Small Business Administration lender Business Loan Express is in the pipeline with its second deal of the year, set to price in late August, via First Union Securities.
The $85 million transaction is structured in three parts, with the four-year, triple-A-rated seniors ($72 million) talked at 55 area over the one-month Libor.
First Union also brought BLE's last transaction, a $63 million deal in March, which was sold as a traditional private placement.
According to sources, CNL Commercial Finance, also a First Union client, will likely tap the market again before year-end. CNL's last deal was worth about $100 million and priced in July.
Other than First Union's quiver of issuers, there's been but one other small business loan deal this year, a $75 million SBA-backed transaction for PMC Capital via Banc One Capital Markets.
Although the sector continues to move slowly, both Credit Suisse First Boston and Greenwich Capital Markets are or have been developing small business loan financing programs, and both plan to bring their clients to term down the line.
In fact, CSFB currently has two prospects on the term deal path, one a first-time issuer and one a repeat issuer, though the market may not see those deals until next year. Both are conventional small business lenders, but CSFB has not ruled out working SBA lenders. Greenwich is said to be targeting the SBA segment.
Generally, the non-SBA small business loan sector should grow but at a measured pace.
"Historically, it's been a small sector from a securitization volume standpoint," said Russell Burns, a director at CSFB. "Non-SBA small businesses lending is very fragmented which has, in part, contributed to the lack of issuance. Since very few institutions have originated a significant volume of non-SBA loans on a regional or national basis, most lender's portfolios lack the size and diversity required of securitization."
Certain lenders that developed national programs have been forced to downsize or exit the business for various reasons.
For example, Heller Financial has exited the business and The Money Store (First Union Small Business Lending) has significantly downsized, both historically among the largest national originators of small business loans.
On the mezzanine front, First Union is looking to bring as many as two deals before the end of the year.
First Union has dubbed the asset class "commercial business loans," which are generally mezzanine loans made to larger borrowers than those targeted by conventional SBL lenders, with annual sales in the $100 million or above range.
The asset class is sometimes described as a cousin to the CLO: an essential difference is the issuer is not an asset manager but a finance company.
So far, the only mezzanine-backed deal came from American Capital Strategies last December. ACAS will potentially tap the market again this year, along with a first-time issuer.
According to a banker involved in the development of the commercial business loan sector, at this time next year there could be as many as five players regularly accessing the market.