Newtek’s roots were established 17 years ago in 1998 with the vision of one of the founders and present CEO, Barry Sloane, to create a business that would offer essential products and services to support an underserved market and yet the backbone of American economy; the small- and medium-sized business (“SMB”) market. Since that initial vision, Newtek has successfully grown and been rightfully awarded the title The Small Business Authority® on all small business needs with its comprehensive suite of product and service offerings including Business Lending, Electronic Payment Processing, Managed Cloud Computing, eCommerce, Accounts Receivable Financing, The Newtek Advantage™, The Secure Gateway, Insurance Services, Web Services, Data Backup, Storage and Retrieval and Payroll. The Company has been publicly traded for over 14 years since 2000, and boasts of over 100,000 business accounts across all 50 states.
Conversion to a Business Development Company (BDC): A Growth and Income Proposition
To foster the continued growth of the business and the brand, Newtek embarked on a new journey on November 12, 2014 when it successfully converted to a business development company (“BDC”). As a BDC, Newtek intends to elect to be treated as a regulated investment company (“RIC”). As a RIC, the Company generally will not have to pay corporate-level U.S. federal income taxes on any income that is distributed to Newtek stockholders in the form of a dividend. To qualify for RIC tax treatment, Newtek is required to distribute at least 90% of its investment company taxable income to its stockholders. In a recent release, the Company announced it currently expects to pay an annual cash dividend of approximately $1.80 per share in 2015, which equates to an attractive double-digit annual yield of 12.3%(1). With this conversion to a BDC there are a few notable points that lend Newtek a competitive advantage in this space. In short, the Newtek BDC model is different than the typical BDC structure making it attractively distinct amongst its peers. Primarily, Newtek’s portfolio companies are operating companies and it holds controlling interests in certain of these companies. Specifically, either directly or through wholly-owned subsidiaries, Newtek holds controlling interests in Newtek Technology Solutions®, Small Business Lending, Inc., CDS Business Services, Inc., Newtek Merchant Solutions, Newtek Insurance Agency, LLC and Newtek Payroll Services. Additionally, contrary to the externally managed BDC structure, Newtek is an internally managed BDC, with no base or incentive fees paid to external managers.
The Company is looking forward to the many opportunities expected to be available within their new structure, led by a seasoned senior management team with long tenure at Newtek, with interests closely aligned with those of its shareholders. The CEO owns approximately 10%(2) of outstanding shares, and combined with management and the Board that percentage exceeds 14%(2).
Newtek, The Small Business Authority® – Building a Lasting Brand
At the core of Newtek’s success is the culmination of hard work and perseverance in building a brand that has garnered industry-wide recognition as a premier provider of a comprehensive suite of products and services to the small business owner. All of these products are customizable and can be tailored to meet the individual needs of each independent business owner, truly helping them increase their sales, lower their costs and, as a result, harness success in the ever-changing competitive landscape. The question has been raised time and time again - how has Newtek been able to navigate the economic cycles over the years, and emerge as the authoritative presence providing such premier service and cutting-edge customizable products? The answer lies in Newtek’s ability to keep their “finger” on the pulse of a constantly changing market, expanding and enhancing their product and service offerings to meet the needs and demands of the independent business owner. It is that market acumen, combined with technological capabilities that have molded the foundation of their business model.
Specifically, at the heart of Newtek’s technological capabilities lies its patented proprietary state-of-the-art web-based technology, NewTracker®, which enables the Company to board the vast majority of its customers in a cost-effective manner through referrals from industry-recognized alliance partners who drive customers to Newtek through NewTracker®. These partners entrust Newtek to offer their independent business clientele the products and services they cannot or do not provide. Currently, Newtek has an impressive list of well-recognized firms as partners and continues to forge these strategic relationships building their customer base across their product lines. The Company currently maintains strategic partnerships with well-known firms and organizations such as Morgan Stanley Smith Barney, UBS, American International Group (“AIG”), Credit Union National Association (“CUNA”), Navy Federal Credit Union, The Hartford, IBERIABANK, New York Community Bank, Community Transportation Association of America (“CTAA”), Pershing, Paragon Financial Group, and Amalgamated Bank to name a few.
