Here’s another sign that small business may be heating up – new securitization of small business loans.
Before your eyes glaze over, keep in mind the securitization of loans backed by the SBA is the first of its kind since the economic crisis, and it means that big investors may be interested again.
That, in turn, means the economy is getting better.
Small-business lender Newtek Business Services just sealed the deal, CFO Magazine reports. The $16 million sale of notes backed by a pool of SBA 7(a) loans was the first securitization of any kind of commercial business loan since the financial crisis, said Newtek chief executive Barry Sloane.
This may not cause a surge in small-business lending, but it may be a sign that fixed-income investors are keen on these methods again.
The Newtek deal earned a AA rating from Standard & Poor's, and the amount of loans backing the notes issued by the trust was three times larger ($24 million) than was required before the bursting of the credit bubble, Sloane added.
"It's a little bit like building a spec home, particularly in today's market," explained Sloane. "You never know whether the bond markets will be open or receptive."
Newtek's transaction was helped by the fact that the 7(a) market has been robust in fiscal 2011, giving the commercial lender a larger pool of loans to choose from. Small business loan traders – once a thriving market - have noted an increase in flow as well.
According to the SBA, as of April 8, lenders had originated $12.5 billion of cash flow-based small-business loans, compared with $7.9 billion a year earlier. Entrepreneurs, take the good news where you can get it.