NewtekOne Inc (NEWT) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Newtek Business Services Inc. Third Quarter 2010 Earnings Conference. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Mr. Barry Sloane, President, CEO and Chairman. Please go ahead, sir.

Good day. My name is Barry Sloane, President and CEO and Chairman of Newtek Business Services. Welcome, everybody, to our Third Quarter 2010 Financial Results Conference Call. Joining me on the call today will be Seth Cohen, our Chief Financial Officer, who I'll ask to read the Safe Harbor statement.

Thanks, Barry. The statements in this slide presentation, including statements regarding anticipated future financial performance, Newtek's beliefs, expectations, intentions or strategies for the future may be forward-looking statements under the Private Securities Litigation Reform Act of 1995. 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 www.sec.gov.

Our Capco's operate under a different set of rules in each of the seven jurisdictions and that these place varying requirements on the structure of our investments. In some cases, particularly in Louisiana or in certain situations in New York, we do not control the equity or management to the qualified business, but that cannot always be presented orally or in a written presentation.

Thank you, Seth. For all of you on the call I'd like to call your attention. If you wanted to follow along with the PowerPoint presentation it is on our website and is available in the events and presentation section in the investor relations portion of our website at www.newtekbusinessservices.com. I welcome you to follow along and we're on slide three, Third Quarter 2010 financial highlights. Today we have announced consolidated pre-tax net income of $248,000 for the three months ended September 30, 2010. This is a $1.3 million positive variance from one year prior. We're also announcing revision of our 2010 annual guidance for consolidated pre-tax net income with a range from flat to up $1 million in pre-tax net income. We're also announcing 2011 annual guidance for consolidating revenue in the range of $124.4 million to $130.8 million and pre-tax net income for 2011 with a lower range of plus $2 million with an upper range of plus $5 million. We are clearly excited to have turned the corner and be in the land of profitability.

Some additional Third Quarter highlights, we're announcing Q3 2010 consolidated revenues of $29.2 million, which is a 9% growth year over year. As we said earlier, the pre-tax net income of $248,000 was a $1.3 million improvement over the year prior. When we look at our two primary revenue-generating entities for Newtek from a segment perspective, EPP and Web Hosting, on a combined basis versus Q3 2009 we had 10% growth, coming in at $25.3 million versus $22.9 million. And our Small Business finance lending segment posted a pre-tax net income of $404,000 versus a loss of $756,000 for the year prior.

Looking at our business over nine months, also real good stellar performance. We had 7% growth on a consolidated revenue basis for the nine months. Looking at pre-tax loss for the nine months, it was negative $112,000 for the year ended September 30, 2010. That's a $3.9 million improvement versus September 30, 2009 pre-tax loss last year of $4 million. Once again, on a combined basis EPP and Web Hosting, when we look at revenues 14% growth, EPP and Web Hosting, this year versus last and we're very, very proud of that growth.

For the Third Quarter we're going to spend a reasonable amount of time looking at our financial performance, cash position, balance sheets, business trends, get a little bit more detail on the revision of the 2010 projections for the year. We're going to spend a good amount of time talking about our strategic mission as the Small Business Authority in the marketplace. We're also going to discuss pre-announcing of the launching of our Small Business Authority index, which will be part of our new website and the launching of the Small Business Authority Market Sentiment Survey, our monthly poll that we'll be producing, all which of will be available when our new website is launched with the new domain name at www.thesba.com, which will be officially launched in January of 2011.

Looking at the Third Quarter financial results further, Electronic Payment Processing, our largest segment by revenue, came in $20.5 million, up 13% over the year prior; Web Hosting came in at $4.8 million, up 1%; Small Business Finance came in at $3 million, which is up 105% from Q3 2009. Focusing on pre-tax net income, Electronic Payment Processing came in $1.3 million, up 24% over the year prior; Web Hosting up $1.3 million, up 24% over Q3 2009; and Small Business Finance came in at $404,000 profit, a $1.2 million improvement over the pre-tax loss several years prior.

Looking at our cash positions, looking at cash equivalents, restricted cash and the broker receivable at [7-30-29], that number was down slightly. Came in at $24.2 million versus $25.8 million. The difference between the year-over-year numbers primarily reflects the use of cash or equity capital for the lending and receivables purchasing business that we've been utilizing in 2010. Focusing more closely on one of our important segments, the Electronic Payment Processing segment, our payment processing revenue up 13% over the year prior, our pre-tax net income up 24%. We're really seeing some very good trends in this segment. I think it's primarily a function of our business model and how well we're doing on a competitive basis.