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Newtek - The Largest Non-Bank SBA 7(a) Lender
Newtek has been assisting their customers with their financing needs for over 11 years, providing them with SBA 7(a) loans, lines of credit and inventory financing, to name a few examples. Since 2004, Newtek has been providing financing directly to its customers, never using brokers and, to date, has approved over $1.0 billion in loans. Over the years, the Company has prided itself on taking great care to maintain its strict adherence to underwriting guidelines, never sacrificing credit quality for the sake of growth. It is this discipline that has enabled Newtek to withstand multiple lending cycles, including the credit crunch of 2008-2009, and to achieve the title of the largest non-bank SBA 7(a) lender(3) and hold a position in the top-ten most active SBA 7(a) lenders among all banks and non-banks(3).
Newtek establishes liquidity for the unguaranteed loan portions of the SBA 7(a) loans it originates through securitizations. The Company has issued five Standard and Poor’s rated AA and A securitizations since 2010, closing its largest securitization with the most favorable terms to date in December 2014. The Company’s ability to secure more attractive advance rates and lower cost of funds in the most recent securitization is testament to the high quality and consistent strong performance of Newtek’s loans. With historic returns on investment in excess of 30% in the Company’s SBA 7(a) lending program, Newtek will focus on continuing to grow this business in 2015 and beyond.
Cutting Edge Products and Services – Capturing Market Opportunity
Newtek’s success and expertise extend well beyond its lending capabilities. Newtek is at the forefront of solutions in the cloud computing and eCommerce arenas. Specifically, Newtek has met the rapid adoption of cloud computing over the past few years with its highly functional cloud environment that boasts premium security, dependability with 99.9% uptime, and incredibly fast scalable performance which allows independent business owners to simultaneously control their IT costs and grow their businesses. Newtek’s cloud infrastructure and unique provision of 24/7/365 U.S.-based live customer service to assist independent business owners and IT professionals with all of their needs, has given small- to mid-sized organizations the unique opportunity to gain access to computing power and software that was only previously available to large corporations.
Newtek is also known for introducing the first true all-in-one ecommerce offering, where Newtek is the webhost, the merchant and shopping cart provider with its own secure proprietary gateway that handles all credit card transactions. Everything the business needs is all in one place, therefore reducing costs and once again is supported by around-the-clock customer service. In fact, it was Newtek’s success and notoriety in the payments space that recently attracted SEQR by Seamless (OMX: SEAM), one of the world’s largest suppliers of payment systems for mobile phones to partner with Newtek. This partnership allows for Newtek to gain an edge in the ever-changing U.S. payments landscape and enables them to offer small- and medium-sized business merchants a seamless and secure payments platform and solution, eliminating interchange fees charged by traditional credit card companies.
The Best is Yet to Come
While The Small Business Authority® brand continues to provide high levels of satisfaction to independent business owners in all 50 states, there is still a tremendous opportunity to continue to penetrate the vast small- to medium-sized business market of over 27.5 million businesses. The Company is looking forward to continuing to grow the business, capture market opportunity and expand their customer base, while returning its profits to the hands of its stakeholders under its new structure as a BDC.
For more information, please visit www.thesba.com, or contact Jayne Cavuoto, Director of Investor Relations, at firstname.lastname@example.org, or 212-273-8179, or Simrita Singh, Director of Marketing, at email@example.com, or 212-356-9566. Also, be sure to view Newtek’s Annual Magazine at http://www.thesba.com/newtek/annual-magazine/, which provides a plethora of information on the cutting-edge products Newtek provides with detailed information on issues facing the SMB market and how Newtek can help.
(1) Based on January 9, 2015 closing price of $14.59
(2) As of December 22, 2014
(3) For the 12-month period ended September 30, 2014. According to the U.S. Small Business Administration and measured by dollar volume of approved loans.
The Small Business Authority® is a registered trade mark of Newtek Business Services Corp., and neither are a part of or endorsed by the U.S. Small Business Administration.
Note Regarding Forward Looking Statements
Statements in this press release including statements regarding Newtek's beliefs, expectations, intentions or strategies for the future, may be "forward-looking statements." All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among others, intensified competition, operating problems and their impact on revenues and profit margins, anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments and similar matters. Risk factors, cautionary statements and other conditions, which could cause Newtek’s actual results to differ from management’s current expectations, are contained in Newtek’s filings with the Securities and Exchange Commission and available through http://www.sec.gov.
The company paid consideration to SNN or its affiliates for this article.
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