
<CAPTION>
                                                       % of
                                                    Statistical
                                   Current           Calculation
                                  Unguaranteed           Date
    Current Unguaranteed            (BLC)            Aggregate
     Principal Balance             Principal          Principal      # of Loans
                                     Balance            Balance
-------------------------------  ---------------      ----------      ----------
<S>                                <C>                     <C>          <C>

     < Balance                                         0.10%               3
25,000                                     19,264.54

     </= Balance                                       0.93%               4
25,000              < 50,000              182,227.52

     </= Balance                                       1.32%               4
50,000              < 75,000              257,150.65

     </= Balance                                       5.93%               13
75,000              < 100,000           1,155,621.78

     </= Balance                                       4.64%                8
100,000             < 125,000             905,010.92

     </= Balance                                       8.44%               12
125,000             < 150,000           1,644,419.56

     </= Balance                                       7.54%                9
150,000             < 175,000           1,469,032.53

     </= Balance                                       7.82%                8
175,000             < 200,000           1,524,906.87

     </= Balance                                       5.34%                5
200,000             < 225,000           1,041,007.53

     </= Balance                                       24.17%              19
225,000             < 250,000           4,711,714.02

     </= Balance                                        7.92%               6
250,000             < 300,000           1,544,377.97

     </= Balance                                        3.23%               2
300,000             < 325,000             629,240.48

     </= Balance                                        1.79%               1
325,000             < 350,000             349,545.29

     </= Balance                                        1.84%               1
350,000             < 375,000             359,149.92

     </= Balance                                                            --
375,000             < 400,000                -              -

     </= Balance                                                            --
400,000             < 425,000                -              -

     </= Balance                                        2.30%                1
425,000             < 450,000             448,390.95

     </= Balance --
450,000             < 500,000                -              -

     </= Balance                                        2.67%                1
500,000             < 550,000             520,806.33

                                      -48-
<PAGE>

     </= Balance                                        3.07%                1
550,000             < 600,000             598,900.11

     </= Balance                                        7.11%                2
600,000             < 700,000           1,386,784.55

700000 < Balance                                        3.82%                1
744,000.00

Total:                                  19,491,552      100%               101
=====                                   ===========     ====               ===


</TABLE>



                                      -49-
<PAGE>


                  The distribution of the principal balances of the Unguaranteed
Interests as of the Statistical Calculation Date was as follows:

<TABLE>
<CAPTION>
                                                       % of
                                                    Statistical
                                   Current           Calculation
                                  Unguaranteed           Date
    Current SBA Aggregate            (BLC)            Aggregate
    Loan Principal Balance         Principal          Principal      # of Loans
                                     Balance            Balance
-------------------------------  ---------------      ----------      ----------
<S>                                <C>                     <C>          <C>

50,000  <Balance                 19,264.54                  0.10%             3

50,000   </=   75,000            --                         0.00%            --
        Balance               <

75,000   </=  100,000            --                          0.00%           --
        Balance               <

100,000   </=   125,000           38,877.24                 0.20%             1
        Balance               <

125,000   </=   150,000          143,350.28                 0.74%             3
        Balance               <

150,000   </=   175,000           53,750.00                 0.28%             1
        Balance               <

175,000   </=   200,000          222,111.67                 1.14%             2
        Balance               <

200,000   </=   225,000          278,368.98                 1.43%             3
        Balance               <

225,000   </=   250,000          160,344.22                  0.82%            2
        Balance               <

250,000   </=   300,000          995,277.56                  5.11%           11
        Balance               <

300,000   </=   350,000          542,203.58                  2.78%            5
        Balance               <

350,000   </=   400,000        1,036,837.49                 5.32%             8
        Balance               <

400,000   </=   450,000          983,389.41                 5.05%             7
        Balance               <

450,000   </=   500,000          478,350.82                 2.45%             3
        Balance               <

500,000   </=   550,000          855,601.71                 4.39%             5
        Balance               <

550,000   </=   600,000        1,349,906.87                 6.93%             7
        Balance               <

600,000   </=   650,000          822,944.16                 4.22%             4
        Balance               <

                                      -50-
<PAGE>

650,000   </=   700,000          447,763.67                 2.30%             2
        Balance               <

700,000   </=   750,000       10,063,210.31                 51.63%           30
        Balance               <

750,000   </=   800,000        1,000,000.00                 5.13%             4
        Balance               <

Total:                          19,491,551.52               100.00%         101
=======                         =============                ======        =====


</TABLE>

                                      -51-
<PAGE>


         The distribution of the  Loan-to-Value  Ratios of the SBA Loans without
giving  effect  to the  discounts  to  collateral  value  as of the  Statistical
Calculation Date was as follows:

<TABLE>
<CAPTION>


                                                  Percentage of
                                                   Statistical
                                                  Calculation Date
                                                  Unguaranteed
Undiscounted           Current Unguaranteed        Principal
Loan-To-Value Ratio      Principal Balance          Balance        # of Loans
--------------------    ---------------------      ----------      ----------
<S>                      <C>                     <C>               <C>


LTV <=25%                $   17,314.10                    0.09%       2

25% < LTV <=30%          $        0.00                    0.00%       0

30% < LTV <=35%          $  663,931.78                    3.41%       2

35% < LTV <=40%          $  499,687.66                    2.56%       2

40% < LTV <=45%          $  838,214.32                    4.30%       4

45% < LTV <=50%          $1,358,620.46                    6.97%       6

50% < LTV <=55%          $  635,442.24                    3.26%       4

55% < LTV <=60%$          3,661,905.36                   18.79%      14

60% < LTV <=65%$          2,639,188.46                   13.54%      14

65% < LTV <=70%$          2,626,634.83                   13.48%      14

70% < LTV <=75%$          2,423,095.25                   12.43%      11

75% < LTV <=80%$          1,743,517.04                    8.94%      10

80% < LTV <=85%$          1,284,721.95                    6.59%       6

85% < LTV <=90%$            671,509.93                    3.45%       7

90% < LTV <=95%$            136,250.00                    0.70%       1

95% < LTV <=100$            291,518.14                    1.50%       4

LTV > 100%               $        0.00                    0.00%       0


Total:                     $19,491,552                    100.00%     101
======                   =============                    =======     =====
</TABLE>

                                      -52-
<PAGE>



         The  distribution  of the SBA Loans based upon the first four digits of
the Office of Management and Budget's Standard Industrial  Classification was as
follows:

<TABLE>
<CAPTION>
                                           % of Statistical
                                           Calculation Date
                            Current            Aggregate
      SIC CODE        Unguaranteed (BLC)   Principal Balance   # of
                       Principal Balance                         Loans
--------------------------------------------------------------------------
<S>               <C>          <C>                      <C>             <C>
                  600          199,767.05               1.02%           1
                 1541          138,509.63               0.71%           2
                 2759           53,750.00               0.28%           1
                 3993          144,523.52               0.74%           1
                 4449           94,570.72               0.49%           1
                 4581          218,063.37               1.12%           1
                 4953          161,500.00               0.83%           1
                 4993          199,790.60               1.03%           1
                 5032          171,793.60               0.88%           1
                 5331           97,225.49               0.50%           1
                 5411        1,183,785.62               6.07%           7
                 5541        1,315,571.71               6.75%           9
                 5591          136,250.00               0.70%           1
                 5712          153,000.00               0.78%           1
                 5713           82,256.43               0.42%           1
                 5719          275,007.50               1.41%           1
                 5812        3,308,120.61              16.97%          17
                 5813          131,250.00               0.67%           1
                 5995           97,500.00               0.50%           1
                 6512          250,000.00               1.28%           1
                 7011        8,666,861.80              44.46%          32
                 7211          183,087.79               0.94%           2
                 7212            1,950.44               0.01%           1
                 7334          186,612.28               0.96%           1
                 7513           65,031.67               0.33%           1


                                      -53-
<PAGE>

                 7538          199,651.70               1.02%           1
                 7542          433,150.45               2.22%           3
                 7543            2,535.17               0.01%           1
                 7699          115,236.32               0.59%           1
                 7948          349,545.29               1.79%           1
                 7992          105,334.47               0.54%           1
                 7999           68,639.15               0.35%           1
                 8051          252,961.68               1.30%           2
                 8059          448,717.46               2.30%           2

                            19,491,551.52             100.00%          101
                          ================           =========        =====


</TABLE>

                                      -54-
<PAGE>


Subsequent SBA Loans

                  The  Subsequent SBA Loans to be included in the Trust Fund are
expected to have the following characteristics as of their related Cut-Off Dates
(unless otherwise indicated).1

Range of weighted average original Unguaranteed Interest.....$100,000 - $300,000
Range of original Unguaranteed Interest.......................$25,000 - $750,000
Range of weighted average Note Rate..............................10.25% - 11.25%
Range of Note Rates..............................................10.00% - 11.25%
Range of weighted average ages...........................................0-3 mo.
Range of ages............................................................0-6 mo.
Range of weighted average original terms.............................200-300 mo.
Range of original terms...............................................84-300 mo.
Range of weighted average gross margins................................2.5-2.75%
Range of gross margins.................................................2.0-2.75%
Range of weighted average original undiscounted LTV ratios................60-85%
Range of original undiscounted LTV ratios................................40-110%


------------
1
The actual  characteristics  of the  Subsequent  SBA Loans to be included
in the Trust Fund may vary somewhat from the characteristics presented.


                                      -55-
<PAGE>




          The following  table sets forth the Prime Rate for the first  business
day of each of the  following  calendar  quarters as reported in The Wall Street
Journal:
<TABLE>

               1995              1996               1997                    1998
             ----               ----                ----                   ----
<S>            <C>                 <C>               <C>                  <C>
Quarter

1st           8.50%           8.50%               8.25%                    8.50%

2nd           9.00%           8.25%               8.50%                    8.50%

3rd           9.00%           8.25%               8.50%                    8.50%

4th           8.75%           8.25%               8.50%                    8.25%
</TABLE>

The values set forth in the table above are historical and may not be indicative
of future values of the Prime Rate.




                                      -56-
<PAGE>




                              THE SBA LOAN PROGRAM

General

                  The Small Business Act of 1953 (the "Act"),  which created the
Small  Business  Administration,  also  established  the general  business  loan
program under Section 7(a) of the Act (the "Section 7(a) Program").  The Section
7(a) Program was intended to encourage  lenders to provide  loans to  qualifying
small  businesses.  Loans made under the  Section  7(a)  Program  can be used to
construct,  expand or convert  facilities,  to purchase  building  equipment  or
materials or to finance  machinery  and  equipment,  business  acquisitions  and
inventory.  Money  lent  under the  Section  7(a)  Program  also can be used for
working capital.

The Section 7(a) Loan Guaranty Programs

                  The SBA administers  three levels of lender  participation  in
the  Section  7(a)  Program.  Under the  first  level,  known as the  Guaranteed
Participant  Program,  the lender gathers and processes data from applicants and
forwards it, along with a request for the SBA's guaranty, to a local SBA office.
The SBA then completes an independent  analysis and decides  whether to guaranty
the loan. SBA turnaround time on such applications varies greatly,  depending on
its backlog of loan applications.

                  Under the second level of lender  participation,  known as the
Certified  Lender  Program,  the lender  (the  "Certified  Lender")  gathers and
processes  data  from  applicants  and  makes a  request  to the SBA,  as in the
Guaranteed  Participant  Program  procedure.  The SBA then performs an expedited
review of the lender's  credit  analysis,  which  generally is completed  within
three  working  days.  The SBA requires  that lenders  originate  loans  meeting
certain portfolio and volume criteria before  authorizing them to participate in
the Certified Lender Program.

                  Under the third  level of lender  participation,  known as the
Preferred Lender Program,  the lender (the "Preferred Lender") has the authority
to approve a loan and obligate the SBA to guarantee the loan without  submitting
an application  to the SBA for credit  review.  The lender is required to notify
the SBA of the  approved  loan  and  submit  certain  documents.  The  standards
established for  participants in the Preferred Lender Program are more stringent
than those for  participants in the Certified Lender Program and involve meeting
additional portfolio quality and volume requirements.  The granting of Preferred
Lender status is based upon a lender's ability to originate and service loans in
a particular territory to the satisfaction of the SBA.

Section 7(a) Loan Parameters

                  Under each of the Guaranteed Participant, Certified Lender and
Preferred Lender Programs, the SBA currently guarantees loans up to 75%, subject
to a per borrower  guaranty  maximum of $750,000.  These limits have varied from
time to time.  Loans  originated  under the Section 7(a) Program can bear either
fixed or adjustable rates of interest,  as negotiated between the lender and the
borrower at origination.  Adjustable-rate  loans  generally  adjust on the first
business  day of each  calendar  quarter  based on a  specified  margin over the
lowest  prime rate,  as  published  in The Wall Street  Journal.  For loans made
pursuant to the Guaranteed  Participant,  Certified  Lender or Preferred  Lender
Programs, this margin generally does not exceed 2.75% per annum.

                  Terms to maturity for guaranteed loans vary depending upon the
use of proceeds and an evaluation of the  borrower's  ability to repay the loan.
For  instance,  working  capital loans are limited to seven year terms unless an


                                      -57-
<PAGE>

extension  is  obtained,  which can  increase the term to a maximum of 10 years.
Real  estate  loans  generally  have  terms up to 25 years,  and  machinery  and
equipment  loans generally have a maximum term of 15 years. If the loan proceeds
are to be used for  multiple  qualifying  purposes,  a blended term based on the
foregoing criteria may be offered by the Lender.

The Seller's Participation in SBA Section 7(a) Program

                  The SBA Loans are partially  guaranteed by the SBA pursuant to
a Small Business Administration Loan Guaranty Agreement (Deferred Participation)
(SBA Form 750),  dated March 27, 1997,  and a Supplemental  Guarantee  Agreement
Preferred  Lender  Program (SBA Form 1347),  dated  August 1, 1997,  each by and
between the Seller and the SBA, and pertinent SBA regulations found at 13 C.F.R.
Part 120.

                  The Seller has  Preferred  Lender  status  with the SBA in the
areas served by the following SBA district offices:  Richmond,  Virginia;  Miami
and, Jacksonville, Florida; Atlanta, Georgia; Chicago and Springfield, Illinois;
Denver,  Colorado;  St. Louis,  Springfield and Kansas City, Missouri;  Wichita,
Kansas; Omaha,  Nebraska;  Des Moines and Cedar Rapids, Iowa;  Albuquerque,  New
Mexico;  Oklahoma City,  Oklahoma;  Little Rock,  Arkansas;  Newark, New Jersey;
Pittsburgh,  Pennsylvania;   Baltimore,  Maryland;  Clarksburg,  West  Virginia,
Louisville,  Kentucky; Birmingham, Alabama; Columbia, South Carolina; Nashville,
Tennessee;  Indianapolis,  Indiana; New Orleans,  Louisiana;  Las Vegas, Nevada;
District of  Columbia;  three  districts  in New York  including  Rochester  and
Syracuse;  and seven districts in Texas,  including Houston,  Dallas and Austin.
See "The Seller" herein.


                  YIELD, MATURITY AND PREPAYMENT CONSIDERATIONS

                  The value of an investment in the Class A Certificates  may be
affected by, among other things,  a change in interest  rates. If interest rates
fall below the then current Note Rates on the SBA Loans,  the rate of prepayment
on such SBA Loans may increase. Prepayments, delinquencies and defaults may also
be influenced by a number of other factors including economic conditions.

                  On each Remittance Date, the  Certificateholders  are entitled
to receive 30 days' interest on the Class A or Class B Principal Balance, as the
case may be, immediately prior to such Remittance Date at the applicable Class A
or  Class  B  Remittance  Rate,  subject  to  the  adjustments  described  under
"Description of the Agreement and the Certificates--Class A and Class B Interest
Distribution  Amounts" herein. This is the case even if Principal Prepayments or
Curtailments  are received  with respect to the SBA Loans during the related Due
Period. With respect to such Principal Prepayments and Curtailments the Servicer
will remit to the Trustee for deposit in the Certificate  Account,  from amounts
otherwise  payable to it as  servicing  compensation,  Compensating  Interest as
described under "Description of the Agreement and the  Certificates--Payments on
the SBA Loans; Distributions on the Certificates" herein.

                  For the  Certificates,  the net  effect  of each  distribution
respecting  interest  generally will be the pass-through on each Remittance Date
to each  Certificateholder  of an amount which is equal to 30 days'  interest at
the  Class A or Class B  Remittance  Rate,  as the case may be,  subject  to the
adjustments described herein.

                  The Excess  Spread on the  guaranteed  portions of the SBA ss.
7(a)  Loans  will be  available  to make  up  shortfalls  in  amounts  to  which
Certificateholders are entitled on Remittance Dates. The amount of Excess Spread
varies from loan to loan and will be eliminated  when a borrower  prepays a loan
in full. In addition,  the Excess Spread on an SBA ss. 7(a) Loan in default will
be paid by the SBA  until  the  purchase  by the SBA of the  related  Guaranteed
Interest (up to 120 days of accrued interest).

                                      -58-
<PAGE>

                  With  respect to SBA ss.  7(a) Loans for which the  Guaranteed
Interest was sold in the secondary  market on or after September 1, 1993 (unless
the related SBA ss.  7(a) Loan was  approved by the SBA on or after  October 12,
1995) and SBA ss. 7(a) Loans  approved by the SBA on or after  October 12, 1995,
regardless  of whether they were sold in the Secondary  Market (the  "Additional
Fee  SBA  Loans"),  a  fee  equal  to  40  basis  points  or  50  basis  points,
respectively, per annum on the outstanding balance of the Guaranteed Interest of
such Additional Fee SBA Loans (the  "Additional  Fee") is required to be paid by
the Seller to the SBA. Although such Additional Fee is the responsibility of the
Seller,  the  Additional  Fee will be funded from the  interest  received by the
related  Obligor.  Accordingly,  any such  Additional Fee will reduce the Excess
Spread on the related SBA ss. 7(a) Loan.

                  Unscheduled  payments,  delinquencies  and defaults on the SBA
Loans and distributions from the Pre-Funding  Account, if any, on the Remittance
Dates in January 1999,  February 1999 and March 1999 and the Special  Remittance
Date will affect the amount of funds  available  to make  distributions  on each
Remittance Date. In addition, the Servicer may, at its option, on any Remittance
Date on or after  the date on which  the then  outstanding  aggregate  principal
balance  of the  Unguaranteed  Interests  is less than 10% of the sum of (i) the
Original Pool Principal Balance and (ii) the initial  Pre-Funded Amount, if any,
purchase  from the Trust Fund all of the  Unguaranteed  Interests  and any other
assets  in the  Trust  Fund at a price  equal to the sum of (x) 100% of the then
outstanding  Class A and Class B Principal  Balances,  and (y) 30 days' interest
thereon  at the  then  applicable  Class A and  Class B  Remittance  Rates  (the
"Termination    Price").   See   "Description   of   the   Agreement   and   the
Certificates--Termination;  Purchase of SBA Loans" herein. However,  because the
SBA Loans may prepay,  the weighted average life of the Certificates or the date
on which  the  outstanding  aggregate  principal  balances  of the  Unguaranteed
Interests  will be less than 10% of the sum of (i) the Original  Pool  Principal
Balance and (ii) the Pre-Funding Amount, if any, cannot be determined.

                  None of the SBA  Loans  are  balloon  loans  and each is fully
amortizing  in  accordance  with its terms.  The SBA Loans may be prepaid at any
time without payment of a prepayment fee or penalty. In general,  when the level
of prevailing interest rates for similar loans significantly  declines, the rate
of prepayment is likely to increase,  although the prepayment rate is influenced
by  a  number  of  other  factors,   including   general  economic   conditions.
Prepayments,  liquidations  and  purchases of the  Unguaranteed  Interests  will
result in distributions to  Certificateholders  of amounts which would otherwise
be distributed over the remaining terms of the SBA Loans.

                  The final scheduled  Remittance  Date for the  Certificates is
January 2025,  which is the date on which the principal  balances of the Class A
and Class B Certificates would be reduced to zero,  assuming that no prepayments
are  received  on the SBA  Loans  and that  distributions  of  principal  of and
interest on each of the SBA Loans are timely received. The weighted average life
of the  Certificates  is likely to be shorter than would be the case if payments
actually made on the SBA Loans conformed to the foregoing  assumptions,  and the
final Remittance Date with respect to the Certificates could occur significantly
earlier than the final  scheduled  Remittance  Date because (i)  prepayments are
likely to occur, and (ii) the Servicer may cause a termination of the Trust Fund
as described above.

                  The "weighted  average  life" of a  Certificate  refers to the
average  amount of time that will elapse  from the  Closing  Date to the date on
which each dollar in respect of principal  of such  Certificate  is repaid.  The
weighted  average lives of the  Certificates  will be influenced by, among other
factors,  the rate at which  principal  payments  (including  Monthly  Payments,
Principal  Prepayments,  Excess Payments and  Curtailments)  are made on the SBA
Loans.

                                      -59-
<PAGE>

                  Prepayments  on loans  are  commonly  measured  relative  to a
prepayment  standard or model. The model used in this  Memorandum,  the Constant
Prepayment Rate ("CPR") , represents an assumed  constant rate of prepayment per
annum relative to the then  outstanding  principal  balance of a pool of new SBA
loans.  The CPR does not purport to be either a  historical  description  of the
prepayment  experience  of  any  pool  of  SBA  loans  or a  prediction  of  the
anticipated  rate of  prepayment  of any pool of SBA  loans,  including  the SBA
Loans.

                  The  Seller  makes  no  representation  as to  the  particular
factors that will affect the  prepayment of the SBA Loans,  as to the percentage
of the principal balance of the SBA Loans that will be paid as of any date or as
to the overall rate of prepayment on the SBA Loans.

                  Greater  than   anticipated   prepayments  of  principal  will
increase the yield on Certificates  purchased at a price less than par.  Greater
than   anticipated   prepayments   of  principal  will  decrease  the  yield  on
Certificates  purchased at a price greater than par. The effect on an investor's
yield due to principal  prepayments on the SBA Loans occurring at a rate that is
faster (or  slower)  than the rate  anticipated  by the  investor  in the period
immediately  following  the  issuance of the  Certificates  will not be entirely
offset by a subsequent  like  reduction  (or  increase) in the rate of principal
payments.  The weighted average lives of the Certificates  also will be affected
by the amount and timing of delinquencies  and defaults on the SBA Loans and the
recoveries,   if  any,  on  defaulted  SBA  Loans  and  foreclosed   properties.
Delinquencies and defaults  generally will slow the rate of payment of principal
to the  Certificateholders.  However,  this  effect will be offset to the extent
that lump sum recoveries on defaulted SBA Loans and foreclosed properties result
in principal payments on the Certificates faster than otherwise scheduled.

                  The following table under the heading  "Weighted Average Lives
of the Class A  Certificates"  assumes,  among  other  things,  that (i) (a) the
scheduled interest payment in each month for each SBA Loan has been based on the
outstanding balance as of the first day of the month preceding the month of such
payment,  (b) the initial weighted average Note Rate for the SBA Loans delivered
at closing  for the  January  1999  scheduled  payments  is 10.96% per the chart
below, and (c) thereafter,  the scheduled  payments and remaining term to stated
maturity  for each SBA loan is as set  forth  below  (rather  than  based on the
actual SBA Loan  characteristics) so that such scheduled payments would amortize
the  remaining  balance by its stated  maturity  date,  (ii)  scheduled  monthly
payments of principal  and interest on the SBA Loans will be timely  received on
the first day of each month (with no defaults),  commencing on the Cut-Off Date,
(iii) the Servicer  does not  exercise  its option to purchase the  Unguaranteed
Interests and thereby  cause a  termination  of the  Agreement,  (iv)  principal
prepayments  on the SBA Loans  represent  prepayments  in full of individual SBA
Loans and will be received on the last day of each month commencing December 31,
1998 at the  respective  percentages  of CPR set  forth in the table and (v) the
Certificates  will be issued on December  30,  1998.  The  following  table also
assumes that the Pre-Funding  Account is established,  the original  Pre-Funding
Amount equals its maximum  permitted amount and the entire  Pre-Funded Amount is
used to purchase SBA ss.7(a) Loans at the end of the Pre-Funding Period.

  Note Rate      Gross Margin           Balance          Remaining Term
------------   ---------------     ---------------     ------------------
   10.96%         2.71%            $21,431,228.10           271 mon.


                  Based upon the foregoing assumptions, some or all of which are
unlikely  to reflect  actual  experience,  the  following  table  indicates  the
projected  weighted average lives of each Class of Certificates at various CPRs.