It's clear the economy has slowed down and the payment processing natural growth from the industry has slowed down, but we're just doing a real good job taking market share, servicing our customers, bringing on bigger and larger accounts, as well as new product development within the segment. Our Q3 2010 EPP segment came in at EBITDA about $1.7 million versus Q3 2009 of $1.5 million. We always like to mention this particular segment doesn't have any debt on it and we focus on eCommerce, which effectively is the combination of EPP and Web Hosting being a key corporate initiative and focus for the Company.

Looking at the Web Hosting business, good performance in a tough economic environment. Not quite as robust as Merchant Services but still doing quite well given the difficulty in the market and in the industry. Revenue came up -- came in up 1% year over year, pre-tax net income came up 24%. We're continuing to invest in the Web Hosting segment to support future growth. We do have excess capacity in our NOC center. Our pre-tax net income of $1.3 million came in higher versus Q3 2009 of $1 million. We're continuing to target IT partners, web developers and tech execs.

This particular segment we are focusing on the larger customers that are seeking for managed servicers and are not quite faring as well as at the lower understand of the market where, number one, weaker businesses are going out of business. They're reducing the number of sites and reducing their expenditures in the marketplace. However, we are being able to a achieve a greater revenue dollar per customer and we'll expand upon that in future conference calls.

As we said earlier, as an eCommerce player, we believe we're one of the few, if not only, players that is true one stop shop for everything that you need; the combination of Hosting and EPP. So if you come to us, you can actually get a full eCommerce package, the web design, the Hosting, the EPP, the gateway and the shopping cart all from one professional in our shop. And once you become a Newtek Small Business Authority customer, if you have an issue or you need a customer service question answered, you can come to us and one person will be handle -- will be able to handle all your needs, whether it's a hosting question, a gateway question, a shopping cart question or a merchant services question.

Looking at our position in the SBA lending space, which has been a real good business division for us this year, clearly there's significantly-reduced competition amongst the banks, particularly for lending. Also, many of the non-bank lenders were not able to survive the economic downturn in 2008 and 2009. Clearly we were able to do that. We're clearly making better quality loans at better prices in the marketplace. We funded $15.2 million worth of loans in Q3 2010. I will also add that, as many of you aware, the House and the Senate passed H.R. 5297, which President Obama signed into law and effectively offered a 90% guarantee program and a waiver of guarantee fees again through the end of December 31, 2010. Several loans that we had targeted to fund in the Third Quarter will be rolled over into the Fourth Quarter as borrowers opted to wait and hold out for the waiving of the guarantee fee. So we do anticipate a real good Fourth Quarter and some of that is built into our guidance.

On slide 13 you can clearly see the differential between a 75% government guarantee SBA business and a 90% government guarantee SBA business. As the current law stands right now, the SBA will no longer be able to issue 90% commitments post December 31, 2010. We will be taking commitments up through that time. We do anticipate doing that, provided the funding is there, and we do anticipate the funding being available. That'll give us a pipeline of 90s for 2011 probably through the First Quarter but not much beyond that. So our guidance reflects a 90% guarantee in 2011 through the First Quarter and 75% guarantee in the remaining three quarters.

When we go to slide 14, you can see some of the changes we've made with respect to the segment guidance. We revised our EPP guidance up a little higher from $6.7 million to $7.2 million, now $7.1 million to $7.3 million. That's in EBITDA. In Hosting we were $6.2 million to $6.6 million. We're now $6.6 million to $6.7 million. In Small Business Finance we were $3.4 million to $4.3 million. Now we're $4.1 million to $4.4 million. And in All Other this went against us. We're now at a negative $1.4 million to negative $1.1 million from a negative $1 million to a negative $0.7 million. And Corporate Activities improved for a negative 6.9 -- excuse me, from a negative $7.4 million to $7.1 million to a negative $6.9 million to $6.8 million.

Clearly we think the Small Business Lending segment is a key segment and is an important swing segment for us. As we look at the marketplace, one of the things we've done a good job this year is in growing our servicing portfolio. Our current servicing portfolio stands at $275 million. We anticipate being close to the $300 million mark by the end of the year. Some things that we hope to continue for our success in lending throughout 2010 and through 2011, we talked about the 90% guarantee percentage. We're anticipating in the Q4 pipeline we could wind up closing on additional $23 million in 2010. It would be nice to beat that number. We're currently pricing our guidance with the guarantees being sold at 109.5. Frankly, we've been able to achieve results significantly north of that in recent times.

