The small-business loan sector is poised for an active year, with deals from new issuers, leveled prepayments, and the possible return to market of No. 1 lender Heller Financial.

"Obviously Heller is a large rated entity, and they don't have to do deals," said an analyst who covers the small business loan sector. "They're not a gain-on-sale player, and can be opportunistic."

With the advent of new lending partnerships, online ventures and other efforts, Heller has significantly increased its presence in the market over the last year or so, recently overtaking the Money Store as the top originator of business loans. Though Heller hasn't accessed the securitization market since the summer of 1998, the company originated in the area of $700 million in loans last year.

"I think if Heller came back they might consider doing a public deal, because they access that market through their other trusts," said one source.

However, Heller's return to the small-business sector is not likely to utilize Small Business Administration loans. "I don't think they'll come to market with [SBA loans]," said Evan Mitnick, a vice president at Prudential Securities Inc. who works on small- business loan deals.

This factor, however, will not hinder the company from tackling the sector: "There's a possibility they'll securitize small-business loans," he added.

Also this year, the Money Store, now a subsidiary of First Union Capital Markets, is expected to hit the sector with a $200 million to $300 million public offering as early as this month, though definitely before June, an industry source said.

First Union will likely manage the transaction.

March might also bring a $25 million private placement from a first-time issuing, non-bank financial lender, the source added.

As Mitnick implied regarding Heller's plans, the use of SBA loans to fuel small-business securitizations will continue to decrease this year all around, he said, following a trend that started in 1999.

"I think there's going to be very few people going forward who will securitize SBAs just because the SBA regulations don't really make it desirable," Mitnick said.

"What the SBA is saying is that if you're securitizing your SBA loans, depending upon the performance of the underlying securitization, your lender's preferred lender status could be jeopardized," said John Bella assistant vice president at Duff & Phelps Credit Rating Co.

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