Seeking to broaden the secondary market for unguaranteed loans, NAGGL says it hopes to securitize $80 million of small-business credits next spring.

The deal would apparently be the first to involve participation from multiple lenders, but would be structured similarly to recent transactions by two nonbank lenders.

Tony Wilkinson, president and chief executive of the National Association of Government Guaranteed Lenders, is working with Prudential Securities to organize a pool of loans.

The securities would be backed by a pledge of interest and principal from the unguaranteed portion of Small Business Administration-backed loans and would give lenders a way to reduce maturity risk in their portfolios.

"Through securitization, the lender is still liable for the credit, but they can get rid of the maturity risk," he said.

So far, only single-issuer securities have reached the market. In the past year, the Money Store of Union, N.J., has sold nearly $260 million in securities backed by the unguaranteed portion of SBA loans. And Dallas-based PMC Capital sold $25 million of similarly-backed securities.

Prudential, which underwrote the most recent offering of the Money Store, is expected to underwrite the NAGGL-coordinated deal.

Securitization of unguaranteed small business loans and leases is picking up steam after getting off to a slow start following passage of the Small Business Loan Securitization and Secondary Market Enhancement Act in September.

Already, bankers and the leasing industry try expect to take advantage of the new law.

"The bottom line is this is just going to make more capital available to all kinds of small businesses," said Steve Fier, director of federal government relations with the Equipment Leasing Association.

The leasing industry had sold between $5 billion and $6 billion of unguaranteed lease securities into the secondary market before the passage of the bill. With 80% of small businesses leasing at least some of their equipment, Mr. Fier said the likely effect is that finance companies will be more willing to take on the risks of the small business market.

The law is meant to spur securitizations of small business financings by putting such securities under a standard national law and by allowing investors to buy them on margin and to use them as a credit pledge.

Banks and other financial services companies will have an easier time selling their loans and leases as well, by making them conform to accounting principles. This would allow banks and other depository tory institutions to maintain regulatory capital only on the amount of recourse retained on the loan or lease, not upon the entire pool, as was previously required.

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