Newtek Business Services completed the securitization and sale of an added $20.5 million of non-guaranteed portions of U.S. Small Business Administration (SBA) loans and said the forecast looks good for small business ABS in 2012.
The latest deal is an amendment to the securitization of $23 million in SBA loans that closed in December 2010. Guggenheim Securities managed the sale of the additional trust notes. Standard and Poor’s rated the securitization trust Notes 'AA' based on the collateral in the entire, upsized pool.
Newtek is active in making U.S. SBA 7(a) loans where 75% of the loan is backed by a U.S. government guarantee and 25% is uninsured. However, the risks are shared pro rata with the U.S. government. Newtek typically retains the unguaranteed portion of the SBA loans and incurs related warehouse financing costs.
SBA 7(a) lending represents a significant part of the small business lending market today. According to Barry Sloane, chairman, president and CEO of Newtek, the company closed more than $100 million of small business loans under this program in 2011, which created or stabilized roughy 1800 jobs nationally.
"With commercial banks and community banks not being able to lend, this has created more opportunities for us and allowed us to get more real quality credit," Sloane said. "Securitization has helped financed our position as a non-bank lender."
The SBA 7(a) program is also one of the few government programs that have returned money to Treasury, and as a result, Sloane believes it will likely be increased.
"We see ourselves using securitizations more and more and we plan on increasing our originations by 35% this year over last year. Hopefully we can go significantly beyond that," he said.