One of the important issues with respect to Newtek is our legacy Capco business, which, for the most part, has been a business that we're in the process of burning off. It leaves us with unusual balance sheet considerations. It does clearly use up some of our management time, accounting costs and other miscellaneous costs. When we look at slide 19, the balance sheet items to discuss and consider, things like credits in lieu of cash, $38.2 million, which balances against notes payable and credits in lieu of cash and those are basically non-cash assets and liabilities that do match off against each other. We also have an asset and liability, which relates to the issues, which are very elaborately discussed in the Q. When you sell an SBA loan, there is a period in the first 90 days of the sale wherein the event the loan goes bad I have to be bought out of the pool. Due to that contingency, I believe that's FAS 166. Do I have that right, Seth?

Yes.

Thank you, good for me. There is a potential liability in that. Obviously you can see you have a $19.8 million asset and a $19.9 million liability. They match off, as well. So if you take a look at those two and you combine them, you're looking at somewhere in the neighborhood of $50 million of assets and liabilities that really do match off each other and it kind of gives the Company of having a much higher leverage ratio than it currently is against $54 million of stockholders equity.

So we look forward toward the future on slide 20 where, in one instance, the tax credits will be being reduced over time. Our forecast is at the end of 2010 on the tax credits and commensurate liability we'll be at about $35 million. A year from the end of this year we'll be at a little bit north of $15 million. And then in 2012 down to about $7 million or $8 million. And then in 2013 under $5 million. So that clearly will reduce some of the leverage on our balance sheet and those are both non-cash items.

When we look at hitting the 100% mark in the various different Capco's, we were able to sunset one Capco last year, our Wisconsin Capco. Our Florida Capco will sunset at 100% in December of this particular year, so that'll take another Capco off of our balance sheet. We are also getting close on Alabama and some Louisiana, Texas and D.C. We look forward to hitting the 100% mark in these particular Capco's statute sitting at investment thresholds that will enable us to dissolve the Capco's, reduce our management time, as well as the inherent costs in legal and accounting that come along with managing these Capco's.

When we look at our growth strategy going forward and look for what's going to give us lift, we're very, very excited about the launch of our new website, thesba.com, beginning January of 2011. Clearly we believe that the launch of our new website will help us in our branding strategy of positioning the Company as the true Small Business Authority in the marketplace. We're going to continue to emphasize cross selling and cross marketing into the customer base. We do anticipate offering some data to the marketplace at year end to show you how well we're doing in that segment and demonstrating it is actually becoming a significant part of our revenue base and revenue growth. We believe we'll continue to grow alliance channels as an outsourcing of our services. This is a very important and always been a major portion of our business.

We'll have some announcements in the Fourth Quarter in that particular area, and I think you will see the Company really pushing forward on its Small Business Authority branding strategy with additional television and radio advertising. As we look at Newtek as the Small Business Authority, we clearly are a leader for small businesses. The Small Business Authority provides products and services and data to the small and medium-size business market all across the United States, as well as international customers, to enable them to grow their sales, reduce their expenses, reduce their risk and really offer state-of-the-art efficient business strategy, structures and content to run one's business. As we seek to grow our presence in the marketplace and to be known as the Small Business Authority, the launching of thesba.com will clearly enhance that. We clearly recognize the importance of the small business market to the US economy. It's clearly a major portion of GDP, new hires and nine out of ten businesses, according to the Small Business Administration, are considered small under this particular definition.

One of the things that Newtek has been able to do over the course many years is develop sub-brands under Newtek and under the Small Business Authority, which have attracted a fairly decent amount of web traffic. So our goal is to redirect all these various sites, which you will see on slide 28, 29, 30, 31, 32, 33, 34, 35, 36, to get to slide 37. Clearly, the most active of our sites today are through our Newtek Technology Services division where we have a very large cluster of based and clientele where we're hosting websites and technology applications for small businesses all over the US and some international countries, as well.

Our website control center clearly gets tremendous amount of traffic as business owners go to that site, and technology providers to see how many hits a site gets in a particular day, how long people stay on the site, what time of day they go on the site using our control center and toolset that's available to our customer base. As well as our also internally developed NEWTracker system that we've filed a patent on, which is what our alliance partners use and many of our customers use to get to us, and all of that traffic will be directed through thesba.com. This will give us approximately 49,000 unique visitors without any additional work to drive traffic to that particular site. That's just by consolidating it and we think this is going to leave us, according to some studies, in the top 10,000 and 20,000 sites in the world, understanding that's a fairly-high ranking and that should actually give us some significant visibility in showing up in search.

