Lenders and lessors provide the funding necessary for many businesses to launch, grow, and thrive. But what happens when the financial institutions that are providing funds to companies find themselves in need of capital?

When liquidity runs low, lenders will often look to gather deposits to help generate capital. This is the most straightforward way to make a financial institution more liquid and to have the cash on hand to fulfill the obligations to existing loans or leases. But when the market is in a downturn, or other factors prevent a financial institution from obtaining a greater number of deposits, there is still an opportunity to increase its liquidity position by selling loans or leases.

Selling Loans & Leases

Offloading loans and leases through a resale market can be a strategic way to optimize balance sheets and gain liquidity. Through this process, banks and other financial institutions can sell portfolios of loans or leases that no longer align with the trajectory of their business or hinder the ability to offer credit to additional borrowers.

The Bancorp Commercial Lending purchases loans and leases through its SBAlliance® and Lease Alliance® programs, respectively. By partnering with banks, credit unions, and other unregulated financial institutions, we provide a transaction structure that allows for The Bancorp to fund the loans or leases and the option for the originating partner to retain the customer relationship and gather deposits.

Beyond generating the liquidity needed to keep business flowing, there can be several other benefits for financial institutions to sell off loans or lease portfolios.

• MANAGING LENDING LIMITS
  As the management of loans and leases moves through a transaction, the seller frees up credit that it can extend to new and existing borrowers. Offering additional credit can be an attractive asset to growing businesses that are looking to expand operations and need capital in order to do so.
• FEE INCOME
  Through the sale of a loan or a lease, the seller may also earn fee income from the buyer based on the loan terms and pricing. Particularly with the sale of leases, there is generally fee income paid up front to the seller.
• IMPROVING WAREHOUSE LINE OF CREDIT
  For unregulated entities, selling loans and leases to a buyer can help clean up a warehouse line of credit, a line of credit provided to mortgage lenders by financial institutions. Through the transaction, the funds from the sale enable the lender to pay down its line of credit from its warehouse lender, while the seller can retain the origination fees.

Though a need for liquidity may be the primary motivator for a financial institution to consider the sale of a portfolio of loans or leases, there are other positive outcomes that stem from the transaction. The Bancorp Commercial Lending works with banks, independent lenders and lessors, and other financial institutions to complete loan and lease transactions that provide capital when it’s needed most.

To learn more about how The Bancorp partners with financial institutions to offer SBA loans through SBAlliance®, click here.

To learn more about Lease Alliance®, click here.