                                      -60-
<PAGE>

As used in the table, 0% CPR indicates no Principal Prepayments, Curtailments or
Excess Payments. The Class A and Class B Certificates were priced assuming 12.0%
CPR.

Weighted Average Lives of the Class A Certificates


                 Weighted Average Life        Earliest Retirement at Servicer's
  CPR                (Years) (1)                        Option (2)
  -------      ------------------------      ----------------------------------

  0%                    15.40                               September 2020
  8%                     8.41                               December 2016
 12%                     6.62                               December 2013
 16%                     5.39                               April 2011


(1)      The  weighted  average  life  of a  Certificate  is  determined  by (i)
         multiplying  the amount of each  payment of  principal by the number of
         years from the date of issuance to the related  Remittance  Date,  (ii)
         summing the results,  and (iii) dividing the sum by the total principal
         distributions.

(2)      Assuming early  termination of the Trust Fund when the then outstanding
         aggregate principal balance of the Unguaranteed  Interests is less than
         10% of the sum of (i)  Original  Pool  Principal  Balance  and (ii) the
         initial Pre-Funded Amount, if any.

Since the  individual  characteristics  of the SBA Loans will not  correspond to
those  assumed  above,  the  actual  weighted  average  lives  and the  earliest
retirement dates of the Certificates  will vary from those of the underlying SBA
Loans even if any indicated CPR is met. In addition,  there is no assurance that
Principal  Prepayments,  Curtailments or Excess Payments will occur, or, if they
do occur,  that they will  occur at a  constant  rate  approximating  any of the
indicated CPRs.


                                   THE SELLER

                  Business  Loan  Center,  Inc.,  a  Delaware  corporation  (the
"Seller"),  originates  and  services  SBA loans.  The Seller is a  wholly-owned
subsidiary  of  BLC  Financial  Services,  Inc.,  a  Delaware  corporation  (the
"Parent").  The Seller is  headquartered  at 645 Madison  Avenue,  New York, New
York, 10022 and its telephone number is 212-751-5626.

                  The  Parent is a  publicly-traded  corporation  the  principal
asset of which is its  ownership  of the  Seller.  In  addition,  BLC  Financial
Network,  Inc., BLC Financial Network of Florida, Inc., BLC Financial Network of
Mid-America, Inc., Business Loan Center Financial Corp. and Business Loan Center
Financial Corp. II are wholly-owned  subsidiaries of the Parent. The Parent also
wholly-owns  BLC Capital  Corporation,  a Delaware  corporation  originating and
servicing  loans not  meeting  the  Seller's  criteria  for SBA  loans,  and BLC
Commercial Capital Corporation,  a Florida corporation which participates in the
United States  Department of  Agriculture  Business & Industry  Guaranteed  Loan
Program.

                  The Seller or its predecessors  began  originating loans under
the SBA program in 1987.

                  The Seller has  Preferred  Lender  Status  with the SBA in the
areas served by the following SBA district offices:  Richmond,  Virginia;  Miami
and, Jacksonville, Florida; Atlanta, Georgia; Chicago and Springfield, Illinois;




                                      -61-
<PAGE>


Denver,  Colorado;  St. Louis,  Springfield and Kansas City, Missouri;  Wichita,
Kansas; Omaha,  Nebraska;  Des Moines and Cedar Rapids, Iowa;  Albuquerque,  New
Mexico;  Oklahoma City,  Oklahoma;  Little Rock,  Arkansas;  Newark, New Jersey;
Pittsburgh,  Pennsylvania;   Baltimore,  Maryland;  Clarksburg,  West  Virginia,
Louisville,  Kentucky; Birmingham, Alabama; Columbia, South Carolina; Nashville,
Tennessee;  Indianapolis,  Indiana; New Orleans,  Louisiana;  Las Vegas, Nevada;
District of  Columbia;  three  districts  in New York  including  Rochester  and
Syracuse; and seven districts in Texas, including Houston, Dallas and Austin.

                  The Seller operates through affiliates in its referral network
as described below under  "Origination"  herein.  The Seller's  Mid-Atlantic and
Northeastern  Region  is  operated  through  its  BLC  Financial  Network,  Inc.
affiliate, a Delaware corporation  maintaining corporate facilities in Richmond,
Virginia. The Seller's Southeastern Region is operated through its BLC Financial
Network of Florida, Inc. affiliate, a Florida corporation  maintaining corporate
facilities in Panama City Beach,  Florida. The Seller's Middle America Region is
operates through its BLC Financial  Network of Mid-America,  Inc.  affiliate,  a
Kansas corporation maintaining corporate facilities in Wichita, Kansas.

                  During fiscal years ending 1994,  1995,  1996,  1997 and 1998,
the Seller  originated 38, 51, 41, 74 and 135 SBA loans,  respectively,  with an
aggregate principal amount of approximately $13.5 million,  $20.0 million, $18.5
million, $42.3 million and $87.0 million,  respectively. At June 30, 1994, 1995,
1996,  1997 and  1998,  the  Seller  was  servicing  a  portfolio  of SBA  loans
aggregating  approximately $38.8 million,  $56.1 million,  $67.0 million,  $98.0
million and $169.0 million, respectively.


                   THE SBA LOAN LENDING PROGRAM OF THE SELLER

                  As of the Statistical  Calculation Date, the Seller originated
approximately  25.48% and 73.69% of its SBA loans  under the  Guaranteed  Lender
Program ("GLP") and Preferred Lender Program ("PLP"),  respectively.  The Seller
applies  the  same  level  of loan  review  and  documentation  for  all  loans,
regardless of the Program under which they were originated.

                  The  primary  source  of loan  origination  for the  Seller is
through a referral network that includes three subsidiaries of the Parent,  each
of which focuses on one of the Seller's  regions  described  above. In addition,
the Seller may generate originations through loan brokers, advertising and prior
relationships  between  the Seller and  borrowers.  Loan  brokers,  real  estate
brokers and loan representatives are often paid commissions for origination.

                  Loan  officers  and  underwriters  employed  by  the  Parent's
subsidiaries  are  responsible  for analyzing the  creditworthiness  of proposed
borrowers  and  preparing  loan  summaries,  which  include  a  credit  analysis
(including a description of the collateral),  purpose of the loan, strengths and
weaknesses of the credit and  eligibility  for the  applicable  SBA program.  In
addition,  for each  proposed  loan  the  loan  officers  perform  a  collateral
analysis, financial analysis (including historical debt-service coverage and net
worth  ratios),  personal  resource  analysis and corporate and personal  credit
checks.  Personal financial statements and resumes are required of each owner of
20% or more of a proposed  borrower  and of each  guarantor.  Principals  of the
borrower are required to provide their tax returns for the most recent years.

                  Loan  applications   deemed  creditworthy  after  the  initial
analysis are forwarded to the Seller's loan committee for further  review,  Loan
Committee-approved applications are submitted to the SBA for approval, except in
the case of loans made pursuant to the PLP, in which case SBA prior  approval is
not required.



                                      -62-
<PAGE>


                  Loan  packagers  employed  by the  Parent's  subsidiaries  are
responsible  for  assembling   documentation  and  preparing  the  standard  SBA
submission package. The loan packagers also help to ensure that any deficiencies
or conditions noted in the Seller's  internal approval process or by the SBA are
remedied and/or complied with prior to closing.

                  SBA loans  originated  by the Seller  generally  range in size
from approximately  $25,000 to $1.5 million.  Average loan sizes for origination
during the fiscal years ended 1994, 1995, 1996, 1997 and 1998 were approximately
$355,000, $392,000, $451,000, $572,000 and $644,000, respectively.

                  The  closings  of SBA Loans for the Seller are  supervised  by
loan closing  officers.  Neither the annual  salaries nor the annual  bonuses of
such officers (if any) are determined on the basis of volume of closings. Unless
otherwise  approved  by the BLC  president,  all  closings  are  attended by the
Seller's outside attorney or a representative of such attorney's firm.

                  Once a loan is funded, the complete original files (credit and
legal) are forwarded promptly to the Servicing  Department in New York. When the
loan package is received,  the final  physical file is  established in a uniform
manner, and a computerized  "tickler system" tracks follow-up items, such as UCC
filing  renewals,  insurance  policy  expirations and deeds of trust or mortgage
recording.  The  tickler  system  alerts  the  Seller's  officers  to  make  the
appropriate and timely renewals for each of these items.

Loan Purpose and Collateral for SBA ss. 7(a) Loans

                  The Seller makes commercial real estate loans, general-purpose
small business  loans,  equipment  loans and working capital loans under the SBA
guaranty  program.  The SBA loans made by the Seller are to  borrowers in a wide
range of industries,  including lodging,  service  stations/convenience  stores,
restaurants, retail, building, automotive, entertainment and care sectors.

                  Collateral  for  the  SBA  loans   generally   includes  first
mortgages  (and  where  the  Seller  deems  appropriate,  junior  mortgages)  on
Commercial Properties,  first and junior mortgages on Residential Properties and
liens on machinery and equipment,  accounts  receivable  and inventory.  All SBA
loans are generally also personally  guaranteed by one or more principals of the
borrower.

Competition and Market Area

                  Some of the  Seller's  main  competitors  are The Money Store,
AT&T Capital  Corporation,  GE Capital,  Heller First  Capital  Corporation  and
numerous  banks.  The  Seller  operates  from  14  lending  locations  that  are
geographically  dispersed so that the Seller can effectively lend throughout the
United States.

                  The  Seller  originates  loans  to a  variety  of  industries.
However,  based upon its loss  experience and economic  forecasts  obtained from
industry associations, chambers of commerce, academic institutions, governmental
entities and others,  the Seller may de-emphasize  lending in certain regions or
industries  from time to time.  The Seller  also  periodically  has  refined its
underwriting  guidelines to either exclude or to more closely scrutinize certain
high risk ventures.

Underwriting Criteria for SBA ss. 7(a) Loans

                  The Seller seeks to control two risks through its underwriting
standards:  (i)  default of the actual  credit and (ii) SBA  repudiation  of its
guaranty due to  ineligibility,  noncompliance  with SBA lending  regulations or
poor  documentation.  The Seller's  underwriting  emphasizes  the ability of the


                                      -63-
<PAGE>

borrower to repay the loan from the cash flow of the  business.  The Seller also
examines  whether the  borrower  possesses  a  significant  equity  stake in the
business,  the capital position of the borrower, the character of the principals
and their  relevant  management  experience,  collateral  value  and the  credit
history of the borrower and its principals.  The Seller has  established  review
procedures to help ensure that all loans that it  originates or acquires  comply
with the requirements of the SBA.

                  Loan officers evaluate each applicant's  financial statements,
credit  reports,  business  plans and other data to  determine if the credit and
collateral satisfy the Seller's  standards.  Where audited financial  statements
are not  available  for a  borrower,  the  Seller  may  review  the  uncertified
financial  statements of such borrower,  or such  borrower's tax returns.  These
standards   include   historical   debt-service   coverage,   reasonableness  of
projections  (typically  on a  three-year  basis),  strength of  management  and
sufficiency of secondary repayment,  as well as the SBA's eligibility rules. The
Seller does not require every  borrower to satisfy an identical set of financial
tests or ratios.

                  The  Seller's  loan  officers  assess  the  reasonableness  of
projections  based primarily upon (i) their  experience with other similar loans
in the same  industry  and area,  (ii) their  knowledge  of the  industry of the
applicant,  (iii) their general experience in assessing small business loans and
(iv) the business experience of the applicant. The qualification of an applicant
to prepare such  projections is generally based upon the applicant's  experience
in the business area and market for which the loan is requested. Some applicants
prepare  projections  with the assistance of accountants,  business  consultants
and/or franchisors, while some applicants obtain no such assistance.  Typically,
there is no independent third party review of such projections.

                  The Seller attempts, to the extent possible, to obtain a first
lien on substantially all of the business assets of each borrower, including its
commercial  real  estate,  machinery  and  equipment,   inventory  and  accounts
receivable.  In some instances  subordination  of the lien is permitted to allow
borrowers to obtain  short-term  financing with these assets from other sources.
The  Seller  may also  obtain  liens on  residential  properties  owned by,  and
personal  guarantees  of,  principals  of the  borrower.  The Seller relies more
heavily  on  collateral  values  when  considering  a  loan  to  a  start-up  or
early-stage  business.  Life insurance coverage on principals of the borrower is
often required to augment the collateral coverage.

                  In evaluating  the adequacy of collateral for an SBA loan, the
Seller estimates  liquidation  values for the various types of collateral.  As a
basis for such  estimates,  the Seller  obtains  from an  appraiser  selected or
approved  by the Seller a current  third-party  appraisal  of  significant  real
estate assets.  Loan officers also generally will conduct an on-site  inspection
of the collateral.  Financial statements and current purchase prices are used in
establishing a fair market value for other types of collateral.  The Seller then
discounts  such fair market  values  (prior to deducting  any prior liens on the
collateral) by applying  liquidation  percentages that generally fall within the
following ranges:

                                                        Percent of
       Collateral Type                              Fair Market Value
       ---------------                              -----------------
       Commercial land and buildings                         70-80%
       Personal real estate                                  70-80
       Leasehold improvements                                 0-15
       Good will intangibles                                  0
       Accounts receivable                                    0
       Inventory                                             10-50
       Machinery and equipment                               30-60
       Furniture and fixtures                                10-40


                                      -64-
<PAGE>

                  Appraisals  of  commercial  real  estate  in  transactions  of
$100,000  or  more  are   generally   required  to  be  performed  by  either  a
state-certified  or a  state-licensed  appraiser.  Exceptions  are granted  with
senior approval if qualified  appraisers are not available and the person making
the appraisal has  demonstrated  experience to the satisfaction of the Seller or
if other  collateral  or  factors  in the  proposed  loan  make the real  estate
collateral  relatively  unimportant.  Generally,  no  third-party  appraisals of
owner-occupied  residences are required unless the residence is the primary or a
substantial   portion  of  collateral  for  the  loan.  Required  appraisals  of
owner-occupied  residential  properties  are made by either  state-certified  or
state-licensed  appraisers.  In addition to appraisals,  prior to the funding of
any SBA Loan,  representatives of the Seller generally perform a site inspection
to determine the  appropriateness of the location for the proposed business use,
observe the economic conditions of the local market and inspect the property for
obvious structural defects or environmental issues (as discussed further below).

Servicing and Collections of SBA ss. 7(a) Loans

                  The Seller services all the SBA loans it originates. Servicing
includes  collecting  payments from borrowers,  remitting payments on Guaranteed
Interests  to  the  FTA,  accounting  for  principal  and  interest,  contacting
delinquent  borrowers and  supervising  foreclosures.  A computerized  "tickler"
system is maintained for each loan.  Such tickler system produces status reports
of required  actions with respect to each loan,  as well as billing  statements,
payment receipts, past due notices and other notices to borrowers.

                  Each quarter and in certain instances,  monthly, borrowers are
sent payment  change  notices  showing the interest rate for the next quarter or
month,  the outstanding loan balance,  the next payment  adjustment date and the
monthly  payment for that  period  (apportioned  for  interest  and  principal).
Billing notices are sent monthly to borrowers.

                  The Servicing  Department is responsible for all  post-closing
follow-up  until the loan is repaid.  These duties include  tracking  receipt of
payments,  tracking field visits, analyzing post-closing  financials,  reviewing
UCC filings and coordinating  post-closing borrower requests with the SBA (e.g.,
exchanges of  collateral  or  assumptions).  In addition,  the regional  offices
typically conduct field visits to the borrower's place of business at least once
a year. The initial  post-closing  visit generally is scheduled prior to the end
of the first  year after  final  funding to review  the  servicing  process  and
requirements of the Seller.  Finally,  all loan documents require that borrowers
submit updated  financial  statements at least  annually,  which are reviewed by
loan servicing officers to determine debt-service-coverage ratios and compliance
with loan covenants. The Seller does not generally obtain independent appraisals
of a borrower's collateral subsequent to the closing of the relevant loan.

                  Delinquency  reports are generated  daily.  The following is a
general description of the Servicer's policy toward delinquencies and is subject
to exceptions. On the tenth day following a missed payment, the Seller begins to
charge late fees to the borrower (as permitted by the note agreement) and a loan
officer  contacts the borrower by  telephone.  On the  twentieth day following a
missed payment,  a past due notice is automatically  mailed to the borrower.  On
the 25th day  following  delinquency,  loans are put on a watch  list and on the
30th day a senior loan officer contacts the borrower.  On or before the 60th day
following a missed payment,  the Seller will notify the SBA of the  delinquency,
and will discuss with the SBA the range of available  and  appropriate  recovery
strategies,  including the possibility of foreclosure.  Foreclosure  proceedings
are  generally  begun within 120 days after the related SBA Loan has become past
due.

Workouts and Liquidations of SBA  ss. 7(a) Loans

                                      -65-
<PAGE>

                  When  an SBA  Loan  becomes  90  days  past  due,  the  Seller
generally  initiates  procedures  that  result  in the SBA's  repurchase  of the
Guaranteed Interest of the defaulted SBA loan from the holder thereof,  which is
usually a secondary market investor.  In most cases the repurchase process takes
30 to 60 days to complete.  The SBA tries to minimize the repurchase  time frame
because it pays accrued  interest (up to 120 days) on the guaranteed  portion of
the loan  (including the related  Excess Spread) until the loan is  repurchased.
After  it  has  repurchased  a  Guaranteed  Interest,  the  SBA  owns  a  direct
participation in the related loan.

                  A loan officer is assigned the  responsibility for the workout
or  liquidation  if an SBA loan  becomes 45 days  delinquent.  The loan  workout
officer evaluates the borrower's  corporate and personal  liability to repay and
then formulates an appropriate workout plan.  Generally,  workout plans indicate
the expected  recovery time period and the  possibility  of an assumption of the
debt by a  third-party;  plans also include  liquidation  options.  As discussed
herein, the workout plan may include the deferral of loan payments. If a workout
plan is achieved and the loan is returned to performing  status,  the account is
returned to normal portfolio status in the Servicing Department.

                  In formulating  workout plans, the Seller may assess the value
of the  collateral  through a variety of  sources,  which may  include  brokers,
appraisers  and other  market  sources.  The  Seller may also take steps to help
protect the value of the collateral,  such as performing site visits, appraising
properties,  ensuring  payment  of taxes  and,  where  appropriate,  maintaining
insurance.

                  However,  the SBA generally is reluctant to allow  foreclosure
on a personal residence until all other avenues have been pursued.

                  The Seller  views all SBA loans as small  business  loans and,
even if secured by commercial  real estate,  not as commercial  mortgage  loans.
Accordingly,  the  workout  is  more  complex  and the  period  to  recovery  or
reinstatement  takes longer than for typical  commercial  mortgage  loans.  If a
borrower is uncooperative  or the business is not viable,  the Seller prepares a
liquidation  plan and  determines  the likely  recovery value and best method of
liquidation.

                  The  length of the  workout  is  determined  primarily  by the
complexity  and long-term  viability of the business,  as well as the bankruptcy
status of the  borrower.  Because  each  workout is unique,  it is  difficult to
predict  accurately  the  period of time  required  to  complete  a workout of a
typical SBA loan.

                  In certain cases,  the Seller may forbear payments of interest
and  principal  for a  period  of  three  to  six  months  if  the  borrower  is
experiencing   temporary   difficulties.   See  "The  SBA  Loan   Pool   Certain
Characteristics  of the SBA Loan Pool." Under SBA servicing policy, a lender has
unilateral  authority  to defer loans for up to 90 days.  Past 90 days, a lender
must obtain approval from the investors and the SBA in the guaranteed  portions.
For  deferments  in excess of 180 days,  SBA approval must be obtained for loans
not sold into the secondary markets.

Environmental Policy

                  The Seller has  developed an  environmental  credit  policy to
help  minimize  potential  environmental  liabilities  in  respect of SBA Loans,
whether secured by commercial  real property or otherwise.  This policy conforms
to the  environmental  requirements  set by the SBA.  The Seller will  generally
obtain a Phase I environmental  report on the property.  A Phase I environmental
report describes the results of an audit of the related property  performed by a
licensed  environmental  assessment  firm  selected by the  Seller,  which audit
includes  (i) an  inspection  of the related  and  adjacent  properties;  (ii) a
historical  review  of site  records;  (iii) a review  of  files  or  regulatory


                                      -66-
<PAGE>

agencies concerning the site; and (iv) interviews with individuals knowledgeable
about the site use and operations. In the case of loans classified as "low-risk"
or "medium-risk" by the Seller, the obtaining of a Phase I environmental  report
is optional. Loans classified as "High risk" by the Seller may only be made with
the  approval of a loan  committee  after the  weighing  of factors  such as the
nature  and  extent of risk,  cost of  remediation,  value of other  collateral,
quality of indemnities, the size of the loan and other credit qualities.

                  In  preparing a Phase I  environmental  report,  the  licensed
environmental  assessment  firm may  contact  the  United  States  Environmental
Protection Agency,  state and local water control  authorities,  state and local
environmental  departments  and local fire  departments  to ascertain  whether a
particular property has an environmental problem and, if so, the nature thereof.
The Seller typically does not contact such  authorities  unless an environmental
problem has been revealed.

                  In the  Agreement,  the Seller will represent and warrant that
at the time of  origination  of each  SBA  Loan,  the  related  commercial  real
property was either (1) free of contamination from toxic substances or hazardous
wastes  or (2) that any such  contamination  would not have a  material  adverse
effect on the Trust Fund or the Certificateholders. The Servicer will agree that
if it has  reasonable  cause to believe a property may have  contamination  from
toxic substances or hazardous wastes, it will not foreclose upon the related SBA
Loan or become  involved in operations or management of an Obligor to the extent
such  involvement  would cause the  Servicer to be deemed an "owner or operator"
within the meaning of the applicable environmental laws until after it obtains a
Phase I environmental report.

Delinquency Experience

                  The following  table sets forth the Seller's  delinquency  and
charge-off experience with respect to its portfolio of SBA Loans as of the dates
indicated.  There can be no assurance,  and no  representation is made, that the
delinquency  and  charge-off  experience  with  respect to the SBA Loans will be
similar to that reflected in the table below.

                      SBA Loan Delinquents and Charge-Offs
                             (Dollars in thousands)

                    As of October 31, 1998 and for the Years
                               Ended December 31,
<TABLE>
<CAPTION>
                             1995         1996           1997      10/31/98
              <S>              <C>        <C>                <C>     <C>
                            ----------  ----------    ---------    ------------
45-59 days past due(1)      0.62%        0.52%         0.82%          0.62%
60-89 days past due(1)      1.09%        0.00%         0.00%          0.21%
90+ days past due(1)        2.03%        0.00%         5.94%          6.78%
Loan charged-off, net     $47,435.59   $177,009.41   $476,947.84   $55,706.42
Loans charged-off, net,
as a
percentage of the SBA
unguaranteed
interests(2)                0.42%        1.14%          1.44%          0.11%
Total SBA Loan serviced
portfolio(3)
                         $57,454,044   $69,193,272   $130,842,110   $192,345,095
                        ===========    ===========    ===========   ============
</TABLE>
----------------
(1)      The  delinquency  percentages  are calculated  based upon the aggregate
         guaranteed  and  unguaranteed  interests  of the SBA  loans  which  are
         delinquent by the number of days indicated  divided by total  aggregate
         principal  balance of the guaranteed and unguaranteed  interests of the
         SBA loans contained in the Seller's SBA loan portfolio.

                                      -67-
<PAGE>

(2)      Amounts shown are the aggregate  principal balances of the unguaranteed
         interests of loans in the  Seller's SBA loan  portfolio on the last day
         of the related period.

(3)      The percentage of loan  charge-offs is calculated based upon the dollar
         amount of  charge-offs  divided by the dollar  amount of the  principal
         portion of  unguaranteed  interests  contained in the Seller's SBA loan
         portfolio.


                                      -68-
<PAGE>



Certain Litigation

                  From time to time,  the Seller is  involved  in various  legal
actions  arising in the ordinary  course of its business that, in the aggregate,
involve  amounts  that the Seller  believes to be  immaterial  to its  financial
condition.


                DESCRIPTION OF THE AGREEMENT AND THE CERTIFICATES

General

                  The Certificates  will be issued by a Trust Fund organized and
existing under the laws of the State of New York. Each Certificate  represents a
certain  fractional  undivided  ownership interest in the Trust Fund created and
held  pursuant  to the  Agreement,  subject to the limits  and the  priority  of
distribution  described therein.  The Trust Fund consists primarily of the right
to receive the Unguaranteed Interests in such SBA Loans as are from time to time
subject to the Agreement, together with all proceeds thereof and certain related
assets.

