SBA Secondary Market Still Open Territory: Onsite Coverage
PORTLAND, Ore. — Buying and selling loans on the Small Business Administration’s secondary market is still unfamiliar territory for many credit unions.
Coastal Securities Inc., a firm that puts together the deals on the guaranteed portions of SBA and USDA loans, outlined the potential benefits for credit unions at CU Business Group’s National Business Services Conference Tuesday.
One, being the lender retains the member relationship and having the loans not count against a credit union’s member business lending cap.
“There are a lot of folks sitting on more loans than they need to,” said Zach Brewer, managing director of securities and guaranteed loan markets at Coastal Securities.
Brewer said the secondary market loans also offer “a great way to diversify” a loan portfolio. A credit union can leverage equity and staff because the amount of overhead to get the loans is much less than the originating conventional loans. Greater yield and 0% risk base to principal are other features.
“It’s probably the safest participation you can invest in,” Brewer said.
For the 2010 fiscal year, SBA secondary market loans totaled $12.6 billion and fiscal year 2011 are on tap for $16.4 billion, according to Brad Walden, another managing director of securities and guaranteed loan markets at Coastal Securities. Brewer said the loans have the “full faith and credit of the U.S. government.
CUBG President/CEO Larry Middleman acknowledged the secondary market is still an unknown to some credit unions but said he’s noticed an increase in queries about getting involved.