Lender Life

0214_LenderLife_770

Online loan exchanges offer new options to buy, sell or participate

By Katie Kuehner-Hebert

Community banks now have more options if they want to participate in a commercial loan deal, shed certain loans to reduce concentrations or have a specialty lender take over a credit until a borrower better fits the bank’s profile.

This year, Promontory Interfinancial Network LLC in Arlington, Va., launched Bank Assetpoint, an online exchange for individual commercial loans and other bank assets. Two other firms, ProfitStars Inc. in Allen, Texas, and BancAlliance in Chevy Chase, Md., also support networks facilitating commercial lending in different ways.

Simply posting notices

Operating similarly to an online classified advertising billboard, the Bank Assetpoint network allows banks to post listings to sell loans and view other listings of loans for sale, says Arun Shastri, Promontory Interfinancial’s chief strategy officer. The network also allows banks to post and view listings of bank-owned commercial real estate properties and other assets for purchase or sale. ICBA has a cooperative alliance with Promontory Interfinancial that includes Bank Assetpoint.

“We have our own lending team that calls on companies and works with agents in the field looking for lenders who have participation loans.”
—Lori Bettinger, BancAlliance

“We have a lot of experience in building networks and enabling [lenders] to leverage their collective strength,” Shastri says. “Bank Assetpoint was a natural extension of what we have to offer.”

After registering online and depending on the nature of their business, banks can immediately begin viewing and posting certain assets and communicating with interested parties. Promontory Interfinancial also has “virtual data rooms” for members that need a place to store their confidential information pertaining to a listing.

After sellers and buyers connect, transactions take place offline, outside of the service. Community banks conduct their own underwriting of the credits, and Promontory Interfinancial is not a party to transactions.

Community banks may want to buy loans through the network to increase or diversify their mix in certain asset classes, borrower types or geographic footprint, Shastri says. Alternatively, they may want to sell performing loans to reduce concentrations, or better manage their balance sheet or interest rate risk.

A full-service network

Doing more than listing loans for sale or for purchase online, the Banc-Alliance network goes further as a matchmaker for lenders by getting involved in facilitating commercial loan transactions. The company’s network identifies, evaluates and refers primarily loan and lease opportunities for community banks that become members of the company’s program, says Lori Bettinger, Banc-Alliance’s executive vice president.

The company specializes in arranging senior-secured term loans, equipment finance loans and specialty commercial real estate loans.

“We’re different from an exchange in that we’re charged with sourcing and doing initial underwriting of the loans in conjunction with the credit policies set by the board,” Bettinger says. “We have our own lending team that calls on companies and works with agents in the field looking for lenders who have participation loans.”

BancAlliance is a Maryland non-stock corporation of community banks, and its board is predominately comprised of community bank members. To date, more than 135 community banks in 33 states belong to the network.

Because most of the loans the firm handles are commercial and industrial loans, its loans typically have somewhat longer durations than commercial real estate loans, Bettinger says. Most of the loans the company arranges are middle-market, predominantly fixed-rate commercial and industrial loans, ranging from $50 million to $200 million. The company also funds and retains a portion of the loans it oversees in working with banks to fund.

There is no fee to become a BancAlliance member. Banks only pay a fee if they decide to fund a specific loan opportunity. Fees related to a particular loan are based on the projected spread over the respective base rate of that loan (for example, a spread over three-month LIBOR for middle market corporate loans). Members of the company’s network receive documents supporting underwriting efforts, which members can use as a “starting point” to complete their own underwriting process.

“Sometimes a bank may still not be comfortable with the loan or they don’t have experience in that industry, so they should be willing to spend time and energy to get familiar with it,” Bettinger says. “The worst thing they can do, whether they source the loan through us or anyone else, is to go through a regulatory exam and not understand the loan.”

Specialty secondary market

Another online network offers special access to commercial loan investors. ProfitStars Inc. oversees an online network that facilitates a secondary market for commercial loans called the LendingNetwork that specializes in handling commercial loans that might not currently meet a bank’s underwriting criteria.

The LendingNetwork program allows banks to sell a single business loan in a secondary market for specialty lenders that are members of the program. The specialty lenders within the network keep a loan until either the credit has been rehabilitated or the borrower’s business has become mature enough to meet the originating bank’s credit profile. Community banks don’t have to pay to take back the credit from the program.

“Our goal is to facilitate the ability of banks to service their customers that they typically wouldn’t be able to, typically for credit concerns,” says Mark Messick, the LendingNetwork’s director. “It could be the number of years the customer has been in business, or it could be the type of credit, such as an unsecured loan if the bank only does collateralized lending.”

For those reasons, Messick points out that the program does not arrange participation loans among several banks nor does it serve as a wholesale seller of bad debt, although sometimes the network’s members buy individual loans that have become bad credits. Instead, the program is designed to support profitable business loans in good standing.
“Banks don’t like to say no, and with our exchange they don’t have to say no,” Messick says.


Katie Kuehner-Hebert is a writer in California.

comments powered by Disqus
Top