                  The Certificates will not represent obligations of the Seller,
any of its affiliates or the SBA.

                  The Class A Certificates  will be issued in definitive form in
minimum  denominations  of $100,000 and  integral  multiples of $1,000 in excess
thereof.

                  The Servicer  will be  responsible  for ensuring that each SBA
Loan is  serviced  in  accordance  with  the  Agreement  and the SBA  Rules  and
Regulations.

Assignment of SBA Loans

                  Pursuant to the Agreement, on the Closing Date the Seller will
sell,  transfer,  assign,  set over and otherwise convey without recourse to the
Trustee in trust for the  benefit  of the  Certificateholders  and the SBA,  all
right, title and interest of the Seller to the Unguaranteed Interest of each SBA
Loan listed on a Schedule to the Agreement and all right,  title and interest in
and to all actual payments  collected on and after the Cut-Off Date with respect
to such Unguaranteed Interests, even if such payments relate in whole or part to
periods prior to the Cut-Off Date.

                  In  addition,  during  the  Funding  Period  pursuant  to  the
Agreement,  the  Seller  will  be  obligated  to  sell  to the  Trust  Fund  the
Unguaranteed  Interest of each Subsequent SBA Loan having an aggregate principal
balance  not to  exceed  approximately  $5  million  to  the  extent  that  such
Unguaranteed  Interests are available.  During the Funding Period,  on each date
specified by the Seller (each,  a "Subsequent  Transfer  Date"),  subject to the
conditions set forth in the Agreement,  the Seller will sell, transfer,  assign,
set over and otherwise  convey without  recourse to the Trustee in trust for the
benefit of the  Certificateholders and the SBA, all right, title and interest of
the Seller to the  Unguaranteed  Interest of each such Subsequent SBA Loan to be
transferred on such date and all right,  title and interest in and to all actual
payments  collected  on  and  after  the  Cut-Off  Date  with  respect  to  such
Unguaranteed  Interests,  even if such  payments  relate  in whole or in part to
periods  prior to the related  Cut-Off Date.  The purchase  price payable by the
Trust Fund to the Seller for the  Unguaranteed  Interest of each  Subsequent SBA
Loan will equal the aggregate  principal balance of such Unguaranteed  Interest.
The  purchase  price  will be  payable  solely  from  funds  withdrawn  from the
Pre-Funding Account.

                                      -69-
<PAGE>

                  In  connection  with  such  transfer  and  assignment,  on the
Closing  Date (or,  with respect to a  Subsequent  SBA Loan,  in the case of (a)
below,  at or prior to the  related  Subsequent  Transfer  Date) the Seller will
deliver  to the  Trustee  or,  with  respect  to the SBA Notes  being  delivered
pursuant to (a) below, to the FTA, the following  documents with respect to each
SBA Loan (collectively, the "Trustee's Document File"):

                  (a) The original SBA Note,  endorsed by means of an allonge as
                  follows:  "Pay to the  order of  Marine  Midland  Bank and its
                  successors and assigns,  as trustee under that certain Pooling
                  and Servicing Agreement dated as of December 23, 1998, for the
                  benefit of the United States Small Business Administration and
                  holders of Business Loan Center SBA Loan-Backed  Certificates,
                  Series  1998-1,  Class  A and  Class  B, as  their  respective
                  interests  may  appear,   without  recourse"  and  signed,  by
                  facsimile or manual signature,  in the name of the Seller by a
                  Responsible   Officer,   with  all   prior   and   intervening
                  endorsements  showing a complete chain of endorsement from the
                  originator   to  the  Seller,   if  the  Seller  was  not  the
                  originator;

                  (b) With  respect  to those SBA  Loans  secured  by  Mortgaged
                  Properties,  either: (i) the original Mortgage,  with evidence
                  of recording thereon, (ii) a copy of the Mortgage certified as
                  a true copy by a  Responsible  Officer of the Seller where the
                  original has been transmitted for recording until such time as
                  the  original is returned  by the public  recording  office or
                  duly licensed  title or escrow  officer or (iii) a copy of the
                  Mortgage  certified  by the public  recording  office in those
                  instances where the original recorded Mortgage has been lost;

                  (c) With  respect  to those SBA  Loans  secured  by  Mortgaged
                  Properties,  either:  (i) the original  Assignment of Mortgage
                  from the Seller  endorsed as  follows:  "Marine  Midland  Bank
                  ("Assignee"), its successors and assigns, as trustee under the
                  Pooling and Servicing Agreement dated as of December 23, 1998,
                  subject to the Multi-Party  Agreement dated as of December 23,
                  1998" with evidence of recording thereon  (provided,  however,
                  that  where  permitted  under  the  laws  of the  jurisdiction
                  wherein the Mortgaged  Property is located,  the Assignment of
                  Mortgage  may be effected by one or more  blanket  assignments
                  for SBA Loans secured by Mortgaged  Properties  located in the
                  same  county),  or (ii) a copy of such  Assignment of Mortgage
                  certified  as a true  copy  by a  Responsible  Officer  of the
                  Seller where the original has been  transmitted  for recording
                  (provided,  however,  that where the  original  Assignment  of
                  Mortgage  is not being  delivered  to the  Trustee,  each such
                  Responsible   Officer  may   complete   one  or  more  blanket
                  certificates  attaching  copies of one or more  Assignments of
                  Mortgage relating to the Mortgages originated by the Seller);

                  (d) With  respect  to those SBA  Loans  secured  by  Mortgaged
                  Properties,   either:   (i)   originals  of  all   intervening
                  assignments,  if any,  showing a complete  chain of title from
                  the   originator   to  the   Seller,   including   warehousing
                  assignments,  with  evidence  of  recording  thereon  if  such
                  assignments  were  recorded,  (ii)  copies of any  assignments
                  certified  as true  copies  by a  Responsible  Officer  of the
                  Seller where the originals  have been  submitted for recording
                  until such time as the  originals  are  returned by the public
                  recording   officer,   or  (iii)  copies  of  any  assignments
                  certified  by the  public  recording  office in any  instances
                  where the original recorded assignments have been lost;

                  (e) With  respect  to those SBA  Loans  secured  by  Mortgaged
                  Properties,  either:  (i)  originals  of any  title  insurance


                                      -70-
<PAGE>

                  policies  relating to the Mortgaged  Properties or (ii) copies
                  of any title  insurance  policies  or other  evidence  of lien
                  position certified as true by the Seller;

                  (f) For all SBA Loans,  blanket  assignment of all  collateral
                  securing  the SBA  Loan,  including  without  limitation,  all
                  rights under applicable  guarantees and insurance policies, if
                  any;

                  (g) For all SBA Loans,  irrevocable power of attorney from the
                  Seller to the Trustee to execute,  deliver, file or record and
                  otherwise  deal  with  the  collateral  for the SBA  Loans  in
                  accordance  with the Agreement.  The power of attorney will be
                  delegable  by the Trustee to the  Servicer  and any  successor
                  servicer  and will permit the  Trustee or its  delegate at the
                  Trustee's  request to prepare,  execute and file or record UCC
                  financing statements and notices to insurers; and

                  (h) For all SBA Loans,  blanket Uniform  Commercial Code UCC-1
                  financing  statements  identifying  by type all Collateral for
                  the SBA Loans in the SBA Loan Pool and naming  the  Trustee as
                  secured  party  and  the  Seller  as  the  debtor.  The  UCC-1
                  financing  statements  will be filed on behalf  of the  Seller
                  promptly   following  the  Closing  Date  in  the   applicable
                  locations.

Representations and Warranties of the Seller

                  The   Seller  has   represented   to  the   Trustee   and  the
Certificateholders, among other things, with respect to each SBA Loan, as of the
Closing Date and as of the related Subsequent  Transfer Date with respect to the
Subsequent SBA Loans:

                  (1) The information with respect to each SBA Loan set forth in
the SBA Loan Schedule is true and correct;

                  (2) All of the original or certified documentation required to
be delivered pursuant to the Agreement (including all material documents related
thereto)  has been or will be  delivered  on or prior to the Closing Date to the
Trustee or the FTA, or as otherwise provided in the Agreement;

                  (3) Except for less than approximately 1% of the SBA Loans (by
principal   balance  of  the  Unguaranteed   Interests  as  of  the  Statistical
Calculation  Date),  each SBA Loan was,  and each  Subsequent  SBA Loan will be,
originated and underwritten by the Seller or its predecessors in accordance with
the   Seller's   and  the  SBA's   underwriting   criteria  set  forth  in  "The
Seller--Underwriting Criteria" herein;

                  (4) With  respect to those SBA Loans  secured  by a  Mortgaged
Property,  each  Mortgage  is a  valid  and  subsisting  lien of  record  on the
Mortgaged  Property subject only to any applicable Prior Liens on such Mortgaged
Property  and  subject  in all  cases  to such  exceptions  that  generally  are
acceptable to banking  institutions in connection with their regular  commercial
lending  activities,  and such other exceptions to which similar  properties are
commonly subject and which do not individually, or in the aggregate,  materially
and  adversely  affect the benefits of the  security  intended to be provided by
such Mortgage;

                  (5) With  respect  to those SBA Loans  secured  by  Collateral
other than a Mortgaged Property, the related Note, security agreements,  if any,
and UCC-1 filed with respect to such  Collateral  creates a valid and subsisting


                                      -71-
<PAGE>

lien of record on such Collateral  subject only to any applicable Prior Liens on
such  Collateral and subject in all cases to such  exceptions that generally are
acceptable to banking  institutions in connection with their regular  commercial
lending  activities,  and such other  exceptions to which similar  Collateral is
commonly subject and which do not individually, or in the aggregate,  materially
and  adversely  affect the benefits of the  security  intended to be provided by
such Note and UCC-1;

                  (6)   Immediately   prior  to  the  transfer  and   assignment
contemplated by the Agreement,  the Seller held good and indefeasible  title to,
and was the sole owner of, the  Unguaranteed  Interest of each SBA Loan conveyed
by the Seller subject to no liens, charges, mortgages, encumbrances or rights of
others  except as set forth in paragraph  (4) above or other liens which will be
released simultaneously with such transfer and assignment;

                  (7) As of the  Cut-Off  Date,  no SBA Loan is 30 or more  days
delinquent in payment;

                  (8) To  the  best  of  the  Seller's  knowledge,  there  is no
delinquent  tax or  assessment  lien on any  Mortgaged  Property  and each  such
Mortgaged Property is free of material damage and is in good repair;

                  (9) Each SBA Loan is not  subject to any right of  rescission,
set-off,  counterclaim or defense,  including the defense of usury, nor will the
operation  of any of the  terms  of the  Note or any  related  Mortgage,  or the
exercise of any right thereunder, render either the Note or any related Mortgage
unenforceable  in whole or in  part,  or  subject  to any  right of  rescission,
set-off,  counterclaim or defense,  including the defense of usury,  and no such
right of  rescission,  set-off,  counterclaim  or defense has been asserted with
respect thereto;

                  (10) Each SBA Loan at the time it was made complied and, as of
the Closing Date complies,  in all material  respects with applicable  state and
federal laws and regulations, including, without limitation, usury, equal credit
opportunity, disclosure and recording laws and the SBA Rules and Regulations;

                  (11)  Pursuant  to the SBA Rules and  Regulations,  the Seller
requires that the improvements upon each Mortgaged Property which is the primary
collateral  for the  related  loan are  covered by a valid and  existing  hazard
insurance policy with a generally  acceptable carrier that provides for fire and
extended coverage;

                  (12)  Pursuant  to the SBA Rules and  Regulations,  the Seller
requires  that if a Mortgaged  Property is in an area  identified in the Federal
Register by the Federal  Emergency  Management  Agency as having  special  flood
hazards, an appropriate flood insurance policy is in effect with respect to such
Mortgaged Property with a generally acceptable carrier;

                  (13)  Each SBA Loan  conforms,  and all such SBA  Loans in the
aggregate conform, to the descriptions thereof set forth in this Memorandum;

                  (14) The terms of the Note and the  related  Mortgage or other
security  agreement  pursuant  to which  Collateral  was  pledged  have not been
impaired,  altered or modified in any  respect,  except by a written  instrument
which has been recorded,  if necessary,  to protect the interests of the SBA and
the Certificateholders and which has been delivered to the Trustee;

                  (15) Each Mortgaged  Property which is the primary  collateral
for the related SBA Loan was, at the time of  origination  of such SBA Loan, and


                                      -72-
<PAGE>

to the best of the  Seller's  knowledge  is,  as of the  Cut-Off  Date,  free of
contamination from toxic substances or hazardous wastes or is subject to ongoing
environmental rehabilitation approved by the SBA;

                  (16)  With  respect  to each  SBA  Loan  secured  by a lien on
Collateral which is not a first priority lien, either (i) no consent for the SBA
Loan is required by the holder of any  related  Prior Lien or (ii) such  consent
has been obtained;

                  (17) Any related Mortgage  contains  customary and enforceable
provisions  which render the rights and remedies of the holder thereof  adequate
for the  realization  against  the  Mortgaged  Property  of the  benefits of the
security,  including,  (i) in the  case of a  Mortgage  designated  as a deed of
trust, by trustee's sale, and (ii) otherwise by judicial  foreclosure.  There is
no  homestead  or  other  exemption  available  to  the  Mortgagor  which  would
materially  interfere  with  the  right  to sell  the  Mortgaged  Property  at a
trustee's sale or the right to foreclose the Mortgage;

                  (18)  There  is no  default,  breach,  violation  or  event of
acceleration existing under the SBA Note and no event which, with the passage of
time or with  notice  and the  expiration  of any  grace or cure  period,  would
constitute a default,  breach,  violation or event of acceleration,  and neither
the Servicer nor the Seller has waived any default,  breach,  violation or event
of acceleration;

                  (19)  Each  SBA  Loan  is  secured  by one or  more  items  of
Collateral  and at the time the related SBA Loan was  originated,  the aggregate
value of all  Collateral  securing  such  SBA  Loan  was at  least  equal to the
original  principal  amount of the related SBA Loan and all Prior Liens securing
the related Collateral;

                  (20) At the Closing Date (or in the case of the Subsequent SBA
Loans, as of the related Subsequent Transfer Date), there is no material default
(in the case of a  payment  default,  a payment  more  than 45 days  past  due),
breach,  violation or event of  acceleration  existing under the SBA Note and no
event which,  with the passage of time or with notice and the  expiration of any
grace or cure period, would constitute a default,  breach, violation or event of
acceleration,  and neither the  Servicer  nor the Seller has waived any material
default,  breach,  violation or event of acceleration  (other than the deferrals
described under "The SBA Loan Pool" herein);

                  (21) At  origination,  the realizable  value of the collateral
securing each SBA Loan together with the amount of each personal  guarantee with
respect thereto equaled or exceeded 100% of the principal amount thereof;

                  (22) Except with  respect to no more than 5% of the SBA Loans,
each  Mortgaged  Property is improved by a Commercial  Property or a Residential
Property and does not constitute other than real property under state law;

                  (23) For each month,  the amount of  interest  payable by each
Obligor in accordance  with the terms of the related SBA Loan (net of the amount
of interest payable to the related  Registered Holder, the Excess Spread related
to such SBA Loan,  the Premium  Protection  Fee, the Additional Fee and the Note
Custodian's  Fee) plus the amount of monthly  interest  on amounts on deposit in
the Pre-Funding  Account and Capitalized  Interest  Account expected (based upon
the lowest yielding Permitted Instrument on the Closing Date) to be earned is at
least  equal  to  the  sum  of  (i)  the  amount  of  interest  payable  to  the
Certificateholders  on the related  Remittance Date, (ii) the Servicing Fee, and
(iii) the Annual Expense Escrow Amount, in each case for the same month;

                                      -73-
<PAGE>

                  (24) Each SBA Note will,  with respect to principal  payments,
adjust quarterly or monthly and provide for a schedule of monthly payments which
are, if timely paid,  sufficient to fully amortize the principal balance of such
SBA Note on its maturity date;

                  (25)  Each SBA  Note,  related  Mortgage  (if  any) and  other
agreement  pursuant to which  collateral  is pledged as security for the related
SBA Loan (if any) is the  legal,  valid  and  binding  obligation  of the  maker
thereof and is  enforceable  in accordance  with its terms,  except only as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors'  rights  generally
and by general  principles  of equity  (whether  considered  in a proceeding  or
action in equity or at law), none of which will prevent the ultimate realization
of the security  provided by the collateral or other agreement,  and all parties
to each SBA Loan had full legal  capacity to execute all SBA Loan  documents and
convey the estate therein purported to be conveyed;

                  (26) The  Servicer  has caused and has agreed to  continue  to
cause to be performed  any and all acts  reasonably  required to be performed to
preserve  the rights and  remedies  of the  Trustee  in any  insurance  policies
applicable to the SBA Loans  including,  without  limitation,  in each case, any
necessary  notifications  of  insurers,  assignments  of policies  or  interests
therein, and establishments of co-insured, joint loss payee and mortgagee rights
in favor of the Trustee or the Seller, respectively;

                  (27) Each original  Mortgage was recorded,  and all subsequent
assignments  of the  original  Mortgage  have been  recorded in the  appropriate
jurisdictions  wherein such recordation is necessary to perfect the lien thereof
as against  creditors of the related Obligor (or, subject to the Agreement,  are
in the process of being recorded);

                  (28)  To the  best of the  Seller's  knowledge,  there  are no
material  defaults in complying with the terms of any applicable  Mortgage,  and
all  taxes,  governmental  assessments,  insurance  premiums,  water,  sewer and
municipal  charges,  leasehold  payments or ground rents which previously became
due and owing have been paid, or an escrow of funds has been  established  in an
amount  sufficient to pay for every such item which remains unpaid and which has
been assessed but is not yet due and payable;

                  (29)  To the  best  of the  Seller's  knowledge,  there  is no
proceeding  pending or threatened for the total or partial  condemnation  of any
Mortgaged  Property,  nor is such a  proceeding  currently  occurring,  and such
property is undamaged by waste, fire,  earthquake or earth movement,  windstorm,
flood,  tornado or other  casualty,  so as to affect  adversely the value of the
Mortgaged  Property  as  security  for the SBA  Loan  or the use for  which  the
premises were intended;

                  (30) The  proceeds of the SBA Loan have been fully  disbursed,
and there is no  obligation  on the part of the Seller or the  Servicer  to make
future advances thereunder;  Any and all requirements as to disbursements of any
escrow funds therefor have been complied with, and all costs,  fees and expenses
incurred in making or closing or recording the SBA Loans were paid;

                  (31) There is no  obligation  on the part of the Seller or any
other party (except for any  guarantor of an SBA Loan) to make Monthly  Payments
in addition to those made by the Obligor;

                  (32) No  statement,  report  or other  document  signed by the
Seller or the Servicer  constituting  a part of the SBA File contains any untrue
statement of material fact or omits to state a material  fact  necessary to make
the statements contained therein not misleading;

                  (33) With  respect  to each  Mortgage  constituting  a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been


                                      -74-
<PAGE>

properly  designated and currently so serves and is named in such Mortgage,  and
no fees or expenses are or will become payable by the  Certificateholders to the
trustee  under the deed of trust,  except in  connection  with a trustee's  sale
after default by the Obligor;

                  (34) No SBA Loan has a shared  appreciation  feature, or other
contingent interest feature;

                  (35)  Each SBA Loan was originated to a business located
in the state identified on the SBA Loan Schedule;

                  (36) All parties  which have had any interest in the SBA Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest,  were) (1) in compliance  with
any and all applicable  licensing  requirements of the laws of the state-wherein
any Mortgaged Property is located,  and (2) (A) organized under the laws of such
state,  or (B) qualified to do business in such state,  or (C) a federal savings
and loan  associations or national banks having principal offices in such state,
or (D) not doing business in such state;

                  (37) All parties to the SBA Note and any  related  Mortgage or
other  document  pursuant to which  collateral was pledged had legal capacity to
execute the SBA Note and any such  Mortgage or other  document and each SBA Note
and  Mortgage or other  document  have been duly and  properly  executed by such
parties;

                  (38) The SBA Loan was not  selected  for  inclusion  under the
Agreement from the Seller's portfolio of comparable SBA loans on any basis which
would have a material adverse effect on a Certificateholder;

                  (39) All  amounts  received  after the  Cut-Off  Date,  to the
extent  required by the  Agreement,  shall be deposited  into the  Principal and
Interest Account and are, as of the Closing Date, or, with respect to Subsequent
SBA Loans, as of the related Subsequent  Transfer Date, will be in the Principal
and Interest Account;

                  (40)  Each SBA Loan is personally guaranteed by a principal
of the Obligor; and

                  (41) Each SBA Loan qualifies to be guaranteed by the SBA.

                  Pursuant to the  Agreement,  upon the discovery by the Seller,
the  Servicer,  any  Subservicer  or  the  Trustee  of a  breach  of  any of the
representations and warranties contained in the Agreement relating to the Seller
or the SBA Loans which  materially  and  adversely  affects the value of the SBA
Loans or the interest of the  Certificateholders  or the SBA in the Unguaranteed
Interest  of the related  SBA Loan in the case of a  representation  or warranty
relating to a particular SBA Loan  (notwithstanding that such representation and
warranty was made to the Seller's best  knowledge),  the party  discovering such
breach is required to give prompt written notice to the other parties. Within 60
days of the  earlier to occur of its  discovery  or its receipt of notice of any
such  breach,  the Seller will (i)  promptly  cure such  breach in all  material
respects,  (ii) purchase the Unguaranteed Interest of such SBA Loan from its own
funds at a price equal to the then current principal balance of the Unguaranteed
Interest  of such SBA Loan as of the date of  purchase,  plus 30 days'  interest
thereon  at the  related  Adjusted  SBA  Loan  Remittance  Rate  as of the  next
succeeding  Determination  Date, plus any accrued unpaid Servicing Fees, Monthly
Advances and Servicing  Advances  reimbursable  to the Servicer,  which purchase
price shall be  deposited  in the  Principal  and  Interest  Account on the next
succeeding  Determination Date or (iii) remove such SBA Loan from the Trust Fund
and  substitute  one or more  qualified SBA Loans.  In addition,  the Seller has
agreed  to   indemnify   the  Trust  Fund,   the   Trustee,   the  SBA  and  the
Certificateholders,  against any loss arising from a material breach of any such


                                      -75-
<PAGE>

representation  and  warranty.  The  obligation  of the Seller to so purchase or
substitute and to indemnify the  Certificateholders  and the Trustee constitutes
the sole  remedy  respecting  a material  breach of any such  representation  or
warranty to the Certificateholders or the Trustee.

Payments on the SBA Loans; Distributions on the Certificates

                  The Agreement requires that the Servicer cause an account (the
"Principal  and Interest  Account") to be  established  and maintained at one or
more Eligible Deposit Accounts.

                  All funds in the Principal  and Interest  Account are required
to be held (i)  uninvested,  up to the  limits  insured by the  Federal  Deposit
Insurance  Corporation  (the "FDIC") or (ii) invested in Permitted  Instruments.
Any investment  earnings on funds held in the Principal and Interest Account are
for the account of the Servicer.

                  The  Servicer  is  required  to deposit in the  Principal  and
Interest  Account  (within  two  Business  Days of  receipt):  (i) all  payments
received  after the Cut-Off Date on account of interest on the SBA Loans (net of
the  portion  thereof  required  to be paid  to the  holders  of the  Guaranteed
Interest,  the FTA's Fee, the Premium Protection Fee, the Additional Fee and the
Servicing  Fee and other  servicing  compensation  payable  to the  Servicer  as
permitted by the Agreement),  (ii) the  Unguaranteed  Percentage of all payments
received  after the  Cut-Off  Date on  account  of  principal  on the SBA Loans,
including  the  Unguaranteed  Percentage  of  all  Excess  Payments,   Principal
Prepayments,  Curtailments,  Net Liquidation Proceeds, Insurance Proceeds (other
than amounts to be applied to the restoration or repair of the related Mortgaged
Property,  or to be released to the  Obligor) and  Released  Mortgaged  Property
Proceeds,  (iii) any  amounts  paid in  connection  with the  repurchase  of the
Unguaranteed  Interest  of an SBA  Loan and the  amount  of any  adjustment  for
substituted  SBA Loans and (iv) the amount of any losses  incurred in connection
with investments in Permitted Instruments.

