Small business owners can thank the recent trend toward securitization for the favorable business loan rates they are receiving.
Or, maybe the small business owners should thank the secondary market. Here's why. During the past year, banks have begun grouping and selling small conventional loans to investors as securities. The growing secondary market, in turn, is giving these lenders the opportunity to offer bigger loans with longer terms and better rates to small businesses.
It is now estimated that at least six lenders nationwide are putting together securitizations for small-business loans. Competition and changes in Small Business Administration (SBA) regulations and federal law have led to the sale of $1.2 billion in securitized bonds during the last 16 months--$1 billion of it in June alone.
While obtaining a small business loan remains no easy task, experts say that this trend in securitization is likely to grow and continue offering more and better opportunities for the small business owner.