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Private Equity Coming Into Our Space

March 11, 2015

By Bob Coleman
Editor, Coleman Report

Says Thomas Zernick, Florida Market President, Stearns Bank.

Tom Zernick manages the Florida Market for Stearns Bank and was the former director of SBA lending at HomeBanc.

At the National Alliance of Commercial Loan Brokers conference this week in Las Vegas, Zernick was asked about private equity being used for small business loans.

Hey says, “Absolutely. It used to be that deals $1 million to $5 million were really controlled by the banks doing SBA 7(a) loans. Whether it’s real estate or a business acquisition deal, we are running into more and more private equity funders competing in our space right now and the good news is the borrower usually ends up with a pretty good deal although it’s quite costly when you get into the prime equity funding. I think SBA 7(a) is still a great alternative, but I will tell you they’re reaching down into smaller and smaller deals.

“We just saw a placement from a private equity funder in Atlanta for $1 million deal and that used to be limited to the banks and finance companies. And we’re seeing it now where it’s every day occurrences. More and more dollars are chasing the demand right now for product, so I think the 7(a) loan is still going to win out overall. If you look at 3.25 even at max price at 2.75 over prime, it’s a 6 percent note today. It’s still a great alternative to private equity funds, but we definitely have to sharpen our pencils and we have to deliver better than the private equity placement.

John Hamburger, Publisher of the Restaurant Finance Monitor added, “You think about private equity, it was a leverage buyout model. Private equity is a shareholder lender. Last week I heard private equity is just another word for leverage buyouts, that was the way it worked. And now you’re seeing private equity really morph into more venture capital.

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