                  The  Servicer  may make  withdrawals  from the  Principal  and
Interest Account only for the following purposes:

                           (i) to remit  to the  Trustee  on each  Determination
                  Date  (as  defined  below)  for  deposit  in  the  Certificate
                  Account,  the portion of the  Available  Funds for the related
                  Remittance Date that is net of Compensating Interest,  Monthly
                  Advances  and  amounts  then on deposit in the Spread  Account
                  (and,  with respect to the  Determination  Dates  occurring in
                  January  1999,  February  1999 and March 1999,  net of amounts
                  then on deposit in the Pre-Funding Account and the Capitalized
                  Interest Account);

                           (ii)  to  reimburse  itself  for any  accrued  unpaid
                  Servicing  Fees,   unreimbursed   Monthly   Advances  and  for
                  unreimbursed Servicing Advances to the extent deposited in the
                  Principal  and  Interest  Account (and not netted from Monthly
                  Payments  received).  The Servicer's right to reimburse itself
                  for  unpaid  Servicing  Fees and,  except as  provided  in the
                  following  sentence,  Servicing  Advances and Monthly Advances
                  shall be limited to Liquidation  Proceeds,  Released Mortgaged
                  Property  Proceeds,  Insurance Proceeds and such other amounts
                  as may be  collected  by the  Servicer  from the  Mortgagor or
                  otherwise  relating  to the SBA Loan in  respect of which such
                  unreimbursed   amounts  are  owed.  The  Servicer's  right  to
                  reimbursement  for Monthly Advances and Servicing  Advances in
                  excess  of  such   amounts   shall  be  limited  to  any  late
                  collections of interest  received on the SBA Loans  generally,
                  including  Liquidation  Proceeds,  Released Mortgaged Property
                  Proceeds,  Insurance  Proceeds  and  any  other  amounts.  The


                                      -76-
<PAGE>

                  Servicer's right thereto shall be subordinate to the rights of
                  the  Certificateholders  and  the  holders  of the  Guaranteed
                  Interest;

                           (iii) to withdraw any amount received from an Obligor
                  that is  recoverable  and sought to be recovered as a voidable
                  preference by a trustee in  bankruptcy  pursuant to the United
                  States   Bankruptcy   Code  in   accordance   with  a   final,
                  nonappealable order of a court having competent jurisdiction;

                           (iv) (a) to make investments in Permitted Instruments
                  and (b) to pay itself  interest  paid in respect of  Permitted
                  Instruments or by a Designated Depository Institution on funds
                  deposited in the Principal and Interest Account;

                           (v) to withdraw any funds  deposited in the Principal
                  and  Interest  Account  that were not required to be deposited
                  therein or were deposited therein in error;

                            (vi)  to  pay  itself   servicing   compensation  or
                  interest as permitted under the definition of Excess Proceeds;
                  and

                           (vii)    to clear and terminate the Principal and
                  Interest Account upon the termination of the Agreement;

                  Not later  than the close of  business  on each  Determination
Date,  the  Servicer  will remit to the Trustee  for deposit in the  Certificate
Account any required Monthly Advance and/or Compensating Interest.

                  The Servicer is required to pay all  reasonable  and customary
"out-of-pocket"  costs and expenses incurred in the performance of its servicing
obligations,  including,  but not limited to, the cost of (i) the  preservation,
restoration and protection of the Mortgaged  Property or other Collateral,  (ii)
any enforcement or judicial proceedings,  including foreclosures,  and (iii) the
management and liquidation of Mortgaged Property acquired in satisfaction of the
related Mortgage.  Each such expenditure will constitute a "Servicing  Advance."
The  Servicer  is  obligated  to make the  Servicing  Advances  incurred  in the
performance  of its servicing  obligations.  The Servicer may recover  Servicing
Advances to the extent set forth in clause (ii) above.

                  On the 15th day of each month  commencing in January 1999, or,
if such 15th day is not a  Business  Day,  the first  Business  Day  immediately
following  (each  such day  being a  "Remittance  Date"),  until  the  principal
balances  of the Class A and  Class B  Certificates  are  reduced  to zero,  the
Trustee or Paying Agent will be required to  distribute  to each person in whose
names a  Certificate  is  registered at the close of business on the last day of
the month  immediately  preceding the month of the related  Remittance Date (the
"Record  Date")  or the  Closing  Date  for  the  first  Remittance  Date,  such
Certificateholder's   Percentage   Interest  multiplied  by  the  amount  to  be
distributed to the Class A or Class B Certificateholders,  as the case may be on
such Remittance Date as described below under "--Flow of Funds" herein.

                  Additionally,  any Pre-Funded Amount remaining at the close of
business  on March 26,  1999  (together  with  accrued  interest  thereon at the
applicable  Remittance Rates) will be distributed by or on behalf of the Trustee
on the Special Remittance Date to each Certificateholder. Such distribution will
be made to each person in whose name a Certificate  of the  applicable  Class is
registered on February 28, 1999.

                                      -77-
<PAGE>

                  On  each  Remittance  Date,  the  Trustee  will  mail  to each
Certificateholder  a  statement  setting  forth,  among  other  things,  certain
information as to the distribution  being made on such Remittance Date, the fees
to be paid to the Servicer and the Trustee and the loss and  delinquency  status
of the SBA Loans.  Although the information contained in such statements will be
prepared by the  Servicer,  neither  such  information  nor any other  financial
information furnished to Certificateholders  will be examined and reported upon,
and an opinion will not be expressed by, an independent public accountant.

Certificate Account

                  The Trustee has agreed to establish  and maintain in its trust
department a non-interest-bearing trust account (the "Certificate Account").

Pre-Funding Account

                  The  Pre-Funded  Amount will be  deposited on the Closing Date
into the Pre-Funding  Account.  Amounts in the  Pre-Funding  Account may be used
only (i) to acquire the Unguaranteed  Interests in the Subsequent SBA Loans, and
(ii) to make accelerated  payments of principal on the Certificates.  During the
Funding  Period  amounts  will,  from  time  to  time,  be  withdrawn  from  the
Pre-Funding  Account to purchase  Subsequent  SBA Loans in  accordance  with the
Agreement. Any Pre-Funded Amount remaining at the end of the Funding Period will
be  distributed  as a principal  prepayment on the next  Remittance  Date to the
Certificates on a pro rata basis.  However,  any Pre-Funded  Amount remaining on
March 26,  1999 will be  distributed  as a principal  prepayment  on the Special
Remittance Date.

                  All funds in the  Pre-Funding  Account are required to be held
(i)  uninvested,  up to the  limits  insured  by the  FDIC or (ii)  invested  in
instruments  designated as "Permitted  Instruments"  in the Agreement;  provided
that any amounts held uninvested  shall be, as soon as practicable,  invested in
"Permitted  Instruments".  Any investment  earnings on funds in the  Pre-Funding
Account will be applied to payment of interest on the Certificates.

Capitalized Interest Account

                  On the Closing Date,  the Seller also will make a cash deposit
into the Capitalized  Interest Account.  The amount,  if any,  deposited therein
will be used by the Trustee on the Remittance  Dates  occurring in January 1999,
February  1999 and March 1999 to fund the  excess,  if any, of (i) the amount of
interest  accrued for each such Remittance  Date at the weighted  average on the
portion  of the  Class A and  Class B  Certificates  having  principal  balances
exceeding the principal  balances of the  Unguaranteed  Interest,  over (ii) the
amount of any earnings on funds in the Pre-Funding Account that are available to
pay  interest on the  Certificates  on each such  Remittance  Date.  Any amounts
remaining in the Capitalized Interest Account on the Special Remittance Date and
not used for such  purposes  are  required to be paid  directly to the Seller on
such Special Remittance Date.

                  All funds in the Capitalized  Interest Account are required to
be held (i) uninvested, up to the limits insured by the FDIC or (ii) invested in
Permitted  Instruments.  Any  investment  earnings  on funds in the  Capitalized
Interest Account will be applied to payment of interest on the Certificates.




                                      -78-
<PAGE>

Flow of Funds

                  The  Agreement  requires  the  Servicer  to  withdraw  on  the
Determination  Date preceding each Remittance Date that portion of the Available
Funds in the  Principal and Interest  Account and to remit such amount  together
with the Monthly Advances and Compensating  Interest for the related  Remittance
Date to the Trustee for deposit in the Certificate Account. Upon receipt on each
Determination  Date of such  amount,  the Trustee is  required  to deposit  such
amount into the Certificate Account.

                  On each  Remittance  Date the  Trustee is required to withdraw
from the Certificate  Account the sum of (i) that portion of the Available Funds
received from the Servicer, (ii) the amounts, if any, deposited therein from the
Spread Account as described below under  "--Spread  Account"  herein,  (iii) any
Monthly  Advances  as  described  below  under  "--Monthly   Advances"  and  any
Compensating Interest as described under "--Compensating Interest," (iv) amounts
required to be paid by the Servicer in connection  with losses on investments of
amounts in the Certificate  Account and (v) with respect to the Remittance Dates
in January  1999,  February 1999 and March 1999,  the amounts,  if any deposited
therein from the Pre-Funding  Account and the Capitalized  Interest  Account and
make distributions thereof in the following order of priority:

                        (i)  First, to the Class A Certificates in an amount up
                        to the Class A Interest Distribution Amount;

                       (ii) Second,  to the Class A Certificates in an amount up
                       to the sum of (a) the Class A  Principal  Distribution
                       Amount and (b) the Class A Carry Forward Amount;

                       (iii) Third, to the Spread Account,  any remainder unless
                       and until the  amount  therein  equals  the  Specified
                       Spread Account Requirement;

                       (iv) Fourth,  to the Class B Certificates in an amount up
                       to the Class B Interest Distribution Amount, minus the
                       Class B Carry Forward Interest Amount;

                       (v) Fifth, to the Class B  Certificates,  in an amount up
                       to the sum of (a) the Class B  Principal  Distribution
                       Amount and (b) the Class B Carry-Forward Amount;

                       (vi)  Sixth,  to the  Expense  Account in an amount up to
                       one-twelfth  of the  Annual  Expense  Escrow  Amount
                       plus any amount  required  to be paid to the  Trustee
                       pursuant  to the Agreement  resulting  from
                       insufficiencies  in  the  Expense Account;

                       (vii) Seventh, to the Class B Certificates, the Class B
                       Carry Forward Interest Amount;

                       (viii) Eighth, to the Servicer in an amount up to the
                       Reimbursable Amounts;

                       (ix) Ninth, any remaining amounts to the Spread Account
                       Depositor.

Class A and Class B Interest Distribution Amounts

                  To the extent there are amounts  available for distribution to
the  Certificateholders  on each Remittance Date the Class A  Certificateholders
(and after  payment of principal  and interest o the Class A  Certificateholders
and the funding of the Spread Account) the Class B  Certificateholders,  in that


                                      -79-
<PAGE>

order,  will be entitled to receive  interest  accrued for the related  Interest
Accrual Period at the then applicable  Class A or Class B Remittance Rate on the
Class  A or  Class  B  Principal  Balance,  as  the  case  may  be,  outstanding
immediately  prior to such Remittance Date,  subject to the adjustment set forth
in the next  paragraph.  If,  on any  Remittance  Date,  the  Class A or Class B
Certificates  do not  receive  the full  amount of  interest  to which  they are
entitled,  such shortfall,  plus interest thereon at the then applicable Class A
or Class B Remittance Rate,  compounded monthly,  will be added to the amount of
interest  they are  entitled  to receive on  succeeding  Remittance  Dates.  The
aggregate amounts of interest payable to the Class A and Class B Certificates on
each   Remittance  Date  are  referred  to  herein  as  the  "Class  A  Interest
Distribution   Amount"   and  the   "Class  B  Interest   Distribution   Amount"
respectively.

                  Certain  of the SBA  Loans  adjust  their  interest  rate on a
monthly basis.  Accordingly,  for each Remittance  Date the aggregate  amount of
interest  payable with respect to each of the SBA Loans in accordance with their
terms,  net of the interest  payable to the holders of the Guaranteed  Interest,
the Excess Spread (other than the portion thereof allocated to the Servicing Fee
on the Guaranteed Interest),  the Servicing Fee, the Premium Protection Fee, the
FTA's Fee, the  Additional  Fee (with respect to the  Additional Fee SBA Loans),
the Extra  Interest (as defined  below) and the fees and expenses of the Trustee
allocable to such interest, might exceed or be less than the interest accrued on
the SBA Loans at the weighted average Class A and Class B Remittance  Rates. Any
such  excess  or  shortfall  will  be  allocated  to the  Class  A and  Class  B
Certificates  pro rata in accordance with the amount of interest each such Class
of Certificates would otherwise be entitled to receive but for such adjustment.

                  With respect to each SBA Loan, the "Extra Interest Percentage"
will  equal the excess of (i) the Note Rate that would be in effect for such SBA
Loan as of the  Cut-Off  Date  (or  Subsequent  Cut-Off  Date  with  respect  to
Subsequent SBA Loans) without giving effect to any applicable  lifetime floor or
cap over (ii) the sum of the rates used in determining the Servicing Fee and the
Trustee's fees and expenses and the initial weighted average Class A and Class B
Remittance Rates without giving effect to any applicable lifetime floor or cap.

                  For each Remittance Date, the "Extra Interest" for an SBA Loan
will equal the product of (i) the principal portion of the Unguaranteed Interest
of such SBA Loan for such Remittance Date and (ii) one-twelfth of the applicable
Extra Interest Percentage.

Class A and Class B Principal Distribution Amounts

                  With respect to each  Remittance  Date, the "Class A Principal
Distribution Amount" and the "Class B Principal  Distribution Amount" will equal
the Class A Percentage or the Class B Percentage, as the case may be, multiplied
by the  total of (i) the  Unguaranteed  Percentage  of all  payments  and  other
recoveries  of  principal  of an SBA Loan (net of  amounts  reimbursable  to the
Servicer pursuant to the Agreement)  received by the Servicer or any Subservicer
during the related Due Period,  excluding  amounts  received with respect to SBA
Loans  which  have been  delinquent  24 months  or have  been  determined  to be
uncollectible, in whole or in part, by the Servicer to the extent that the Class
A Certificateholders or the Class B Certificateholders, as the case may be, have
previously  received the Class A Percentage  or the Class B  Percentage,  as the
case may be, of the principal  portion of the Unguaranteed  Interest of such SBA
Loans;  (ii)  the  principal  portion  of  any  Unguaranteed  Interest  actually
purchased  by the Seller for breach of a  representation  and  warranty or other
defect and  actually  received by the  Trustee as of the  related  Determination
Date; (iii) any adjustments with respect to substitutions of SBA Loans for which
the Seller has breached a representation or warranty  deposited in the Principal
and  Interest  Account  and  transferred  to the  Certificate  Account as of the
related  Determination  Date; (iv) the Unguaranteed  Percentage of all losses on
SBA Loans which were finally  liquidated  during the applicable Due Period;  and


                                      -80-
<PAGE>

(v) the Unguaranteed Percentage of the then outstanding principal balance of any
SBA Loan which, as of the first day of the related Due Period,  is delinquent 24
months or determined by the Servicer to be uncollectible in whole or in part.

                  The following chart sets forth an example of  distributions on
the Certificates, based upon the assumption that the Certificates will be issued
in December 1998 with a December 23, 1998 Cut-Off Date and that distributions on
the Certificates are made on the 15th day of each month (or, if such 15th day is
not a Business Day, the next succeeding Business Day, commencing January 1999):

December 23.............
                                        Cut-Off   Date.    The   Original   Pool
                                        Principal  Balance will be the aggregate
                                        principal  amount  of  the  Unguaranteed
                                        Interests   of  the  SBA  Loans  at  the
                                        opening of business on December 23, 1998
                                        after   application   of  all   payments
                                        collected on or before such date.

December  23  -  30...............
                                        The Servicer  deposits in the  Principal
                                        and   Interest   Account   all   amounts
                                        received on account of the  Unguaranteed
                                        Interests  and Excess  Spread of the SBA
                                        Loans.

December 30...................          Closing Date and first Record Date.
                                        Distribution on January 15, 1999
                                        will be made to Certificateholders of
                                        record on the Closing Date.Subsequent
                                        record dates will be the last day of the
                                        month preceding the Remittance Date.

January 13 ..................           Determination Date.  The Servicer
                                        determines the amount of principal and
                                        interest that will be distributed to the
                                        Certificateholders on January 15, and
                                        transfers funds in the Principal and
                                        Interest Account to the Trustee for
                                        deposit in the Certificate Account
                                        together with any Monthly Advances,
                                        Compensating Interest and, to the extent
                                        necessary, amounts from the Spread
                                        Account.

January 15....................          Remittance Date.  The Trustee or the
                                        Paying Agent will distribute to
                                        Certificateholders the amounts required
                                        to be distributed pursuant to the
                                        Agreement.

Spread Account

                  On the Closing Date, the Spread Account Depositor will make an
initial cash  deposit into the Spread  Account in an amount equal to 2.5% of the
Original Pool Principal  Balance (the "Initial  Deposit").  Thereafter,  on each
Remittance  Date the Trustee will deposit into the Spread  Account the Available
Funds, if any,  remaining after payment of interest and principal to the holders
of the Class A Certificates,  until the aggregate  amount then on deposit in the
Spread  Account (the "Spread  Account  Balance")  equals the sum of (i) the then


                                      -81-
<PAGE>

outstanding principal balance of the Unguaranteed Interests of all SBA Loans 180
days or more delinquent and (ii) the greater of (a) 5.0% of the then outstanding
aggregate principal balance of the Unguaranteed  Interests of all the SBA Loans,
or (b) 2.5% of the Original Pool Principal Balance; provided,  however, that for
purposes of clauses (i) and  (ii)(a),  there  shall be  excluded  the  principal
portion of the Unguaranteed  Interest of SBA Loans which have been delinquent 24
months or have been determined to be uncollectible,  in whole or in part, by the
Servicer, to the extent that the Certificateholders have previously received the
Unguaranteed  Portion  of the  principal  balance  of such SBA  Loans  provided,
however,  that in no event  shall the  Spread  Account  Balance  exceed the then
outstanding  Class A  Certificate  Balance (such amount is referred to herein as
the "Specified Spread Account Requirement").

                  On each  Remittance  Date,  to the extent funds are  available
therefor, the Trustee will withdraw from the Spread Account for deposit into the
Certificate  Account the amount, if any, by which (i) the sum of (a) the Class A
Interest Distribution Amount, (b) the Class A Principal  Distribution Amount and
(c) the Class A  Carry-Forward  Amount exceeds (ii) the Available Funds for such
Remittance  Date (but  excluding  from such  definition,  amounts  in the Spread
Account).

                  To the extent  that the Spread  Account  Balance  exceeds  the
Specified  Spread  Account  Requirement,  such excess will be distributed to pay
interest and principal to the Class B Certificates,  as payment of the Trustee's
fees and expenses,  to pay the Servicer up to the Reimbursable  Amounts and then
to the Spread  Account  Depositor.  See  "Description  of the  Agreement and the
Certificates-Flow  of Funds" herein.  The Spread  Account  Depositor will not be
required to refund any amounts previously properly distributed to it, regardless
of whether there are sufficient funds on a subsequent  Remittance Date to make a
full  distribution  to holders of the Class A  Certificates  on such  Remittance
Date.

                  The funding and  maintenance of the Spread Account is intended
to enhance the  likelihood  of timely  payment of principal  and interest to the
holders of the Class A Certificates;  however,  if the SBA Loan Pool experiences
levels of delinquencies and losses above certain  scenarios,  the Spread Account
could be depleted, and shortfalls could result. See "Rating" herein.

Monthly Advances

                  The Servicer is required to remit to the Trustee no later than
the  Determination  Date  preceding  each  Remittance  Date for  deposit  in the
Certificate  Account the amount of the Monthly Advance,  if any, by which (i) 30
days'  interest  at a rate  equal  to the  then  applicable  Adjusted  SBA  Loan
Remittance  Rate  on the  aggregate  Class  A and  Class  B  Principal  Balances
immediately  prior to the  related  Remittance  Date (as the  amount  calculated
pursuant  to this  clause  (i) may be  adjusted  in  accordance  with the limits
described under "Description of the Agreement and the  Certificates--Class A and
Class B Interest  Distribution Amounts" herein) exceeds (ii) the amount received
by the Servicer as of the related  Record Date in respect of interest on the SBA
Loans minus the interest payable to the holders of the Guaranteed Interest,  the
Additional  Fee,  the  Premium  Protection  Fee,  and the fee payable to the FTA
(plus, for the Remittance  Dates in January 1999,  February 1999 and March 1999,
the sum of (a) all funds to be transferred to the  Certificate  Account from the
Capitalized Interest Account for such Remittance Date and (b) certain investment
earnings on amounts in the  Pre-Funding  Account for the  applicable  Remittance
Date).The Servicer is not required to make monthly advances which it determines,
in good faith,  would be nonrecoverable  from amounts received in respect of the
SBA Loans.

                  Monthly  Advances are  reimbursable in the first instance from
late  collections  of interest,  Liquidation  Proceeds,  Insurance  Proceeds and
proceeds  received by the  Servicer in  connection  with  condemnation,  eminent
domain or a release of lien ("Released  Mortgaged Property Proceeds")  collected
with respect to the related SBA Loan as to which the Monthly Advances were made.


                                      -82-
<PAGE>

The  Servicer's  right to  reimbursement  for such  advances  in  excess of such
amounts is limited to late  collections  of  interest  received on the SBA Loans
generally; provided, however, that the Servicer's right to such reimbursement is
subordinate to the rights of the  Certificateholders,  the holder of the Premium
Protection Fee and the holders of the Guaranteed Interest.  Monthly Advances are
intended  to  provide  sufficient  funds  for the  payment  of  interest  to the
Certificateholders  at the then applicable  Class A or Class B Remittance  Rate,
plus an additional  amount, if any, required to pay the fees and expenses of the
Trustee.

Compensating Interest

                  Not later than each  Determination  Date, with respect to each
SBA  Loan as to  which a  principal  prepayment  in  full or a  Curtailment  was
received during the related Due Period, the Servicer is required to remit to the
Trustee,   from  amounts   otherwise   payable  to  the  Servicer  as  servicing
compensation,  an amount ("Compensating Interest") equal to any excess of (a) 30
days' interest on the Unguaranteed  Percentage of the related  principal balance
at the Adjusted SBA Loan  Remittance Rate over (b) that portion of the amount of
interest actually received on the Unguaranteed  Interest of such SBA Loan during
such Due Period and available to be paid to the Certificateholders.

Registration of Class A Certificates

                  The Class A  Certificates  will be issued in fully  registered
form.  The Class A Certificates  will be represented by Class A Certificates  in
definitive,   fully  registered  form  registered  in  the  name  of  individual
purchasers or their nominees.

                  The  Class  A  Certificates  will  be  issued  only  in  fully
registered  form  without  exception in  denominations  of $100,000 and integral
multiples of $1,000 in excess  thereof,  except that one Class A Certificate may
be in a  different  denomination.  No  service  charge  will  be  made  for  any
registration of transfer or exchange of Class A Certificates.

                  The Class A  Certificates  may be  presented  for  exchange or
registration of transfer at the office of the Trustee.  The Class A Certificates
are exchangeable at any time into an equal aggregate principal amount of Class A
Certificates of different authorized denominations. The Class A Certificates may
not be sold or otherwise  transferred except in accordance with the restrictions
described herein under "Notice To Investors."

Servicing and Other Compensation and Payment of Expenses

                  In addition to the  Servicing  Fees,  the Servicer is entitled
under the Agreement to retain additional  servicing  compensation in the form of
assumption  and  other  administrative  fees,  interest  paid  on  funds  in the
Principal and Interest Account,  interest paid on earnings realized on Permitted
Instruments,  certain  excess  amounts in the Expense  Account and late  payment
charges.  The Servicer also is entitled to retain the Premium  Protection Fee on
each SBA Loan. Pursuant to the Agreement, the foregoing is the maximum amount of
servicing compensation available to a successor servicer.

