Small Business Funding Corp. has launched a program to securitize commercial real estate loans for community banks.
The Washington-based company will buy fixed-rate loans with principal amounts of $300,000 to $2 million from community banks nationwide, said James E. Murray, its chairman and chief executive. The company is to package the loans and sell them on the secondary market to private investors.
So far, 40 banks have expressed interest, Mr. Murray said. The company said it expects to close some deals this month. A large midwestern investment bank, which Mr. Murray refused to name, is financing the program.
"This is a market not available to community banks," said Mr. Murray, who ran Fannie Mae in the early 1980s. "Community banks would like to have the ability to originate and sell their loans."
Selling loans to Small Business Funding would offer community banks a quick source of capital to support more lending. Community banks are increasingly selling mortgages to private conduits or indirectly to wholesalers, according to a new survey by America's Community Bankers.
Small Business Funding intends to buy loans originated on multifamily, retail, office, or industrial/warehouse properties. Loans will typically be for seven- to 20-year terms, with interest rates of 8% to 9%. The company plans to buy both seasoned credits and recently originated loans.
Mr. Murray said approvals for interested community banks may take four to six weeks.
Small Business Funding was formed in 1997 to securitize the unguaranteed portion of Small Business Administration 7(a) loans. The company said it is planning to do its first securitization of SBA loans this year.