Business Loan Express entered the securitization market in 1997 with a single issuance backed by portions of Small Business Association loans worth just under $20 million. In 2003, the issuer reached nearly $500 million in term ABS volume.

"We expect volume to continue to grow," said director of capital markets Ted Horan. "We should beat last year's number in 2004."

That said, the company plans to tap the market just twice versus the three deals issued last year.

Horan joined BLX in 2001, and has been more or less the sole engine powering the 230-employee company's securitization efforts since then.

"We are a small company," he said. "Before I came on, the CFO was running the securitization program. But our growth pattern was such that we needed somebody dedicated solely to the capital markets arena."

In addition to term securitizations, BLX has multiple conduit facilities for warehousing purposes, Horan said.

BLX has done nine securitizations to date, with Wachovia Securities acting as lead manager on all of those transactions. Horan expects its next deal to hit the market sometime in May. The company will continue to use Wachovia, Horan said.

BLX currently offers two products in term securitizations, including the prototype, which is comprised of those pieces of SBA loans that are not guaranteed by the government. The guaranteed portions of these loans have their own secondary market.

The second product - which debuted in 2002 - is backed by conventional small- business loans. These are given to companies that have forgone the government's imprimatur.

"Our current game plan is to issue one of each product type into the market each year," he said, adding that the transaction slated for May will be backed by conventional loans.

For the moment, there are no plans to increase the frequency of yearly transactions.

"We were able to increase our warehousing capacity to accommodate larger deal sizes, so it made sense to do it this way rather than doing several smaller ones," Horan said.

The largest warehousing facility, a commercial loan conduit with Wachovia, is now $150 million. In addition, the lender maintains a $100 million facility for SBAs, also with Wachovia, and just last year started a $75 million SBA conduit with West LB.

Investors are attracted to the lack of concentration in the SBA transaction types, Moran said.

"These deals include portions of loans, so you get a lot of granularity because of that bifurcation of the loans," he said.

The average SBA loan for BLX is roughly $700,000. The government may guarantee up to 75% of that loan, leaving only $175,000 for securitization purposes. Horan said that one transaction might include as many as 900 loans for a deal size of $200 million.

Transactions backed by conventional loans are typically not as diverse since the individual loans are considerably larger. The average size is about $1 million, but conventional loans may be as large as $3 million, Horan said. The lender's $149 million 2003-A transaction was comprised of just 230 loans, he said.

However, investors perceive conventional loans to be somewhat stronger on the credit side, Moran said.

"Conventional loans are more well secured from a secondary source of repayment perspective," he said. "One of the biggest differences an investor will see looking at our conventional portfolio is a much lower weighted average LTV. The SBAs have an average 70% LTV, while the average for the conventional program is 55%."

This is because a conventional business loan is more likely to be given to an established business with liquid assets behind it.

"Some of these businesses may not want to put their own liquid assets into the loan, so they cannot qualify for an SBA. But they would still be considered stronger than a start-up with none of those assets," Moran said.

BLX has no plans to expand into the larger commercial loan market, Moran said.

"Our mission is to support the small-business community. When I think of the CLO model, I think of larger credits," he said.

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