Hazard Insurance

                  The  Servicer is required  under the  Agreement to comply with
the SBA Rules and  Regulations  concerning the issuance and  maintenance of fire
and hazard  insurance  with  extended  coverage  customary in the area where the
Mortgaged Property is located.  Such requirements vary from region to region. If
at  origination of an SBA Loan, to the best of the  Servicer's  knowledge  after
reasonable  investigation,   the  related  Mortgaged  Property  is  in  an  area


                                      -83-
<PAGE>

identified in the Federal Register by the Flood Emergency  Management  Agency as
having special flood hazards (and such flood  insurance has been made available)
consistent  with the SBA Rules and  Regulations,  the Servicer  will require the
related Obligor to purchase a flood insurance policy with a generally acceptable
insurance carrier, in an amount  representing  coverage not less than the lesser
of (a) the full insurable  value of the Mortgaged  Property,  or (b) the maximum
amount of insurance available under the National Flood Insurance Act of 1968, as
amended.  The  Servicer  will also be required to  maintain,  to the extent such
insurance  is  available  and  required  by the SBA  Rules and  Regulations,  on
Foreclosed Property constituting real property, fire and hazard insurance in the
amounts  described above and liability  insurance.  Any amounts collected by the
Servicer  under any such  policies  (other  than  amounts  to be  applied to the
restoration  or repair  of the  Mortgaged  Property,  or to be  released  to the
Obligor in accordance  with the SBA Rules and  Regulations),  are required to be
deposited by the Servicer in the Principal and Interest Account.

Realization Upon Defaulted Mortgage

                  Subject  to the SBA Rules and  Regulations  and with the prior
written consent of the SBA (if required by the SBA Rules and  Regulations),  the
Servicer  is required  to  foreclose  upon or  otherwise  comparably  effect the
ownership in the name of the SBA of  Mortgaged  Properties  or other  Collateral
relating to defaulted SBA Loans as to which no satisfactory  arrangements can be
made for collection of delinquent payments.  In connection with such foreclosure
or other  conversion,  the  Servicer  is required  to  exercise  collection  and
foreclosure procedures with the same degree of care and skill in its exercise or
use as it would  exercise or use under the  circumstances  in the conduct of its
own affairs.  The Servicer is required to take into account the existence of any
hazardous  substances,  hazardous wastes or solid wastes on Mortgaged Properties
in  determining  whether to foreclose upon or otherwise  comparably  convert the
ownership  of such  Mortgaged  Property,  and will not  foreclose on a Mortgaged
Property  where it has cause to  believe  such  substance  exists  unless it has
received a Phase I environmental report and such report reveals no environmental
problems   or  such   Mortgaged   Property   is  subject  to  an   environmental
rehabilitation for which the Seller is not responsible.

Waivers and Deferments of Certain Payments

                  The Servicer has agreed to service the SBA Loans in accordance
with the Agreement, the Multi-Party Agreement and the SBA Rules and Regulations.

                  The Agreement requires the Servicer to make reasonable efforts
to collect all  payments  called for under the terms and  provisions  of the SBA
Loans.  Consistent  with the  foregoing and the SBA Rules and  Regulations,  the
Servicer  may in its  discretion  waive any  assumption  fee or any other fee or
charge which the Servicer would be entitled to retain as servicing  compensation
and may  waive,  vary or  modify  any  term of any SBA  Loan or  consent  to the
postponement  of strict  compliance  with any such term or in any  matter  grant
indulgence  to any  Mortgagor,  subject  to the  limitations  set  forth  in the
Agreement and compliance with the SBA Rules and Regulations;  provided, however,
that the Servicer may not extend the date payments are due under an SBA Loan for
more than one year past the  scheduled  final  maturity  of the related SBA Note
without  the  consent of the SBA,  if such  consent is then  required by the SBA
Rules and  Regulations.  In the event the Servicer defers the dates for payments
due on a Note,  the  Servicer  shall  nonetheless  make  payment of any required
Monthly  Advances with respect to the payments so extended to the same extent as
if such installment were due, owing and delinquent and had not been deferred.

Use of Subservicers

                                      -84-
<PAGE>

                  The  Servicer is permitted  under the  Agreement to enter into
Subservicing  Agreements for any servicing and  administration of SBA Loans with
an entity approved by the SBA, if such consent is then required  pursuant to the
SBA Rules and  Regulations.  Notwithstanding  any  Subservicing  Agreement,  the
Servicer  shall not be relieved of its  obligations  under the  Agreement to the
Trustee, the SBA or the Certificateholders,  and the Servicer shall be obligated
to the same extent and under the same terms and  conditions  as if it alone were
servicing and  administering  the SBA Loans.  The Servicer  shall be entitled to
enter into any agreement with a Subservicer for  indemnification of the Servicer
by such  Subservicer  and nothing  contained in the Agreement shall be deemed to
limit or modify such indemnification.

                  The Servicer is required to deliver to the Trustee and the SBA
on or  before  September  30 of each  year  commencing  in  1999,  an  Officer's
Certificate stating, as to each signer thereof,  that (i) the Servicer has fully
complied with certain  provisions of the Agreement  relating to servicing of the
SBA Loans and payments on the  Certificates,  (ii) a review of the activities of
the Servicer  during such preceding year and of performance  under the Agreement
has  been  made  under  such  officer's  supervision,  (iii) to the best of such
officer's  knowledge,  based on such review,  the Servicer has fulfilled all its
obligations  under the Agreement for such year,  or, if there has been a default
in the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status  thereof  including the steps being taken
by the  Servicer to remedy such  default and (iv) the  Servicer has not lost its
license to  originate or sell SBA 7(a) Loans or had its license  suspended.  The
Seller is required to deliver to the Trustee on or before  September  30 of each
year beginning September 30, 1999 an Officer's Certificate describing the status
of compliance with the requirements under the Pooling and Servicing Agreement.

                  On or before  September 30 of each year relating to the fiscal
year ending June 30th  (commencing  with the fiscal year ending June 30,  1999),
the  Servicer is required  to cause to be  delivered  to the Trustee a letter or
letters  of  a  firm  of  nationally  recognized  independent  certified  public
accountants  reasonably  acceptable  to the Trustee  stating that such firm has,
with respect to the  Servicer's  overall  servicing  operations,  examined  such
operations  in  accordance  with the  requirements  of the Uniform  Single Audit
Program for  Mortgage  Bankers,  and stating  such firm's  conclusions  relating
thereto.

Removal and Resignation of Servicer

                  The Majority  Certificateholders,  by notice in writing to the
Servicer,  may,  pursuant  to  the  Agreement,  remove  the  Servicer  upon  the
occurrence of any of the following events:

                            (i) (A) the  failure  by the  Servicer  to make  any
                  required  Servicing  Advance,   to  the  extent  such  failure
                  materially   or  adversely   affects  the   interests  of  the
                  Certificateholders;  (B) the  failure by the  Servicer to make
                  any  required  Monthly  Advance,  to the extent  such  failure
                  materially   and  adversely   affects  the  interests  of  the
                  Certificateholders;  (C) the failure by the  Servicer to remit
                  any  Compensating   Interest,   to  the  extent  such  failure
                  materially   and  adversely   affects  the  interests  of  the
                  Certificateholders;  or (D) any  failure  by the  Servicer  to
                  remit to Certificateholders, or to the Trustee for the benefit
                  of the  Certificateholders,  any  payment  required to be made
                  under the terms of the Agreement,  which continues  unremedied
                  (in the case of the events described in clauses (i)(A), (i)(C)
                  and  (i)(D)  for 30 days)  after the date upon  which  written
                  notice of such  failure,  requiring  the same to be  remedied,
                  shall have been given to the Servicer by the Trustee or to the
                  Servicer and the Trustee by any Certificateholder; or

                                      -85-
<PAGE>

                           (ii)  failure by the  Servicer  or the Seller duly to
                  observe  or  perform,  in  any  material  respect,  any  other
                  covenants,  obligations  or  agreements of the Servicer or the
                  Seller, as set forth in the Agreement, which failure continues
                  unremedied  for a period  of 60 days  after  the date on which
                  written  notice  of such  failure,  requiring  the  same to be
                  remedied, shall have been given to the Servicer or the Seller,
                  as the case may be, by the Trustee or to the Servicer,  or the
                  Seller,   as  the  case  may  be,  and  the   Trustee  by  any
                  Certificateholder; or

                          (iii) a  decree  or  order  of a court  or  agency  or
                  supervisory  authority having jurisdiction for the appointment
                  of a conservator or receiver or liquidator in any  insolvency,
                  readjustment of debt,  marshaling of assets and liabilities or
                  similar  proceedings,  or for the winding-up or liquidation of
                  its affairs,  shall have been entered against the Servicer and
                  such   decree  or  order   shall  have   remained   in  force,
                  undischarged or unstayed for a period of 60 days; or

                           (iv) the Servicer shall consent to the appointment of
                  a conservator  or receiver or  liquidator  in any  insolvency,
                  readjustment of debt,  marshaling of assets and liabilities or
                  similar  proceedings  of or relating to the  Servicer or of or
                  relating  to  all  or  substantially  all  of  the  Servicer's
                  property; or

                            (v)  the   Servicer   shall  admit  in  writing  its
                  inability to pay its debts as they become due, file a petition
                  to   take   advantage   of  any   applicable   insolvency   or
                  reorganization  statute, make an assignment for the benefit of
                  its  creditors,   or  voluntarily   suspend   payment  of  its
                  obligations.

                  The Servicer may not assign the  Agreement nor resign from the
obligations and duties thereby imposed on it except (i) by mutual consent of the
Servicer,  the SBA,  the Trustee and the  Majority  Certificateholders,  (ii) in
connection with a merger,  conversion or consolidation permitted pursuant to the
Agreement  and with the  consent of the SBA (in which case the person  resulting
from the merger,  conversion  or  consolidation  shall be the  successor  of the
Servicer) or (iii) upon the determination  that the Servicer's duties thereunder
are no longer  permissible under applicable law or administrative  determination
and such incapacity  cannot be cured by the Servicer.  No such resignation shall
become  effective until a successor has assumed the Servicer's  responsibilities
and obligations in accordance with the Agreement.

                  Except as provided  above,  upon removal or resignation of the
Servicer, the Trustee will be the successor servicer (the "Successor Servicer").
If, however,  the Trustee is unable to act as Successor Servicer,  or if the SBA
so  requests,  the  Trustee  may  appoint,  or  petition  a court  of  competent
jurisdiction  to appoint,  any established  mortgage loan servicing  institution
acceptable  to the SBA and DCR  having a net worth of not less than  $15,000,000
and which is an  approved  SBA  guaranteed  lender in good  standing,  operating
pursuant to an effective  Loan Guaranty  Agreement as the Successor  Servicer in
the assumption of all or any part of the responsibilities, duties or liabilities
of the Servicer.

Optional Purchase

                  The  Servicer  has  the  right,  but not  the  obligation,  to
purchase the  Unguaranteed  Interest of any  Defaulted SBA Loan for the purchase
price and in the manner  described  under  "Description of the Agreement and the
Certificates--Representations  and  Warranties of the Seller." A "Defaulted  SBA
Loan" is any SBA Loan as to which the related Obligor has failed to make payment


                                      -86-
<PAGE>

in full of three or more consecutive monthly payments. In no event, however, may
the aggregate  principal balance of the Unguaranteed  Interests of Defaulted SBA
Loans so purchased  pursuant to this provision exceed 5.0% of the sum of (i) the
Original Pool Principal Balance and (ii) the initial Pre-Funded Amount.

Termination; Purchase of SBA Loans

                  The Agreement will terminate upon notice to the Trustee of the
earlier of either:  (a) the final payment or other  liquidation  of the last SBA
Loan, or the  disposition of all property  acquired upon  foreclosure of any SBA
Loan and the remittance of all funds due thereunder or (b) mutual consent of the
Servicer and all  Certificateholders in writing;  provided,  however, that in no
event  will  the  trust  established  by  the  Agreement  terminate  later  than
twenty-one  years after the death of the last  surviving  lineal  descendant  of
Joseph P.  Kennedy,  late  Ambassador  of the United  States to the Court of St.
James, alive as of the Cut-Off Date.

                  The Servicer  may, at its option,  terminate  the Agreement on
any date on which  the  then  outstanding  aggregate  principal  balance  of the
Unguaranteed  Interests  is less  than 10% of the sum of (i) the  Original  Pool
Principal Balance and (ii) the Pre-Funding Amount, if any by purchasing,  on the
next succeeding Remittance Date, all of the Unguaranteed Interests and any other
assets  in the  Trust  Fund at a price  equal to the sum of (i) 100% of the then
Outstanding  Class A and Class B Principal  Balances,  and (ii) 30 days' accrued
interest  thereon at the then  applicable  Class A and Class B Remittance  Rates
(the "Termination  Price").  Notwithstanding the prior sentence,  if at the time
the Servicer  determines  to exercise such option,  and the unsecured  long term
debt  obligations  of the  Servicer  are not rated at least BBB by DCR,  if such
Rating Agency is still rating the Class A Certificates,  the Servicer shall give
such Rating  Agency prior  written  notice of the  Servicer's  determination  to
exercise such option and shall not exercise such option,  without the consent of
the Rating Agency with an opinion of counsel,  in form and substance  reasonably
satisfactory to the Rating Agency, that the exercise of such option would not be
deemed a fraudulent  conveyance by the Servicer;  provided,  however, that under
certain circumstances set forth in the Agreement, the Servicer may not take such
action prior to providing  DCR with an opinion of counsel that such  termination
would not be deemed a fraudulent conveyance by the Servicer.

Amendment

                  The  Agreement may be amended from time to time by the Seller,
the  Servicer  and the  Trustee by  written  agreement,  with the prior  written
consent   of  the  SBA,   without   the   notice   to,  or   consent   of,   the
Certificateholders,  to  cure  any  ambiguity,  to  correct  or  supplement  any
provisions therein, to comply with any changes in the Code, or to make any other
provisions  with respect to matters or  questions  arising  under the  Agreement
which shall not be inconsistent with the provisions of the Agreement;  provided,
however,  that such  action  shall not,  as  evidenced  by an Opinion of Counsel
delivered   to   the   Trustee,   adversely   affect   the   interests   of  any
Certificateholder or any other party and further provided that no such amendment
shall  reduce in any manner  the amount of, or delay the timing of, any  amounts
which are required to be distributed on any  Certificate  without the consent of
the Holder of such Certificate, or change the rights or obligations of any other
party hereto without the consent of such party.

                  The  Agreement may be amended from time to time by the Seller,
the Servicer,  the Trustee and the Majority  Certificateholders,  with the prior
written  consent of the SBA,  for the  purpose of adding  any  provisions  to or
changing in any manner or eliminating  any of the provisions of the Agreement or
of modifying in any manner the rights of the Holders; provided, however, that no
such amendment shall reduce in any manner the amount of, or delay the timing of,


                                      -87-
<PAGE>

any amounts which are required to be distributed on any Certificate  without the
consent of the Holder of such Certificate or reduce the percentage of Holders of
which are required to consent to any such  amendment  without the consent of the
Holders holding 100% of the Certificates affected thereby and, provided further,
that no amendment  affecting  only one Class of  Certificates  shall require the
approval of the Holders of the other Class.

                  It  shall  not be  necessary  for  the  Certificateholders  to
approve  the  particular  form  of  any  proposed  amendment,  but it  shall  be
sufficient if such consent shall approve the substance thereof.


                                   THE TRUSTEE

                  Marine Midland Bank, a trust company  located in New York, New
York, has been named Trustee pursuant to the Agreement.

                  The Agreement  requires that the Trustee shall at all times be
(i) a national  banking  association  or banking  corporation  or trust  company
organized and doing  business  under the laws of the United States of America or
of any State,  (ii)  authorized  under  such laws to  exercise  corporate  trust
powers,  (iii)  having a combined  guaranteed  capital  and  surplus of at least
$30,000,000,  (iv) having unsecured and unguaranteed  long-term debt obligations
rated at least BBB by DCR, or such other rating as is acceptable to the SBA, (v)
is subject to supervision or examination by a federal or state  authority,  (vi)
is an approved SBA guaranteed lender in good standing,  operating pursuant to an
effective  Loan Guaranty  Agreement,  and (vii) is reasonably  acceptable to the
SBA. If at any time the Trustee  shall cease to be eligible in  accordance  with
the provisions described in this paragraph,  it shall resign upon request of the
Majority  Certificateholders  in the manner and with the effect specified in the
Agreement.

                  The Trustee,  or any trustee or trustees hereafter  appointed,
may resign at any time in the manner set forth in the Agreement.  Upon receiving
notice of resignation,  the Servicer shall promptly appoint a successor  trustee
or trustees  meeting the eligibility  requirements set forth above in the manner
set forth in the  Agreement.  If no successor  trustee shall have been appointed
and have accepted  appointment within 60 days after the giving of such notice of
resignation,   the  resigning  trustee  may  petition  any  court  of  competent
jurisdiction  for  the  appointment  of a  successor  trustee.  Such  court  may
thereupon,  after such  notice,  if any,  as it may deem  proper and  prescribe,
appoint a successor trustee.

                  No resignation or removal of the Trustee and no appointment of
a successor  trustee shall become  effective until the acceptance of appointment
by a successor trustee.

                  The  Majority  Certificateholders  with the consent of the SBA
and DCR, or the SBA, may remove the Trustee  under the  conditions  set forth in
the Agreement and appoint a successor trustee in the manner set forth therein.

                  The Servicer  shall give notice of each removal of the Trustee
to the Certificateholders,  which notice shall include the name of the successor
trustee and the address of its corporate trust office.

                  Upon  acceptance of appointment by a successor  trustee in the
manner provided in the Agreement,  the Servicer shall give notice thereof to the
Certificateholders.

                  At any time, for the purpose of meeting any legal requirements
of any jurisdiction in which any part of the Trust Fund or property securing the
same may at the time be located,  the  Servicer and the Trustee  acting  jointly
shall have the power and shall  execute and deliver all  instruments  to appoint
one or more Persons approved by the Trustee to act as co-trustee or co-trustees,


                                      -88-
<PAGE>

jointly with the Trustee,  or separate trustee or separate  trustees,  of all or
any part of the  Trust  Fund,  and to vest in such  Person or  Persons,  in such
capacity, such title to the Trust Fund, or any part thereof, and, subject to the
provisions of the Agreement, such powers, duties, obligations, rights and trusts
as the Servicer and the Trustee may consider necessary or desirable.

                  None   of   the   Trustee,    its   authorized   agent(s)   or
representative(s)  will conduct an independent  review and assessment on whether
an SBA Loan should be foreclosed or the underlying property should be liquidated
when a default has occurred with respect thereto.


                 CERTAIN LEGAL MATTERS RELATING TO THE SBA LOANS

General

                  The following discussion contains summaries, which are general
in  nature,  of  certain  legal  matters  relating  to the SBA  Loans.  Laws and
practices  relating to the legal effects and  enforcement of mortgages and deeds
of trust  vary  somewhat  from state to state.  In  general,  however,  the most
significant applicable legal principles are similar in all states. The following
discussion  addresses  the  more  significant  legal  principles  applicable  to
mortgages and deeds of trust in all states.




                                      -89-
<PAGE>


Nature of the Trust Assets

                  The SBA Loans generally will be secured by mortgages, deeds of
trust,  security  deeds or deeds to secure debt,  depending  upon the prevailing
practice in the state in which the  property  subject to the loan is located.  A
mortgage creates a lien upon the real property encumbered by the mortgage, which
lien is generally  not prior to the lien for real estate taxes and  assessments.
Priority between  mortgages depends on their terms and generally on the order of
recording  with a state or county  office.  There are two parties to a mortgage,
the mortgagor,  who is the borrower and owner of the mortgaged property, and the
mortgagee,  who is the lender. The mortgagor delivers to the mortgagee a note or
bond and the mortgage. Although a deed of trust is similar to a mortgage, a deed
of trust  formally has three  parties,  the  borrower-property  owner called the
trustor (similar to a mortgagor),  a lender (similar to a mortgagee)  called the
beneficiary,  and a  third-party  grantee  called the  trustee.  Under a deed of
trust, the borrower grants the property,  irrevocably until the debt is paid, in
trust,  generally  with a power of sale, to the trustee to secure payment of the
obligation. A security deed and a deed to secure debt are special types of deeds
which indicate on their face that they are granted to secure an underlying debt.
By executing a security deed or deed to secure debt,  the grantor  conveys title
to, as opposed  to merely  creating a lien upon,  the  subject  property  to the
grantee  until  such time as the  underlying  debt is  repaid.  The  mortgagee's
authority  under a mortgage,  the trustee's  authority under a deed of trust and
the  grantee's  authority  under a  security  deed or deed to  secure  debt  are
governed by law and, with respect to some deeds of trust,  the directions of the
beneficiary.

Foreclosure/Repossession

                  Foreclosure of a deed of trust or a security deed is generally
accomplished by a non-judicial  trustee's sale under a specific provision in the
deed of trust or security deed which authorizes the trustee to sell the property
at public  auction upon any default by the borrower under the terms of the note,
deed of trust or security deed. In some states, the trustee must record a notice
of  default  and  send a copy to the  borrower-trustor,  to any  person  who has
recorded a request  for a copy of any notice of default  and notice of sale,  to
any successor in interest to the  borrower-trustor,  to the  beneficiary  of any
junior deed of trust and to certain other  persons.  The borrower,  or any other
person  having  a  junior  encumbrance  on  the  real  estate,   may,  during  a
reinstatement  period,  cure the default by paying the entire  amount in arrears
plus the costs and expenses  incurred in enforcing the obligations.  Before such
non-judicial  sales takes place,  typically a notice of sale must be posted in a
public  place  and  published  during a  specific  period of time in one or more
newspapers,  posted on the property,  and sent to parties  having an interest of
record in the property.

                  Foreclosure  of  a  mortgage   generally  is  accomplished  by
judicial action.  The action is initiated by the service of legal pleadings upon
all parties having an interest in the real property. Delays in completion of the
foreclosure may  occasionally  result from  difficulties  in locating  necessary
parties.  When the  mortgagee's  right to  foreclosure  is contested,  the legal
proceedings  necessary  to resolve  the issue can be  time-consuming.  After the
completion of a judicial  foreclosure  proceeding,  the court generally issues a
judgment of foreclosure and appoints a referee or other court officer to conduct
the sale of the property. In general, the borrower, or any other person having a
junior  encumbrance  on the real estate,  may,  during a statutorily  prescribed
reinstatement  period,  cure a monetary  default by paying the entire  amount in
arrears  plus other  designated  costs and expenses  incurred in  enforcing  the
obligation. Generally, state law controls the amount of foreclosure expenses and
costs,  including attorney's fees, which may be recovered by a lender. After the
reinstatement  period has expired  without the  default  having been cured,  the
borrower or junior  lienholder no longer has the right to reinstate the loan and
must pay the loan in full to prevent  the  scheduled  foreclosure  sale.  If the
mortgage is not  reinstated,  a notice of sale must be posted in a public  place
and,  in most  states,  published  for a specific  period of time in one or more


                                      -90-
<PAGE>

newspapers.  In  addition,  some state laws require that a copy of the notice of
sale be posted on the property and sent to all parties having an interest in the
real property.

                  Although   foreclosure   sales  are  typically  public  sales,
frequently no third party  purchaser bids in excess of the lender's lien because
of the difficulty of determining the exact status of title to the property,  the
possible deterioration of the property during the foreclosure  proceedings and a
requirement  that the  purchaser  pay for the  property in cash or by  cashier's
check. Thus the foreclosing lender often purchases the property from the trustee
or referee for an amount equal to the  principal  amount  outstanding  under the
loan,  accrued and unpaid interest and the expenses of foreclosure.  Thereafter,
the lender  will  assume the burden of  ownership,  including  obtaining  hazard
insurance  and making such repairs at its own expense as are necessary to render
the property  suitable for sale. The lender will commonly obtain the services of
a real estate broker and pay the broker's commission in connection with the sale
of the property.  Depending upon market conditions, the ultimate proceeds of the
sale of the property may not equal the lender's investment in the property.

                  Courts  have  imposed   general   equitable   principles  upon
foreclosure,  which are generally designed to mitigate the legal consequences to
the borrower of the borrower's  defaults under the loan  documents.  Some courts
have  been  faced  with the issue of  whether  federal  or state  constitutional
provisions  reflecting  due  process  concerns  for  fair  notice  require  that
borrowers  under deeds of trust receive  notice  longer than that  prescribed by
statute.  For the most part,  these cases have upheld the notice  provisions  as
being  reasonable or have found that the sale by a trustee under a deed of trust
does not involve sufficient state action to afford constitutional  protection to
the borrower.

                  In the case of  foreclosure  on a building which was converted
from a rental building to a building owned by a Cooperative under a non-eviction
plan,  some states  require  that a  purchaser  at a  foreclosure  sale take the
property  subject to rent  control  and rent  stabilization  laws which apply to
certain  tenants who elected to remain in the  building but who did not purchase
shares in the Cooperative when the building was so converted.

Rights of Redemption

                  In some  states,  after  sale  pursuant  to a deed of trust or
foreclosure of a mortgage,  the borrower and foreclosed junior lienors are given
a statutory period in which to redeem the property from the foreclosure sale. In
some  states,  redemption  may occur only upon  payment of the entire  principal
balance of the loan,  accrued  interest  and expenses of  foreclosure.  In other
states,  redemption may be authorized if the former borrower pays only a portion
of the sums due. The effect of a statutory  right of  redemption  is to diminish
the  ability  of the  lender  to sell the  foreclosed  property.  The  rights of
redemption would defeat the title of any purchaser from the lender subsequent to
foreclosure or sale under a deed of trust. Consequently, the practical effect of
the  redemption  right is to force the lender to retain the property and pay the
expenses of ownership until the redemption period has run.

Anti-Deficiency Legislation and Other Limitations on Lenders

                  Certain states have imposed statutory prohibitions which limit
the  remedies  of a  beneficiary  under a deed of trust or a  mortgagee  under a
mortgage.  In some states,  statutory  provisions limit any deficiency  judgment
against  the former  borrower  following  a  judicial  sale to the excess of the
outstanding  debt over the fair market  value of the property at the time of the
sale.  A deficiency  judgment  would be a personal  judgment  against the former
borrower  equal in most cases to the  difference  between  the amount due to the
lender and the net amount  realized  upon any sale of the real  property sold at
the  foreclosure  sale. The purpose of these statutes  generally is to prevent a


                                      -91-
<PAGE>

beneficiary or a mortgagee from obtaining a large  deficiency  judgment  against
the former borrower as a result of low or no bids at the foreclosure sale. Other
statutes limit the right of the  beneficiary or mortgagee to obtain a deficiency
judgment  against the  borrower  following  foreclosure  or sale under a deed of
trust.  Other  statutes  require the  beneficiary  or  mortgagee  to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an attempt
to satisfy the full debt before bringing a personal action against the borrower.
As a result of these prohibitions,  it is anticipated that in many instances the
Master  Servicer  will  not  seek  deficiency   judgments   against   defaulting
mortgagors.

                  In  addition  to  laws  limiting  or  prohibiting   deficiency
judgments, numerous other statutory provisions, including the federal bankruptcy
laws and state laws  affording  relief to debtors,  may interfere with or affect
the ability of the secured  mortgage  lender to realize upon  collateral  and/or
enforce a deficiency judgment.  For example,  with respect to federal bankruptcy
law, a court with federal  bankruptcy  jurisdiction  may permit a debtor through
his Chapter 11 or Chapter 13  rehabilitative  plan to cure a monetary default in
respect of a mortgage loan on a debtor's residence by paying arrearages within a
reasonable  time period and  reinstating  the  original  mortgage  loan  payment
schedule even though the lender accelerated the mortgage loan and final judgment
of foreclosure had been entered in state court provided no sale of the residence
had yet occurred prior to the filing of the debtor's petition.  Some courts with
federal  bankruptcy  jurisdiction  have approved plans,  based on the particular
facts of the  reorganization  case,  that effected the curing of a mortgage loan
default by paying arrearages over a number of years.

                  Courts  with  federal   bankruptcy   jurisdiction   also  have
indicated  that the terms of a mortgage  loan  secured by property of the debtor
may be modified. These courts have suggested that such modifications may include
reducing  the amount of each  monthly  payment,  changing  the rate of interest,
altering the repayment schedule,  and reducing the lender's security interest to
the value of the property,  thus leaving the lender a general unsecured creditor
for the difference between the value of the property and the outstanding balance
of the loan.

                  Federal and local real estate and tax laws provide priority to
certain  tax  liens  over the lien of the  mortgage.  In  addition,  substantive
requirements   are  imposed  upon  mortgage   lenders  in  connection  with  the
origination  and the  servicing of mortgage  loans by numerous  federal and some
state consumer protection laws. These laws include the federal  Truth-in-Lending
Act, Real Estate Settlement  Procedures Act, Equal Credit  Opportunity Act, Fair
Credit  Billing Act,  Fair Credit  Reporting  Act, and related  statutes.  These
federal laws impose specific  statutory  liabilities  upon lenders who originate
mortgage  loans and who fail to comply  with the  provisions  of the  applicable
laws. In some cases, this liability may affect assignees of the mortgage loans.

Enforceability of Certain Provisions

                  Some courts have imposed general equitable principles to limit
the  remedies   available  in  connection  with  foreclosure.   These  equitable
principles are generally  designed to relieve the borrower from the legal effect
of his defaults under the loan documents. For example, some courts have required
that the lender  undertake  affirmative  and expensive  actions to determine the
causes for the borrower's  default and the likelihood  that the borrower will be
able to  reinstate  the loan.  In some  cases,  courts  have  substituted  their
judgment for the  lenders'  judgment and have  required  that lenders  reinstate
loans or recast  payment  schedules in order to  accommodate  borrowers  who are
suffering  from  temporary  financial  disability.  In other cases,  courts have
limited the right of the lenders to foreclose if the default  under the mortgage
instrument or deed of trust is not monetary,  such as the borrower's  failure to
maintain  adequately  the  property  or the  borrower's  execution  of a  second


                                      -92-
<PAGE>

mortgage or deed of trust affecting the property. Finally, some courts have been
willing  to  relieve a  borrower  from the  consequences  of the  default if the
borrower has not received adequate notice of the default.

Environmental Considerations

                  Environmental  conditions  may diminish the value of the Trust
Assets and give rise to liability of various parties. There are many federal and
state  environmental  laws concerning  hazardous  waste,  hazardous  substances,
gasoline,  radon and other materials which may affect the property  securing the
Trust  Assets.  For  example,  under  the  federal  Comprehensive  Environmental
Response  Compensation  and Liability Act, as amended,  and possibly under state
law in certain states, a secured party which takes a deed in lieu of foreclosure
or purchases a mortgaged  property at a  foreclosure  sale may become  liable in
certain  circumstances  for the costs of a remedial action ("Cleanup  Costs") if
hazardous  wastes or hazardous  substances  have been released or disposed of on
the property.  Such Cleanup Costs may be  substantial.  It is possible that such
costs  could  become a  liability  of a Trust and reduce the  amounts  otherwise
distributable to the  Certificateholders if a Mortgaged Property securing a Loan
became the property of such Trust in certain  circumstances  and if such Cleanup
Costs were incurred.  Moreover,  certain states by statute impose a lien for any
Cleanup Costs incurred by such state on the property that is the subject of such
Cleanup  Costs  (a  "Superlien").  All  subsequent  liens on such  property  are
subordinated  to such Superlien  and, in some states,  even prior recorded liens
are subordinated to such Superliens. In the latter states, the security interest
of the  Trustee in a  property  that is  subject  to such a  Superlien  could be
adversely affected.


                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES

                  The following  discussion  represents the opinion of Stroock &
Stroock & Lavan LLP, special Federal tax counsel ("Federal Tax Counsel"),  as to
the  anticipated  material  federal  income tax  consequences  of the  purchase,
ownership and  disposition of  Certificates.  The  discussion,  and the opinions
referred to below, are based on laws, regulations,  rulings and decisions now in
effect  (or,  in the case of certain  regulations,  proposed),  all of which are
subject  to change  or  possibly  differing  interpretations.  Investors  should
consult  their own tax advisors in  determining  the federal,  state,  local and
other tax  consequences  to them of the purchase,  ownership and  disposition of
Certificates.  For  purposes  of this tax  discussion  (except  with  respect to
information  reporting,  or where the context  indicates  otherwise),  the terms
"Certificateholder" and "holder" mean the beneficial owner of a Certificate.

Tax Status of the Trust Fund

                  Upon the  issuance of the  Certificates,  Federal Tax Counsel,
will  deliver its opinion to the effect that,  under then current law,  assuming
compliance  with the  Agreement,  the Trust Fund will be classified  for federal
income tax purposes as a grantor  trust and not as an  association  taxable as a
corporation or a taxable mortgage pool. Accordingly, each Certificateholder will
be subject to federal  income  taxation as if it owned  directly its interest in
each asset owned by the Trust Fund and paid  directly its share of expenses paid
by the Trust Fund.

                  For  purposes  of  federal  income  tax,  the  Spread  Account
Depositor will be deemed to have retained a fixed portion of the interest due on
each SBA Loan (the "Spread").  The Spread will be treated as "stripped  coupons"
within the meaning of Section 1286 of the Code.  The Servicer may also be deemed
to have retained a "stripped coupon" if and to the extent that the Servicing Fee
is determined to be  unreasonable.  In addition,  because the Class B Remittance


                                      -93-
<PAGE>

Rate exceeds the Class A Remittance  Rate, a portion of the interest  accrued on
each SBA Loan will be treated as a "stripped  coupon"  purchased  by the Class B
Certificateholders.  Accordingly, each Class A Certificateholder will be treated
as owning its pro rata  percentage  interest in the  principal  of, and interest
payable on, the Unguaranteed Interest of each SBA Loan (minus the portion of the
interest  payable  on such SBA Loan that is  treated  as  Spread,  as a stripped
coupon retained by the Servicer or as a stripped coupon purchased by the Class B
Certificateholders),  and such interest in the Unguaranteed Interest of each SBA
Loan will be treated as a "stripped  bond" within the meaning of Section 1286 of
the Code.  Similarly,  each Class B Certificateholder  will be treated as owning
its pro rata percentage  interest in the principal of the Unguaranteed  Interest
of each SBA Loan, plus a disproportionate  share of the interest payable on each
SBA Loan.

Class A Certificateholders

                  Because Class A Certificates  represent  stripped bonds,  they
will be  subject  to the  original  issue  discount  ("OID")  rules of the Code.
Accordingly,  the tax treatment of a Class A Certificateholder  will depend upon
whether the amount of OID on a Class A  Certificate  is less than a  statutorily
defined de minimis amount.

                  In general, under regulations issued under Section 1286 of the
Internal Revenue Code of 1986, as amended (the "Code"),  the amount of OID on an
SBA Loan treated as a "stripped bond" will be de minimis if it is less than 0.25
percent  of the  stated  redemption  price at  maturity,  as  defined in Section
1273(a)(2)  of the Code,  multiplied by the number of complete  years  remaining
after the purchase date until the maturity of the SBA Loan. The maturity date is
based  on the  weighted  average  maturity  date  (and a  reasonable  prepayment
assumption  may have to be taken into account in  determining  weighted  average
maturity).  Under the regulations,  the portion of the interest on each SBA Loan
payable to the Class A  Certificateholders  will be treated as "qualified stated
interest."  As a result,  the amount of OID on an SBA Loan will equal the amount
by which the price at which a  Certificateholder  is deemed to have  acquired an
interest in an SBA Loan (the  "Purchase  Price") is less than the portion of the
remaining  principal balance of the SBA Loan allocable to the interest acquired.
Although Federal Tax Counsel cannot opine on the matter,  the Trust Fund intends
to take the  positions  (i)  that the  amount  of OID on the SBA  Loans  will be
determined by aggregating all payments on the SBA Loans allocable to the Class A
Certificateholders  (not including the Spread),  and treating the portion of all
payments on the SBA Loans  allocable to Class A  Certificateholders  as a single
obligation on an aggregate basis,  rather than being determined  separately with
respect to each SBA Loan, and (ii) that no separate  allocation of consideration
must be made to accrued interest or to amounts held in the Certificate Account.

                  Based on these positions,  the Trust Fund anticipates that the
Certificates will not be issued initially with OID (or that any OID present will
be de minimis).  The Internal  Revenue Service  ("IRS") could require,  instead,
that the  computation  be performed  on an  SBA-Loan-by-SBA-Loan  basis.  In the
preamble to the  regulations  under  Section 1286 of the Code,  the IRS requests
comment on appropriate aggregation rules. Any such recalculation could adversely
affect the timing and character of a Class A Certificateholder's income. The IRS
might also  require that a portion of the purchase  price for a  Certificate  be
allocated  to  accrued  interest  on each SBA Loan  and to  amounts  held in the
Certificate Account pending  distribution to  Certificateholders  at the time of
purchase as though such accrued  interest and  collections on the SBA Loans were
separate assets  purchased by the  Certificateholder.  Any such allocation would
reduce the  Purchase  Price and thus  increase  the  discount  (or  decrease the
premium) on the SBA Loans.

                  If the  amount of OID is de  minimis  under the rule set forth
above, the Class A Certificates would not be treated as having OID. Each Class A


                                      -94-
<PAGE>

Certificateholder  would be required to report on its federal  income tax return
its share of the gross income of the Trust Fund,  including interest and certain
other  charges  accrued  on the  SBA  Loans  and any  gain  upon  collection  or
disposition of the SBA Loans (but not including any portion of the Spread). Such
gross income  attributable to interest on the SBA Loans would exceed the Class A
Remittance Rate by an amount equal to the Class A  Certificateholder's  share of
the  expenses  of the Trust Fund for the period  during  which it owns a Class A
Certificate. The Class A Certificateholder would be entitled to deduct its share
of  expenses  of the Trust  Fund to the  extent  described  below.  Any  amounts
received  by a Class A  Certificateholder  from the  Spread  Account or from the
subordination of the Class B Certificates will be treated for federal income tax
purposes as having the same  character as the payments they  replace.  A Class A
Certificateholder  would  report its share of the income of the Trust Fund under
its usual method of accounting.  Accordingly,  interest would be includable in a
Certificateholder's  gross  income when it accrues on the SBA Loans,  or, in the
case of  Certificateholders  who are cash basis taxpayers,  when received by the
Servicer on behalf of  Certificateholders.  The actual  amount of discount on an
SBA Loan would be includable in income as principal payments are received on the
SBA Loans.

                  If,  contrary to the treatment  anticipated by the Trust Fund,
the OID on an SBA Loan is not de minimis,  a Class A  Certificateholder  will be
required to include in income,  in addition to the amounts  described above, any
OID as it accrues, regardless of when cash payments are received, using a method
reflecting a constant yield on the SBA Loans.  It is possible that the IRS could
require use of a prepayment assumption in computing the yield of an SBA Loan. If
an SBA Loan is deemed to be acquired  by a  Certificateholder  at a  significant
discount,   such  treatment  could   accelerate  the  accrual  of  income  by  a
Certificateholder.

                  Although  the  Trustee  intends  to account  for OID,  if any,
reportable by holders of Class A Certificates by reference to the price paid for
a Class A Certificate by an initial purchaser, the amount of OID will differ for
subsequent  purchasers.  Such  subsequent  purchasers  should  consult their tax
advisers  regarding the proper  calculation  of OID on the interest in SBA Loans
represented by a Class A Certificate.

                  As  to  SBA  Loans   that  are  real   estate   mortgages,   a
Certificateholder  may be able (or may be  required) to account for any discount
on such SBA Loans as market discount rather than OID if either (i) the amount of
OID with respect to the Certificate was treated as zero under the OID de minimis
rule when the Certificate was stripped or (ii) no more than 1% (i.e.,  100 basis
points), including any amount of servicing in excess of reasonable servicing, is
stripped  off from the SBA Loans.  As noted  above,  the Trust  Fund  intends to
account  for the SBA Loans on an  aggregate  basis and does not intend to report
separately  for this  purpose with respect to the SBA Loans that are real estate
mortgages.

                  In the event  that an SBA Loan is treated  as  purchased  at a
premium (i.e., its Purchase Price exceeds the portion of the remaining principal
balance of such SBA Loan allocable to the Certificateholder),  such premium will
be amortizable by the  Certificateholder as an offset to interest income (with a
corresponding reduction in the Certificateholder's basis) under a constant yield
method  over the term of the SBA Loan if an  election  under  Section 171 of the
Code is made with respect to the interests in the SBA Loans  represented  by the
Certificates or was previously in effect. By analogy to recently  finalized bond
premium regulations,  any allowable premium in excess of the interest income may
be  deductible  to the extent of prior  accruals of interest.  Any such election
will also apply to all debt instruments held by the Certificateholder during the
year in which the election is made and all debt instruments acquired thereafter.

                  A  Certificateholder  will be entitled  to deduct,  consistent
with its method of accounting,  its pro rata share of reasonable  servicing fees


                                      -95-
<PAGE>

and other fees paid or  incurred by the Trust Fund as provided in Section 162 or
212 of the Code. If a Certificateholder  is an individual,  estate or trust, the
deduction  for such  holder's  share of such  fees will be  allowed  only to the
extent that all of such holder's  miscellaneous  itemized deductions,  including
such holder's share of such fees,  exceed two percent of such holder's  adjusted
gross income. In addition, the amount of itemized deductions otherwise allowable
for the taxable year for an individual  whose  adjusted gross income exceeds the
"applicable  amount" ($100,000 (or $50,000 in the case of a separate return by a
married  individual),  adjusted for changes in the cost of living  subsequent to
1990) will be  reduced by the lesser of (i) 3 percent of the excess of  adjusted
gross  income over the  applicable  amount,  or (ii) 80 percent of the amount of
itemized deductions otherwise allowable for such taxable year. For taxable years
beginning after December 31, 1997, in the case of a partnership  that has 100 or
more partners and elects to be treated as an "electing large  partnership,"  70%
of such  partnership's  miscellaneous  itemized  deductions  will be disallowed,
although the remaining  deductions  will generally be allowed at the partnership
level and will not be subject to the 2% floor that would otherwise be applicable
to individual partners.

Class B Certificateholders

                  In General. Except as described below, it is believed that the
Class B Certificateholders  will be subject to tax in the same manner as Class A
Certificateholders.  However,  no federal  income tax  authorities  address  the
precise method of taxation of an instrument such as the Class B Certificates and
Federal Tax Counsel  cannot  opine on this issue.  In the absence of  applicable
authorities,  the Trustee intends to report income to Class B Certificateholders
in the manner described below.

                  Each Class B  Certificateholder  will be treated as owning (i)
the Class B Percentage of the principal portion of the Unguaranteed  Interest on
each SBA Loan plus (ii) a  disproportionate  portion of the interest on each SBA
Loan  (not  including  the  Spread).  Income  will  be  reported  to a  Class  B
Certificateholder  based on the assumption that all amounts payable to the Class
B  Certificateholders  are taxable under the coupon stripping  provisions of the
Code and treated as a single  obligation.  In  applying  those  provisions,  the
Trustee will take the position that a Class B  Certificateholder's  entire share
of the  interest on an SBA Loan will  qualify as  "qualified  stated  interest."
Thus, except to the extent modified by the effects of subordination of the Class
B  Certificates,  as  described  below,  income  will  be  reported  to  Class B
Certificateholders  in the  manner  described  above for  holders of the Class A
Certificates.

Effect of Subordination

                  If the Certificateholders of one Class of Certificates receive
distributions of less than their share of the Trust Fund's receipts of principal
or  interest  (the  "Shortfall  Amount")  because  of the  subordination  of the
Certificates,  it is believed  that such  Certificateholders  would  probably be
treated  for  federal  income  tax  purposes  as if  they  had (l)  received  as
distributions  their  full  share  of  such  receipts,  (2)  paid  over  to  the
Certificateholders  of the other Class of  Certificates  an amount equal to such
Shortfall Amount, and (3) retained the right to reimbursement of such amounts to
the extent of future collections  otherwise  available for deposit in the Spread
Account. However, Federal Tax Counsel cannot opine to such treatment.

                  Under this treatment,  (1) Class B Certificateholders would be
required to accrue as current income any interest, OID income, or (to the extent
paid on the SBA  Loans)  accrued  market  discount  of the Trust Fund that was a
component of the Shortfall  Amount,  even though such amount was in fact paid to
the Class A Certificateholders,  (2) a loss would only be allowed to the Class B
Certificateholders  when their right to receive  reimbursement of such Shortfall
Amount became worthless  (i.e.,  when it became clear that that amount would not
be available from any source to reimburse such loss),  and (3)  reimbursement of


                                      -96-
<PAGE>

such  Shortfall  Amount  prior to such a claim  of  worthlessness  would  not be
taxable income to Class B Certificateholders  because such amount was previously
included  in  income.  Similarly,  a loss  would  only be allowed to the Class A
Certificateholders  when their right to receive  reimbursement of such Shortfall
Amount became  worthless.  Those  results  should not  significantly  affect the
inclusion  of income for Class B  Certificateholders  on the  accrual  method of
accounting,   but   could   accelerate   inclusion   of   income   to   Class  B
Certificateholders on the cash method of accounting by, in effect,  placing them
on the accrual method.  Moreover, the character and timing of loss deductions is
unclear and Federal Tax Counsel cannot opine as to such character or timing.

Status of the Certificates as Real Property Loans

                  The  Certificates  generally will be "qualifying real property
loans" within the meaning of Section  593(d) of the Code,  "real estate  assets"
for purposes of Section  856(c)(4)(A)  of the Code,  and interest  income on the
Certificates  generally will be "interest on obligations secured by mortgages on
real property"  within the meaning of Section  856(c)(3)(B)  of the Code, to the
extent  that  the  SBA  Loans  are  mortgages  secured  by  real  property.  The
Certificates generally will be treated as "loans . . . secured by an interest in
real property" within the meaning of Section  7701(a)(19)(C)(v)  of the Code, to
the extent that the SBA Loans are secured by residential real estate mortgages.

Sales of Certificates

                  A holder that sells a Certificate  will recognize gain or loss
equal to the difference between the amount realized on the sale and its adjusted
basis in the  Certificate.  In  general,  such  adjusted  basis  will  equal the
holder's  cost  for the  Certificate,  increased  by the  amount  of any  income
previously reported with respect to the Certificate, and decreased by the amount
of any losses previously reported with respect to the Certificate and the amount
of any distributions  received thereon.  Any such gain or loss generally will be
capital  gain or loss if the  assets  underlying  the  Certificate  were held as
capital assets, except that, in the case of a Certificate that was acquired with
more than a de minimis amount of market  discount,  such gain will be treated as
ordinary  interest  income to the extent of the  portion of such  discount  that
accrued during the period in which the seller held the  Certificate and that was
not  previously  included  in  income.  Any such  capital  gain or loss would be
long-term  capital  gain  or  loss  if the  Certificateholder's  holding  period
exceeded one year.

Foreign Investors

                  A  Certificateholder  who is not a "United  States person" (as
defined  below)  and is not  subject  to  federal  income tax as a result of any
direct or indirect connection to the United States other than its ownership of a
Certificate generally will not be subject to United States income or withholding
tax in  respect  of  payments  of  interest  or  original  issue  discount  on a
Certificate,  provided  that the holder  complies to the extent  necessary  with
certain identification  requirements (including delivery of a statement,  signed
by the Certificateholder under penalties of perjury, certifying that such holder
is not a United  States  person  and  providing  the name  and  address  of such
holder). For these purposes,  the term "United States person" means a citizen or
a resident of the United  States,  a corporation,  partnership,  or other entity
created  or  organized  in,  or under  the laws of,  the  United  States  or any
political  subdivision  thereof,  an estate  the  income of which is  subject to
United States federal income taxation  regardless of its source, and a trust for
which one or more  United  States  persons  have the  authority  to control  all
substantial  decisions  and for which a court of the United  States can exercise
primary  supervision over the trust's  administration.  Recently issued Treasury
regulations,  which are generally  effective with respect to payments made after
December 31, 1999, consolidate and modify the current certification requirements
and means by which a holder  may claim  exemption  from  United  States  federal
income tax withholding and provide certain presumptions  regarding the status of


                                      -97-
<PAGE>

holders  when  payments  to the  holders  cannot  be  reliably  associated  with
appropriate  documentation  provided to the payor.  All holders  should  consult
their tax advisers regarding the application on these regulations.

Backup Withholding

                  Payments of  interest  and  principal,  as well as payments of
proceeds  from  the  sale of  Certificates,  to  Certificateholders  who are not
"exempt recipients" may be subject to the "backup withholding" tax under Section
3406 of the  Code at a rate of 31  percent,  if  such  holders  fail to  furnish
certain  information,  including their taxpayer  identification  numbers, to the
Trustee,  its  agent,  or the broker  effecting  a sale of the  Certificate,  or
otherwise fail to establish an exemption from such tax. Any amounts deducted and
withheld from a distribution to a Certificateholder would be allowed as a credit
against  such  Certificateholder's  federal  income  tax.  Furthermore,  certain
penalties  may be imposed by the IRS on a  Certificateholder  who is required to
supply information but who does not do so in the proper manner.


                              ERISA CONSIDERATIONS

                  The  Employee  Retirement  Income  Security  Act of  1974,  as
amended  ("ERISA"),  imposes certain  requirements on employee  benefit plans or
other  retirement  arrangements  which are subject to ERISA and on those persons
who are fiduciaries with respect to such benefit plans or arrangements.  Certain
employee benefit plans, such as governmental  plans (as defined in Section 3(32)
of ERISA) and certain  church plans (as defined in Section 3(33) of ERISA),  are
not subject to ERISA. In accordance with ERISA's  general  fiduciary  standards,
before  investing in a Certificate  a benefit plan  fiduciary  should  determine
whether  such an  investment  is  permitted  under the  governing  benefit  plan
instruments  and is  appropriate  for the  benefit  plan in view of its  overall
investment policy and the composition and diversification of its portfolio.

                  In  addition,  employee  benefit  plans  or  other  retirement
arrangements  subject to ERISA and  individual  retirement  accounts  or certain
types of Keogh  plans not  subject to ERISA but  subject to Section  4975 of the
Code or any entity whose underlying  assets include plan assets by reason of the
plan, account or other arrangement investing in such entity (including insurance
company separate or general accounts or collective  investment  funds) ("Plans")
are  prohibited  from engaging in a broad range of  transactions  involving Plan
assets and persons having certain specified relationships to a Plan ("parties in
interest"  and  "disqualified  persons").   Such  transactions  are  treated  as
"prohibited  transactions"  under Sections 406 and 407 of ERISA and excise taxes
are imposed  upon such  persons by Section  4975 of the Code.  The  Seller,  the
Servicer,  Rothschild Inc., the Trustee and certain of their affiliates might be
considered  "parties in interest" or  "disqualified  persons"  with respect to a
Plan. If so, the  acquisition or holding of Certificates by or on behalf of such
Plan could be considered to give rise to a "prohibited  transaction"  within the
meaning of ERISA and the Code unless an exemption is available. Furthermore, the
Department  of  Labor  ("DOL")  has  issued  a  regulation  (29  C.F.R.  Section
2510.3-101)  concerning the definition of what  constitutes the assets of a Plan
(the "Plan Asset Regulation") which provides that, under certain  circumstances,
the underlying assets and properties of corporations,  partnerships,  trusts and
certain  other  entities  in which a Plan makes an "equity"  investment  will be
deemed for purposes of ERISA to be assets of the investing  Plan unless  certain
exceptions  apply.  If an  investing  Plan's  assets  were  deemed to include an
interest  in the SBA Loans  which  constitute  the Trust  Fund and not merely an
interest in the Certificates, transactions occurring in the servicing of the SBA
Loans  might  constitute   prohibited   transactions  unless  an  administrative
exemption  applies.   Thus,  a  Plan  fiduciary  considering  an  investment  in
Certificates should also consider whether such an investment might constitute or
give rise to a  prohibited  transaction  under ERISA or the Code.  In  addition,


                                      -98-
<PAGE>

investors  that are insurance  companies  should consult with their counsel with
respect to the United  States  Supreme  Court  case,  John  Hancock  Mutual Life
Insurance  Co. v. Harris Trust and Savings Bank,  114 S. Ct. 517 (1993).  In the
John Hancock decision,  the Supreme Court ruled that assets held in an insurance
company's  general  account  may be deemed  to be "plan  assets"  under  certain
circumstances.  Investors  should  analyze  whether  that  decision  or  federal
legislation  enacted  affecting  such  accounts  (See  Section 1460 of the Small
Business Job Protection Act of 1996) and any regulations  issued  thereunder may
have an impact with respect to purchases of Certificates.

                  The  DOL has  issued  to  Rothschild  Inc.  an  administrative
exemption,  Prohibited Transaction Exemption 95-59, 60 Fed. Reg. 35930 (July 12,
1995) (the  "Exemption"),  which  generally  exempts from the application of the
prohibited  transaction  provisions  of Section  406(a),  Section  406(b)(1) and
Section  406(b)(2) of ERISA,  and the excise taxes  imposed  pursuant to Section
4975(a) and (b) of the Code, the initial purchase, holding and subsequent resale
of mortgage-backed and asset-backed pass-through certificates, such as the Class
A Certificates,  representing a beneficial  undivided  interest in certain asset
pools held in a trust (as  defined  in  paragraph  III.B of  Section  III of the
Exemption),  along with  certain  transactions  relating  to the  servicing  and
operation of such asset pools, provided that certain conditions set forth in the
Exemption  are  satisfied.  Paragraph  III.B  of  Section  III of the  Exemption
provides  in part that a trust means an  investment  pool the corpus of which is
held in trust and  consists  solely of: (1) secured  consumer  receivables,  (2)
secured credit instruments, (3) obligations secured by residential or commercial
real  property,  (4)  obligations  secured by motor  vehicles  or  equipment  or
qualified  motor  vehicle  leases,  (5)  guaranteed  governmental  mortgage pool
certificates or (6) an undivided  fractional  interest in any of the obligations
listed in clauses (1) - (5) above.

                  If the general  conditions  of Section II of the Exemption are
satisfied,  the Exemption may provide an exemption from the restrictions imposed
by Sections  406(a) and 407(a) of ERISA (as well as the excise taxes  imposed by
Section 4975(a) and (b) of the Code by reason of Sections  4975(c)(1)(A) through
(D) of the Code) in  connection  with the direct or indirect  sale,  exchange or
transfer of Class A Certificates by Plans in the initial issue of  Certificates,
the  holding  of  Class A  Certificates  by  Plans  or the  direct  or  indirect
acquisition or disposition  in the secondary  market of Class A Certificates  by
Plans.  However,  no exemption  is provided  from the  restrictions  of Sections
406(a)(1)(E),  406(a)(2)  and 407 of ERISA for the  acquisition  or holding of a
Class A  Certificate  on  behalf of an  "Excluded  Plan" by any  person  who has
discretionary  authority or renders investment advice with respect to the assets
of such Excluded  Plan.  For purposes of the Class A  Certificates,  an Excluded
Plan  is a Plan  sponsored  by (1)  Rothschild  Inc.,  (2) the  Seller,  (3) the
Servicer,   (4)  the  Trustee,  (5)  any  Obligor  with  respect  to  SBA  Loans
constituting more than 5 percent of the aggregate  unamortized principal balance
of the SBA Loans as of the date of initial  issuance and (6) any  affiliate of a
person described in (1) to (5) above (the "Restricted Group").

                  If the specific  conditions  of paragraph  I.B of Section I of
the Exemption are also  satisfied,  the Exemption may provide an exemption  from
the restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes
imposed  by  Sections  4975(a)  and  (b)  of  the  Code  by  reason  of  Section
4975(c)(I)(E)  of the Code in connection  with (1) the direct or indirect  sale,
exchange or transfer of Class A Certificates in the initial  issuance of Class A
Certificates between the Seller,  Rothschild Inc. and a Plan when the person who
has  discretionary  authority or renders  investment  advice with respect to the
investment of Plan assets in Class A Certificates is (a) an obligor with respect
to 5  percent  or less of the  fair  market  value  of the SBA  Loans  or (b) an
affiliate of such a person,  provided certain conditions are met, (2) the direct
or  indirect  acquisition  or  disposition  in the  secondary  market of Class A
Certificates by Plans,  provided certain conditions are met, and (3) the holding
of Class A Certificates by Plans.

                                      -99-
<PAGE>

                  If the  specified  conditions of paragraph I.C of Section I of
the Exemption  are  satisfied,  the Exemption may provide an exemption  from the
restrictions  imposed by Sections  406(a),  406(b) and 407(a) of ERISA,  and the
taxes  imposed  by  Sections  4975(a)  and (b) of the Code by reason of  Section
4975(c)  of  the  Code  for  transactions  in  connection  with  the  servicing,
management and operation of the Trust Fund.

                  The Exemption may provide an exemption  from the  restrictions
imposed  by  Sections  406(a)  and  407(a) of ERISA,  and the taxes  imposed  by
Sections 4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through
(D) of the Code if such  restrictions  are  deemed  to  otherwise  apply  merely
because  a person  is deemed  to be a "party  in  interest"  or a  "disqualified
person" with respect to an investing Plan by virtue of providing services to the
Plan (or by virtue of having certain  specified  relationships to such a person)
solely as a result of such Plan's ownership of Class A Certificates.

                  The Exemption sets forth the following six general  conditions
which must be satisfied  for a transaction  to be eligible for exemptive  relief
thereunder.

                  (1) The acquisition of the  certificates by a Plan is on terms
(including the price for the certificates) that are at least as favorable to the
Plan as they would be in an arm's length transaction with an unrelated party;

                  (2) The rights and  interests  evidenced  by the  certificates
acquired by the Plan are not subordinated to the rights and interests  evidenced
by other certificates of the trust;

                  (3) The  certificates  acquired  by the Plan have  received  a
rating at the time of such  acquisition that is one of the three highest generic
rating  categories  from  either  Standard & Poor's  Ratings  Services,  Moody's
Investors  Service,  Inc.,  or  Fitch  IBCA,  Inc.  (collectively,  the  "Rating
Agency");

                  (4)      The trustee must not be an affiliate of any other
member of the Restricted Group (as defined above);

                  (5) The sum of all payments made to and retained by Rothschild
Inc. in connection with the  distribution  of  certificates  represents not more
than  reasonable  compensation  for  placing  the  certificates.  The sum of all
payments made and retained by the Seller pursuant to the assignment of the loans
to the trust fund  represents not more than the fair market value of such loans.
The sum of all payments made to and retained by the servicer represents not more
than reasonable  compensation  for such person's  services under the pooling and
servicing  agreement and reimbursement of such person's  reasonable  expenses in
connection therewith; and

                  (6) The Plan investing in the  certificates  is an "accredited
investor" as defined in Rule  501(a)(1) of Regulation D under the Securities Act
of 1933.

                  In   addition,   the  trust  fund  must  meet  the   following
requirements:

                           (i)       the corpus of the trust  fund must  consist
                                     solely of assets of the type that have been
                                     included in other investment pools;

                           (ii)      certificates in such other investment pools
                                     must  have  been  rated in one of the three
                                     highest  rating  categories  of the  Rating
                                     Agency  for at least one year  prior to the
                                     Plan's acquisition of certificates; and

                                     -100-
<PAGE>

                           (iii)     certificates  evidencing  interests in such
                                     other   investment  pools  must  have  been
                                     purchased by investors other than Plans for
                                     at  least  one  year  prior  to any  Plan's
                                     acquisition of certificates.


                  On July 21, 1997, the DOL published in the Federal  Register a
final  amendment to the  Exemption  which  extends  exemptive  relief to certain
mortgage-backed  and  asset-backed  securities  transactions  using  pre-funding
accounts  for trusts  issuing  pass-through  certificates.  With  respect to the
Certificates,  the  amendment  generally  allows a portion of the  mortgages  or
receivables  ("Loans")  supporting payments to  Certificateholders  and having a
principal  amount equal to no more than 25% of the total principal amount of the
Certificates  to be  transferred  to the Trust  within a 90-day  or  three-month
period following the Closing Date ("Pre-Funding  Period"),  instead of requiring
that all such Loans be either identified or transferred on or before the Closing
Date.  The relief is effective  for  transactions  occurring on or after May 23,
1997, provided that the following conditions are met:

                  (1) The  ratio  of the  amount  allocated  to the  Pre-Funding
Account  to the  total  principal  amount  of  the  Certificates  being  offered
("Pre-Funding Limit") must not exceed twenty-five percent (25%).

                  (2) All Loans  transferred after the Closing Date ("Additional
Loans") must meet the same terms and conditions for  eligibility as the original
Loans used to create the Trust, which terms and conditions have been approved by
the Rating Agency.

                  (3) The transfer of such Additional  Loans to the Trust during
the  Pre-Funding  Period must not result in the  Certificates  receiving a lower
credit rating from the Rating Agency upon termination of the Pre-Funding  Period
than the rating that was  obtained  at the time of the  initial  issuance of the
Certificates by the Trust.

                  (4) Solely as a result of the use of pre-funding, the weighted
average annual percentage interest rate (the "average interest rate") for all of
the Loans in the  Trust at the end of the  Pre-Funding  Period  must not be more
than 100 basis points lower than the average  interest  rate for the Loans which
were transferred to the Trust on the Closing Date.


                  (5) Either:  (i) the  characteristics  of the Additional Loans
must be  monitored  by an  insurer or other  credit  support  provider  which is
independent  of the Seller;  or (ii) an independent  accountant  retained by the
Seller must provide the Seller with a letter (with copies provided to the Rating
Agency,  the  Placement  Agent  and  the  Trustee)  stating  whether  or not the
characteristics of the Additional Loans conform to the characteristics described
in the Confidential Placement Memorandum and/or Pooling and Servicing Agreement.
In preparing such letter,  the independent  accountant must use the same type of
procedures  as were  applicable  to the Loans which were  transferred  as of the
Closing Date.


                  (6) The Pre-Funding Period must end no later than three months
or 90 days after the Closing Date or earlier, in certain  circumstances,  if the
amount on deposit in the Pre-Funding  Account is reduced below the minimum level
specified in the Pooling and Servicing  Agreement or an event of default  occurs
under the Pooling and Servicing Agreement.

                                     -101-
<PAGE>

                  (7) Amounts  transferred  to any  Pre-Funding  Account  and/or
Capitalized  Interest  Account used in connection  with the  pre-funding  may be
invested  only in  investments  which are permitted by the Rating Agency and (i)
are direct  obligations of, or obligations fully guaranteed as to timely payment
of principal and interest by, the United States or any agency or instrumentality
thereof  (provided that such obligations are backed by the full faith and credit
of the United  States);  or (ii) have been rated (or the obligor has been rated)
in one of the three  highest  generic  rating  categories  by the Rating  Agency
("Permitted Investments").


                  (8) The Confidential  Placement Memorandum must describe:  (i)
any Pre-Funding  Account and/or Capitalized  Interest Account used in connection
with a Pre-Funding  Account;  (ii) the duration of the Pre-Funding Period; (iii)
the percentage  and/or dollar amount of the Pre-Funding Limit for the Trust; and
(iv) that the amounts  remaining  in the  Pre-Funding  Account at the end of the
Pre-Funding  Period will be  remitted to  Certificateholders  as  repayments  of
principal.


                  (9) The Pooling and  Servicing  Agreement  must  describe  the
Permitted  Investments  for the  Pre-Funding  Account and  Capitalized  Interest
Account and, if not  disclosed in the  Confidential  Placement  Memorandum,  the
terms and conditions for eligibility of the Additional Loans.

                  The Seller  expects  that the  conditions  with respect to the
Pre-Funding  Account will be satisfied and that the general conditions set forth
under clauses (2), (3) and (5) above will be satisfied.


                  As the Class B  Certificates  are  subordinate,  the Exemption
will  not be  applicable  to the  sale,  purchase  or  holding  of such  Class B
Certificates.  However,  if the Class B Certificates are sold in the future in a
private  placement or underwriting by Rothschild Inc. or any other entity with a
prohibited  transaction  exemption  similar  to  the  Exemption,   the  Class  B
Certificates  may be purchased by an "insurance  company general account" within
the meaning of Section V(e) of Prohibited  Transaction Class Exemption 95-60, 60
Fed. Reg. 35925 (July 12, 1995) but the Class B  Certificates  may not otherwise
be purchased by or on behalf of other Plans.

                  Any  Plan  fiduciary  considering  the  purchase  of a Class A
Certificate  should  consult  with its  counsel  with  respect to the  potential
applicability  of ERISA and the Code to such  investment  and as to whether  the
conditions  of the  Exemption  are  satisfied  with respect to such  investment.
Moreover,  each Plan  fiduciary  should  determine  whether,  under the  general
fiduciary standards of investment prudence and diversification, an investment in
the Class A Certificates  is appropriate  for the Plan,  taking into account the
overall  investment  policy  of the  Plan  and  the  composition  of the  Plan's
investment portfolio.


                                    PLACEMENT

                  Pursuant to the terms of a Purchase  Agreement  (the "Purchase
Agreement"),  among the Seller,  the Spread  Account  Depositor  and the Initial
Purchaser,  the Spread Account  Depositor will sell to the Initial Purchaser and
the Initial  Purchaser will purchase from the Spread Account Depositor the Class
A Certificates.


                                     -102-
<PAGE>

                               NOTICE TO INVESTORS

                  Because of the following  restrictions,  investors are advised
to consult legal  counsel  prior to making any offer,  resale or pledge or other
transfer of Class A Certificates.

                  The  Class  A  Certificates  are  being  offered  and  sold to
"Qualified  Institutional  Buyers" within the meaning of and in reliance on Rule
144A  under  the  Securities  Act,  and to a  limited  number  of  institutional
"Accredited  Investors"  within  the  meaning  of Rule  501(a)(1)-(3)  under the
Securities Act.

                  Class A  Certificates  will  be  delivered  to the  purchasers
thereof in definitive, fully registered and certificated form without coupons in
minimum  denominations of $100,000 or any integral  multiple of $1,000 in excess
thereof.  See  "Description  of the  Agreement  and the  Certificates  --  Form,
Denomination, Exchange, Registration and Title."

                  Each purchaser of the Class A Certificates offered hereby will
be deemed to have represented  and/or  acknowledged and agreed as follows (terms
used in this  paragraph that are defined in Rule 144A are used herein as defined
therein):

                           (1) The purchaser  (A) is a "qualified  institutional
                  buyer"  within the  meaning  of Rule 144A or an  institutional
                  "Accredited    Investor"   (within   the   meaning   of   Rule
                  501(a)(1)-(3)  or  (7)  under  the  Securities  Act),  (B)  is
                  acquiring the Class A Certificates  for its own account or for
                  the  account  of such a  qualified  institutional  buyer or an
                  institutional  Accredited  Investor  purchasing for investment
                  and not for  distribution  in violation of the Securities Act,
                  and (C) will deliver a certificate in the form attached to the
                  Agreement prior to receipt of Class A Certificates.

                           (2) The Class A  Certificates  have not been and will
                  not  be  registered   under  the  Securities  Act,  any  state
                  securities  or  "Blue  Sky"  law,  and may  not be  reoffered,
                  resold,  pledged or  otherwise  transferred  except (A) (i) in
                  certificated  form (1) to a person whom the seller  reasonably
                  believes is a  "qualified  institutional  buyer" as defined in
                  Rule 144A of the  Securities  Act that  purchases  for its own
                  account  or the  account of  another  qualified  institutional
                  buyer to whom  notice  is given  that the  resale,  pledge  or
                  transfer is being made in reliance on Rule 144A,  or (2) to an
                  institutional   Accredited  Investor  pursuant  to  any  other
                  exemption from the registration requirements of the Securities
                  Act, in each case subject to (a) the receipt by the Trustee of
                  a letter in the form  attached  to the  Agreement  and (b) the
                  receipt by the Trustee of such other  evidence  acceptable  to
                  the Trustee that such reoffer,  resale,  pledge or transfer is
                  in compliance  with the  Securities  Act and other  applicable
                  laws, (ii) pursuant to another  exemption  available under the
                  Securities  Act or  (iii)  pursuant  to a  valid  registration
                  statement and (B) in accordance with all applicable securities
                  and "Blue Sky" laws of any States of the United  States or any
                  other applicable jurisdictions.

                           (3) The  Class A  Certificates  will bear a legend to
                  the  following  effect,   unless  the  Bank  and  the  Trustee
                  determines otherwise in accordance with applicable law:

                           "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),
OR UNDER ANY STATE  SECURITIES OR BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF,
BY PURCHASING THIS CERTIFICATE,  AGREES THAT THIS CERTIFICATE MAY BE REOFFERED,
RESOLD,  PLEDGED OR OTHERWISE  TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER  APPLICABLE  LAWS AND ONLY (1) IN CERTIFICATED FORM
(A)  PURSUANT  TO RULE 144A UNDER THE  SECURITIES  ACT  ("RULE  144A") TO A


                                     -103-
<PAGE>

PERSON THAT THE HOLDER REASONABLY  BELIEVES IS A QUALIFIED  INSTITUTIONAL  BUYER
WITHIN THE MEANING OF RULE 144A (A "QIB"),  PURCHASING  FOR ITS OWN ACCOUNT OR A
QIB PURCHASING  FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED,  IN EACH
CASE,  THAT THE  REOFFER,  RESALE,  PLEDGE OR OTHER  TRANSFER  IS BEING  MADE IN
RELIANCE ON RULE 144A, OR (B) TO AN INSTITUTIONAL  "ACCREDITED INVESTOR" (WITHIN
THE MEANING OF RULE  501(a)(1)-(3)  or (7) UNDER THE SECURITIES  ACT) PURCHASING
FOR INVESTMENT AND NOT FOR  DISTRIBUTION  IN VIOLATION OF THE SECURITIES ACT, IN
EACH CASE,  SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER  SUBSTANTIALLY
IN THE FORM PROVIDED IN THE AGREEMENT AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH
OTHER EVIDENCE  ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER,  RESALE,  PLEDGE OR
TRANSFER IS IN COMPLIANCE  WITH THE SECURITIES ACT AND OTHER  APPLICABLE LAWS OR
IN EACH CASE IN ACCORDANCE  WITH ALL  APPLICABLE  SECURITIES  LAWS OF THE UNITED
STATES AND  SECURITIES  AND BLUE SKY LAWS OF ANY STATE OF THE UNITED  STATES AND
ANY OTHER APPLICABLE  JURISDICTION,  (2) PURSUANT TO ANOTHER EXEMPTION AVAILABLE
UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE  STATE SECURITIES
LAWS, OR (3) PURSUANT TO A VALID REGISTRATION STATEMENT. "

                           (4) If it is acquiring any Class A Certificates  as a
                  fiduciary or agent for one or more investor  accounts,  it has
                  sole  investment  discretion with respect to each such account
                  and  that  it has  full  power  to make  the  acknowledgments,
                  representations  and agreements  contained herein on behalf of
                  such account.


                                LEGAL INVESTMENT

                  There may be restrictions on the ability of certain investors,
including depository institutions, either to purchase Class A Certificates or to
purchase Class A Certificates  representing more than a specified  percentage of
the  investor's  assets.  Investors  should  consult their own legal advisors in
determining whether and to what extent the Class A Certificates constitute legal
investments for such investors.

                                     RATING

                  It  is  a  condition  to  their  issuance  that  the  Class  A
Certificates be rated "AAA" by DCR. A security rating is not a recommendation to
buy, sell or hold securities and may be subject to revision or withdrawal at any
time. No person is obligated to maintain the rating on any Certificate.


                                  LEGAL MATTERS

                  Certain legal matters relating to the validity of the issuance
of the Class A Certificates will be passed upon for the Seller by Weil,  Gotshal
& Manges,  LLP and Stroock & Stroock & Lavan LLP.  Stroock & Stroock & Lavan LLP
also will render opinions relating to the transfer of the Unguaranteed Interests
from the  Seller to the Trust  Fund and as to the  material  federal  income tax
consequences  associated  with the purchase,  ownership and  disposition  of the
Class A Certificates. See "Material Federal Income Tax Consequences" herein.


                              FINANCIAL INFORMATION

                                     -104-
<PAGE>

                  The Seller has  determined  that its financial  statements are
not material to the offering made hereby. Except for certain representations and
warranties relating to the SBA Loans, the obligations of the Seller with respect
to the SBA Loans are primarily limited to contractual servicing obligations.

                  The  Trust  Fund has been  formed  to own the SBA Loans and to
issue the Certificates. The Trust Fund had no assets or obligations prior to the
issuance of the  Certificates  and will not engage in any activities  other than
those described herein. Accordingly, no financial statements with respect to the
Trust Fund are included in this Memorandum.




                                     -105-
<PAGE>



                            INDEX OF PRINCIPAL TERMS

                                                                           Page



<PAGE>


Account......................................................................105
Accredited Investors...........................................................1
Act...........................................................................52
Additional Fee.................................................................9
Additional Fee SBA Loans.......................................................9
Adjusted SBA Loan Remittance Rate.............................................23
Aggregate Class A Certificate Principal Balance..............................105
Aggregate Class B Certificate Principal Balance..............................105
Annual Expense Escrow Amount.................................................105
Assignee......................................................................21
Assignment of Mortgage.......................................................105
Available Funds...............................................................12
BIF..........................................................................105
Business Day.................................................................105
Capitalized Interest Account..................................................12
Certificate Account...........................................................73
Certificate Register.........................................................105
Certificate Registrar........................................................105
Certificateholder or Holder..................................................105
Certified Lender..............................................................52
Class A Carry-Forward Amount..................................................16
Class A Certificates...........................................................8
Class A Interest Distribution Amount..........................................75
Class A Percentage............................................................16
Class A Principal Distribution Amount.........................................15
Class A Remittance Amount.....................................................16
Class A Remittance Rate.......................................................13
Class B Carry-Forward Amount..................................................16
Class B Certificates...........................................................8
Class B Interest Distribution Amount..........................................75
Class B Principal Distribution Amount.........................................15
Class B Remittance Amount.....................................................16
Class B Remittance Rate.......................................................13
CLASS CARRY FORWARD INTEREST AMOUNT..........................................106
Class A Certificate Balance...................................................15
Class B Certificate Balance...................................................15
Class B Percentage............................................................16
Cleanup Costs.................................................................88
Code..........................................................................89
Collateral...................................................................106
Commercial Property..........................................................106
Compensating Interest.........................................................24
CPR...........................................................................55


                                     -106-
<PAGE>

Curtailment..................................................................106
Cut-Off Date..................................................................10
Designated Depository Institution............................................106
Determination Date...........................................................106
Due Date.....................................................................106
Due Period....................................................................15
Eligible Deposit Account.....................................................106
ERISA.........................................................................25
Event of Default.............................................................106
Excess Payments..............................................................106
Excess Proceeds..............................................................106
Excess Spread.................................................................10
Expense Account..............................................................107
Extra Interest................................................................75
Extra Interest Percentage.....................................................75
FDIC.........................................................................107
Federal Tax Counsel...........................................................25
FHLMC........................................................................107
FNMA.........................................................................107
Foreclosed Property..........................................................107
Foreclosed Property Disposition..............................................107
FTA............................................................................9
FTA's Fee......................................................................9
Funding Period................................................................12
grantor trust.................................................................25
Guaranteed Interest............................................................9
Initial Class A Certificate Principal Amount...................................8
Initial Class B Principal Amount...............................................8
Initial Deposit...............................................................18
Insurance Proceeds...........................................................107
Interest Accrual Period.......................................................11
IRS...........................................................................89
Liquidated SBA Loan..........................................................107
Liquidation Proceeds.........................................................107
Loan Guaranty Agreement......................................................107
Majority Certificateholders..................................................107
Monthly Advance...............................................................23
Monthly Payment..............................................................107
Mortgage.....................................................................107
Mortgaged Property...........................................................108
Multi-Party Agreement.........................................................22
Net Liquidation Proceeds.....................................................108
Note Rates....................................................................38
Notes.........................................................................11
Obligor........................................................................9


                                     -107-
<PAGE>

OID...........................................................................25
Opinion of Counsel...........................................................108
Original Class A Certificate Principal Balance...............................108
Original Class B Certificate Principal Balance...............................108
Original Pool Principal Balance...............................................11
Paying Agent.................................................................108
Percentage Interest..........................................................108
Permitted Instruments........................................................108
Person.......................................................................109
Pool Principal Balance.......................................................109
Preferred Lender..............................................................52
Pre-Funded Amount.............................................................11
Premium Protection Fee........................................................10
Prime Rate....................................................................13
Principal and Interest Account...............................................109
Principal Balance............................................................109
Principal Prepayment.........................................................109
Prior Lien...................................................................109
Purchase Price................................................................89
Record Date...................................................................17
Registered Holder............................................................109
Reimbursable Amounts.........................................................109
Released Mortgaged Property Proceeds..........................................77
REMIC.........................................................................25
Remittance Date...............................................................17
Residential Property.........................................................110
Responsible Officer..........................................................110
SAIF.........................................................................110
SBA File.....................................................................110
SBA Form 1086................................................................110
SBA Loan Interest Rate.......................................................110
SBA Loan Pool..................................................................9
SBA Loan Schedule............................................................110
SBA Rules and Regulations....................................................110
Section 7(a) Program..........................................................52
Servicer's Certificate.......................................................110
Servicing Advances............................................................24
Servicing Fee.................................................................24
Servicing Officer............................................................111
simple interest...............................................................35
Special Remittance Date.......................................................12
Specified Spread Account Requirement..........................................18
Spread........................................................................88
Spread Account................................................................17
Spread Account Agreement......................................................18


                                     -108-
<PAGE>

Spread Account Custodian.....................................................111
Spread Account Depositor......................................................17
Spread Balance................................................................18
Subsequent SBA Loans...........................................................2
Subsequent Transfer Date..................................................10, 64
Subservicer..................................................................111
Subservicing Agreement.......................................................111
Successor Servicer............................................................81
Superlien.....................................................................88
Tax Return...................................................................111
Termination Price.............................................................82
Trustee........................................................................8
UCC...........................................................................22
Unguaranteed Percentage.......................................................10
United States person..........................................................92
weighted average life.........................................................54



                                     -109-
<PAGE>

CERTAIN DEFINITIONS

             Set  forth  below  is a  summary  of  certain  of  the  definitions
contained in the Agreement and used in this Memorandum. Reference is made to the
Agreement for the full definitions of all terms.

             ACCOUNT:  The Certificate  Account, the Pre-Funding Account and the
Capitalized Interest Account, each established by the Trustee for the benefit of
the  Certificateholders;  the Expense Account established by the Trustee for the
benefit  of the  Trustee  and the  Spread  Account  held by the  Spread  Account
Custodian pursuant to the Spread Account Agreement.  The Trustee's obligation to
establish and maintain the Certificate  Account pursuant to the Agreement is not
delegable.

             AGGREGATE CLASS A CERTIFICATE  PRINCIPAL BALANCE: As of any date of
determination, the Original Class A Aggregate Certificate Principal Balance less
the sum of all amounts previously  distributed to the Class A Certificateholders
in respect of principal.

             AGGREGATE CLASS B CERTIFICATE  PRINCIPAL BALANCE: As of any date of
determination, the Original Aggregate Class B Certificate Principal Balance less
the sum of all amounts previously  distributed to the Class B Certificateholders
in respect of principal.

             ANNUAL EXPENSE ESCROW AMOUNT: The product of .05% per annum and the
Pool  Principal  Balance,  which is computed and payable on a monthly  basis and
represents the estimated annual Trustee's fees and Trust Fund expenses.

             ASSIGNMENT OF MORTGAGE:  With respect to those SBA Loans secured by
a Mortgaged  Property,  an  assignment  of the  Mortgage,  notice of transfer or
equivalent  instrument sufficient under the laws of the jurisdiction wherein the
related  Mortgaged  Property is located to reflect of record the transfer of the
related SBA Loan to the Trustee.

             BIF:  The Bank Insurance Fund, or any successor thereto.

             BUSINESS DAY: Any day other than (i) a Saturday or Sunday,  or (ii)
a day on which  banking  institutions  in the States of New York or Delaware are
authorized or obligated by law or executive order to be closed.

             CERTIFICATEHOLDER or HOLDER: Each Person in whose name a Class A or
Class B  Certificate  is registered in the  Certificate  Register,  except that,
solely  for the  purposes  of giving  any  consent,  waiver,  request  or demand
pursuant to the Agreement, any Certificate registered in the name of the Seller,
the Servicer,  any Subservicer or any affiliate of any of them,  shall be deemed
not to be outstanding and the undivided  Percentage  Interest  evidenced thereby
shall not be taken into account in determining whether the requisite  percentage
of Certificates necessary to effect any such consent,  waiver, request or demand
has been obtained.

             CERTIFICATE REGISTER:  The Certificate Register established and
maintained in accordance with the Agreement.

             CERTIFICATE REGISTRAR:  Initially, Marine Midland Bank and
thereafter, any successor appointed pursuant to the Agreement.

                                     -110-
<PAGE>

             CLASS B CARRY FORWARD INTEREST AMOUNT: For the Class B Certificates
on any Remittance Date, an amount equal to the product of (i) the Class Interest
Distribution  Amount for the Class B Certificates for such Remittance Date times
(ii) a fraction,  the numerator of which is the Class B Carry Forward Amount and
the denominator of which is the Aggregate Class B Certificate Principal Balance.

             COLLATERAL: All items of property (including a Mortgaged Property),
whether real or personal,  tangible or intangible,  or otherwise,  pledged by an
Obligor or others to the Seller to secure payment under an SBA Loan.

             COMMERCIAL PROPERTY:  Real property (other than agricultural
property or Residential Property) that generally is used by the Obligor in the
conduct of its business.

             CURTAILMENT:  With respect to an SBA Loan, any payment of principal
received  during a Due  Period  as part of a  payment  that is in excess of five
times the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the SBA Loan in full, nor is intended to cure a delinquency.

             DESIGNATED  DEPOSITORY  INSTITUTION:  With respect to the Principal
and Interest  Account,  an entity  which is an  institution  whose  deposits are
insured by either the BIF or SAIF  administered  by the FDIC,  the unsecured and
uncollateralized  long-term debt obligations of which shall be rated A or better
by DCR, and which is either (i) a federal  savings  association  duly organized,
validly  existing and in good standing under the federal  banking laws,  (ii) an
institution  duly  organized,  validly  existing and in good standing  under the
applicable banking laws of any state, (iii) a national banking  association duly
organized, validly existing and in good standing under the federal banking laws,
or (iv) a principal subsidiary of a bank holding company, in each case acting or
designated by the Servicer as the depository  institution  for the Principal and
Interest Account.

             DETERMINATION DATE:  That day of each month which is the third
Business Day prior to the 15th day of such month.

             DUE DATE:  The day of the month on which the Monthly Payment is due
from the Obligor on an SBA Loan.

             ELIGIBLE  DEPOSIT ACCOUNT:  Either (a) a segregated  account with a
Designated  Depository  Institution  or (b) a segregated  trust account with the
corporate trust department of a depository  institution organized under the laws
of the United States of America or any one of the States (or any domestic branch
of a foreign  bank),  having  corporate  trust  powers and acting as trustee for
funds deposited in such account.

             EVENT OF DEFAULT:  The Events of Default of the Servicer  specified
in the Agreement.

             EXCESS PAYMENTS: With respect to a Due Period, any amounts received
on an SBA Loan in excess of the Monthly  Payment due on the Due Date relating to
such Due Period which does not  constitute  either a Curtailment  or a Principal
Prepayment  or payment with respect to an overdue  amount.  Excess  Payments are
payments of principal for purposes of the Agreement.

             EXCESS  PROCEEDS:  As of any Remittance  Date,  with respect to any
Liquidated SBA Loan, the excess,  if any, of (a) the Unguaranteed  Percentage of
the total Net Liquidation  Proceeds,  over (b) the Principal Balance of such SBA


                                     -111-
<PAGE>

Loan as of the date  such SBA Loan  became a  Liquidated  SBA Loan  plus 30 days
interest  thereon at the then  applicable  Adjusted  SBA Loan  Remittance  Rate;
provided,  however,  that such  excess  shall be  reduced by the amount by which
interest accrued on the advance, if any, made by the Servicer at the related SBA
Loan  Interest  Rate(s)  exceeds  interest  accrued on such  advance at the then
applicable weighted average Class A and Class B Remittance Rates.

             EXPENSE ACCOUNT:  The expense account established and maintained by
the Trustee in accordance with the Agreement.

             FDIC:  The Federal Deposit Insurance Corporation and any successor
thereto.

             FHLMC:  The Federal Home Loan Mortgage Corporation and any
successor thereto.

             FNMA:  The Federal National Mortgage Association and any successor
thereto.

             FORECLOSED PROPERTY:  Property, the title to which is acquired in
foreclosure or by deed in lieu of foreclosure.

             FORECLOSED  PROPERTY  DISPOSITION:  The final sale of a  Foreclosed
Property acquired in foreclosure or by deed in lieu of foreclosure. The proceeds
of any  Foreclosed  Property  Disposition  constitute  part of the definition of
Liquidation Proceeds.

             INSURANCE  PROCEEDS:  Proceeds paid by any insurer  pursuant to any
insurance  policy  covering  an SBA Loan,  Collateral  or  Foreclosed  Property,
including  but not  limited  to title,  hazard,  life,  health  and/or  accident
insurance policies.

             LIQUIDATED SBA LOAN: Any defaulted SBA Loan or Foreclosed  Property
as to which the Servicer has determined that all amounts which it reasonably and
in good faith expects to recover have been  recovered from or on account of such
SBA Loan.

             LIQUIDATION PROCEEDS: Cash, including Insurance Proceeds,  proceeds
of any Foreclosed  Property  Disposition,  revenues received with respect to the
conservation  and  disposition of a Foreclosed  Property,  and any other amounts
received in connection  with the  liquidation  of defaulted  SBA Loans,  whether
through trustee's sale, foreclosure sale or otherwise.

             LOAN  GUARANTY  AGREEMENT:  The Loan Guaranty  Agreement  (Deferred
Participation)  (SBA Form 750) dated March 27, 1997 between the SBA and Business
Loan Center, Inc., as such agreement may be amended from time to time.

             MAJORITY  CERTIFICATEHOLDERS:  The Holder or Holders of Class A and
Class B  Certificates  evidencing  an Aggregate  Class A  Certificate  Principal
Balance and Aggregate Class B Certificate Principal Balance, as the case may be,
in excess of 50% of the  Aggregate  Class A  Certificate  Principal  Balance and
Aggregate Class B Certificate Principal Balance, as the case may be.

             MONTHLY  PAYMENT:  The monthly payment of principal and/or interest
required to be made by an Obligor on the related SBA Loan, as adjusted  pursuant
to the terms of the related SBA Note.

             MORTGAGE:  The mortgage, deed of trust or other instrument creating
a lien on a Mortgaged Property.

                                     -112-
<PAGE>

             MORTGAGED PROPERTY:  The underlying real property, if any, securing
an SBA Loan, consisting of a Commercial Property or
Residential Property and any improvements thereon.

             NET  LIQUIDATION  PROCEEDS:  Liquidation  Proceeds  net of (i)  any
reimbursements to the Servicer made therefrom pursuant to the Agreement and (ii)
amounts  required to be released to the related  Obligor  pursuant to applicable
law.

             OPINION OF COUNSEL: A written opinion of counsel,  who may, without
limitation, be counsel for the Seller or the Servicer,  reasonably acceptable to
the Trustee and experienced in matters relating thereto.

             ORIGINAL CLASS A CERTIFICATE PRINCIPAL BALANCE:  The initial
aggregate principal amount of Class A Certificates issued on
the Closing Date.

             ORIGINAL CLASS B CERTIFICATE PRINCIPAL BALANCE:  The initial
aggregate principal amount of Class B Certificates on the
Closing Date.

             PAYING AGENT: Initially,  Marine Midland Bank, and thereafter,  any
other Person that meets the eligibility standards for the Paying Agent specified
in the  Agreement  and is  authorized  by the  Trustee to make  payments  on the
Certificates on behalf of the Trustee.

             PERCENTAGE  INTEREST:  With  respect  to  a  Class  A  or  Class  B
Certificate,  the portion of the Trust Fund evidenced by such Class A or Class B
Certificate,   expressed  as  a  percentage,  the  numerator  of  which  is  the
denomination  represented  by  such  Class  A or  Class  B  Certificate  and the
denominator  of which is the Original Class A Certificate  Principal  Balance or
Original Class B Certificate Principal Balance, as the case may be.

             PERMITTED INSTRUMENTS:  As used herein, Permitted Instruments shall
include the following:

                  (i) direct general  obligations  of, or obligations  fully and
         unconditionally  guaranteed  as to the timely  payment of principal and
         interest  by,  the  United  States  or any  agency  or  instrumentality
         thereof,  provided  such  obligations  are backed by the full faith and
         credit of the United  States,  FHA  debentures,  Federal Home Loan Bank
         consolidated senior debt obligations, and FNMA senior debt obligations,
         but  excluding  any of such  securities  whose terms do not provide for
         payment of a fixed dollar amount upon maturity or call for redemption;

                  (ii) federal funds, certificates of deposit, time deposits and
         banker's  acceptances  (having original maturities of not more than 365
         days) of any bank or trust company  incorporated  under the laws of the
         United States or any state thereof,  provided that the short-term  debt
         obligations  of such bank or trust  company at the date of  acquisition
         thereof have been rated Duff 1+ or better by DCR;

                  (iii)  deposits  of any bank or savings  and loan  association
         which has combined  capital,  surplus and undivided profits of at least
         $3,000,000 which deposits are held only up to the limits insured by the
         BIF or SAIF  administered  by the  FDIC,  provided  that the  unsecured
         long-term debt obligations of such bank or savings and loan association
         have been rated A or better by DCR;

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                  (iv)  commercial paper (having original maturities of not more
than 365 days) rated Duff 1+ or better by DCR;

                  (v) debt  obligations  rated AAA by DCR  (other  than any such
         obligations  that do not have a fixed par value  and/or  whose terms do
         not promise a fixed dollar amount at maturity or call date);

                  (vi) investments in money market funds rated Duff 1+ or better
         by DCR the assets of which are invested solely in instruments described
         in clauses (i)-(v) above;

                  (vii) certain guaranteed  investment  contracts and repurchase
         agreements satisfying the criteria set forth in the Agreement; and

                  (viii) any other investment acceptable to the Rating Agencies,
         written  confirmation  of which shall be furnished to the Trustee prior
         to any such investment.

         PERSON:  Any  individual,  corporation,   partnership,  joint  venture,
association,   joint-stock   company,   trust,   national  banking  association,
unincorporated organization or government or any agency or political subdivision
thereof.

         POOL PRINCIPAL BALANCE:  The aggregate Principal Balances as of any
date of determination.

         PRINCIPAL AND INTEREST ACCOUNT:  The principal and interest account
established by the Servicer pursuant to the Agreement.

         PRINCIPAL  BALANCE:  With respect to any SBA Loan or related Foreclosed
Property, at any date of determination,  (i) the Unguaranteed  Percentage of the
principal  balance of the SBA Loan  outstanding  as of the Cut-Off  Date,  after
application of principal  payments  received on or before such date,  minus (ii)
the sum of (a) the  Unguaranteed  Percentage  of the  principal  portion  of the
Monthly Payments received during each Due Period ending prior to the most recent
Remittance  Date,  which  were  distributed  pursuant  to the  Agreement  on any
previous  Remittance Date, and (b) the Unguaranteed  Percentage of all Principal
Prepayments,   Curtailments,   Excess  Payments,  Insurance  Proceeds,  Released
Mortgaged  Property  Proceeds,  Net  Liquidation  Proceeds and net income from a
Foreclosed  Property  to the extent  applied by the  Servicer as  recoveries  of
principal  in  accordance  with the  provisions  of the  Agreement,  which  were
distributed  pursuant to the  Agreement on any  previous  Remittance  Date.  The
Principal  Balance of any Liquidated SBA Loan or any SBA Loan that has been paid
off will equal $0.

         PRINCIPAL PREPAYMENT:  Any payment or other recovery of principal on an
SBA Loan equal to the outstanding principal balance thereof, received in advance
of the final  scheduled  Due Date  which is  intended  to satisfy an SBA Loan in
full.

         PRIOR LIEN: With respect to any SBA Loan secured by a lien which is not
a first priority lien, each loan relating to the corresponding Collateral having
a prior priority lien.

         REGISTERED HOLDER:  With respect to any SBA Loan, the Person identified
as such in the applicable SBA Form 1086, and any
permitted assignees thereof.

         REIMBURSABLE  AMOUNTS:  As of any  date  of  determination,  an  amount
payable  to the  Servicer  and/or  the Seller  with  respect to (i) the  Monthly


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Advances and Servicing Advances reimbursable pursuant to the Agreement, (ii) any
advances reimbursable  pursuant to the Agreement and not previously  reimbursed,
and (iii) any other amounts  reimbursable to the Servicer or the Seller pursuant
to the Agreement.

         RESIDENTIAL  PROPERTY:  Any one or more of the  following,  (i)  single
family  dwelling unit not attached in any way to another  unit,  (ii) row house,
(iii) two-family house, (iv) low-rise condominium, (v) planned unit development,
(vi) three- or four-family house, (vii) high-rise condominium,  (viii) mixed use
building or (ix) manufactured  home (as defined in FNMA/FHLMC  Seller-Servicers'
Guide) to the extent that it constitutes  real property in the state in which it
is located.

         RESPONSIBLE OFFICER: When used with respect to the Trustee, any officer
assigned  to  the  Corporate  Trust  Division,  including  any  Vice  President,
Assistant  Vice  President,  any Assistant  Secretary,  any trust officer or any
other officer of the Trustee customarily  performing  functions similar to those
performed by any of the above  designated  officers and also,  with respect to a
particular  matter, any other officer to whom such matter is referred because of
such officer's  knowledge of and familiarity with the particular  subject.  When
used  with  respect  to the  Seller or the  Servicer,  the  President,  any Vice
President, Assistant Vice President, or any Secretary or Assistant Secretary.

         SAIF: The Savings Association Insurance Fund, or any successor thereto.

         SBA FILE:  The SBA File maintained with respect to each SBA Loan in
accordance with the Agreement.

         SBA FORM 1086: With respect to SBA ss. 7(a) Loans for which the related
Guaranteed  Interest  was sold in the  secondary  market on or after  January 1,
1985, the Secondary  Participation Guaranty Agreement on SBA Form 1086, pursuant
to which investors purchased the SBA Guaranteed Portion.

         SBA LOAN INTEREST RATE: With respect to any date of determination,  the
then  applicable  annual rate of interest borne by an SBA Loan,  pursuant to its
terms, which, as of the Cut-Off Date, is shown on the SBA Loan Schedule.

         SBA LOAN SCHEDULE:  The schedule of SBA Loans attached as an exhibit to
the Agreement, such schedule identifying each SBA Loan by address of the related
premises,  and the name of the Obligor and setting forth as to each SBA Loan the
following information:  (i) the Principal Balance as of the close of business on
the Cut-Off Date, (ii) the Account Number,  (iii) the original  principal amount
of the SBA  Loan,  (iv) the SBA Loan  Date and  original  number  of  months  to
maturity,  (v)  the  SBA  Loan  Interest  Rate as of the  Cut-Off  Date  and the
guaranteed  rate  payable to the  Registered  Holder and the FTA,  (vi) when the
first Monthly Payment was due, (vii) the Monthly Payment as of the Cut-Off Date,
(viii) the remaining  number of months to maturity as of the Cut-Off Date,  (ix)
the Unguaranteed  Percentage,  (x) the SBA loan number, (xi) the margin which is
added to the Prime Rate to determine  the SBA Loan Interest Rate or, in the case
of fixed rate SBA  Loans,  the  applicable  Note  Rate,  and (xii) the  lifetime
minimum and maximum SBA Loan Interest Rates, if applicable.

         SBA RULES AND REGULATIONS:  The Small Business Act of 1953, as amended,
codified at 15 U.S.C.  631 et seq., all rules and regulations  promulgated  from
time to time thereunder,  the Loan Guaranty Agreement and SBA Standard Operating
Procedures and official notices as from time to time in effect.

         SERVICER'S CERTIFICATE:  The monthly certificate of the Servicer,
delivered to the Trustee in accordance with the Agreement.

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         SERVICING  OFFICER:  Any  officer  of  the  Servicer  involved  in,  or
responsible  for, the  administration  and servicing of the SBA Loans whose name
appears  on a  list  of  servicing  officers  furnished  to the  Trustee  by the
Servicer, as such list may from time to time be amended.

         SPREAD ACCOUNT CUSTODIAN:  Marine Midland Bank, in its capacity as
Spread Account Custodian under the Spread Account Agreement, or any successor
thereto.

         SUBSEQUENT TRANSFER AGREEMENT: Each Subsequent Transfer Agreement dated
as of a  Subsequent  Transfer  Date  executed by the Trustee and the Seller,  by
which Subsequent SBA Loans are sold and assigned to the Trust Fund.

         SUBSEQUENT TRANSFER DATE:  The date specified as such in each
Subsequent Transfer Agreement.

         SUBSERVICER:  Any person with whom the Servicer has entered into a
Subservicing Agreement and who satisfies any requirements set forth in the
Agreement in respect of the qualification of a Subservicer.

         SUBSERVICING  AGREEMENT:  Any  agreement  between the  Servicer and any
Subservicer relating to subservicing and/or  administration of certain SBA Loans
as provided in the Agreement, a copy of which shall be delivered, along with any
modifications thereto, to the Trustee and the SBA.

         TAX RETURN:  The federal income tax return to be filed on behalf of the
Trust Fund together with any and all other  information  reports or returns that
may be  required to be  furnished  to the  Certificateholders  or filed with the
Internal  Revenue Service or any other  governmental  taxing authority under any
applicable provision of federal, state or local tax laws.







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