What's particularly exciting about this is the Company by design has really never tried to position itself as a player on the net to control and control a lot of customers through the net. By using all of its product, all of its content, all of its current traffic flow, we think that beginning next year we do anticipate becoming quite a significant player on the net and we'll seek to enhance that real estate asset and strategy with various ad word and key word campaigns, banner ads, press releases. We also will be launching the Small Business Authority Small Business Index, which will be an index that we will release on a monthly basis. This is an index that's comprised of eight important economic data points all related to the small business economy that in the combined format create a small business index. We've gone back to 2007 and developed a correlation coefficient against GDP. It comes in at about 0.83. I think, importantly, we'll be releasing this index every month, along with content and economic stories that small business owners are going to be interested in.

In addition to that, on a monthly basis we'll be releasing the Small Business Authority Market Sentiment Survey. We'll be surveying our clients and participants in our market news letter with a variety of market-related small business questions relating to things like Obama care, tax rates, workmans' comp issues, all timely questions and issues and things that small business owners would like to know about other small businesses. We will be issuing a market newsletter that'll go out to registrants that come to our site. We're going to offer specials, products and services. We anticipate thesba.com being the destination portal for the small business market to come to see content, evaluate the index, see what's going on there, look at market sentiment survey polls and also to see how small businesses can reduce their expenses, grow their sales and reduce their risk in the marketplace.

Moving towards slide 46, as we mentioned earlier, we clearly have revised some of our segments in 2010. We discussed some of those revisions earlier. I think the most important conclusion you can draw is we're looking at a lower boundary of a break-even number or pre-tax. We're zero for pre-tax profit on the lower end of the range and a up $1 million at the higher end of the range. We're looking at revenues for full-year 2010 coming in between $112 million and $113 million. Clearly we are forecasting a pre-tax profit for 2010.

From page 48 and we have the tracking. This chart it is one of my favorite charts. It shows a 2010 mid-point forecast and a 2011 mid-point forecast in the profitable zone. I call that the Northern Hemisphere. Up $0.6 million for 2010, up $3.5 million pre-tax for 2011. And when we look at our 2011 segment guidance, we clearly have quite a robust business plan going forward. We're looking at generating a nice EBITDA numbers for Electronic Payment Processing, $7.2 million to $7.7 million; Hosting $6.7 million to $7.3 million; Small Business $6.6 million to $8.2 million.

We're looking at generating revenues on a low end of the range of $124 million to $130 million. Gives us about a 7% or 8% revenue growth over the year prior and pre-tax net income coming in between $2 million and $5 million. A lot of this is clearly dependent upon how well we do, particularly in the Small Business Finance Segment which can be somewhat of a volatile segment depending upon the amount of loan originations that we do and our ability to consummate our long-term financing objectives with respect to debt securitization financing from a potential rated structure, as well as further repositioning ourselves with Capital One and larger lending lines.

With that I'd like to turn the financial review portion of the presentation over to Seth Cohen.

Thank you, Barry. I will now review our Third Quarter 2010 results. For the quarter-ended September 30, 2010 we recorded pre-tax income of $248,000 as compared to pre-tax loss of $2.1 million one year ago. We had a net loss of $318,000, or $0.01 per share in 2010 for the Third Quarter based on a provision for income taxes of $590,000 due to anticipated taxable earnings generated for the year, compared to net income of $782,000, or $0.02 per share in 2009, which benefited from a $1.2 million tax benefit in that quarter. Revenue increased by $2.4 million, or 9%, to $29.2 million compared to prior year. This was primarily attributable to the growth in our Electronic Payment Processing, Web Hosting and Small Business Finance segments.

Please turn to slide 53, Cash Positions. We began the year with $12.6 million of unrestricted cash and cash equivalents and ended September 30, 2010 with $7.3 million, a decrease of $5.3 million. The decrease in cash reflects the effects of increased origination of SBA loans, including a $1.4 million increase in our broker receivable from traded but not settled transfers of guaranty portions; purchases of receivables; movement of cash into restricted cash due to the operation of our term loan and our Capco's; and $1.3 million in principal payments on that term loan. Cash, restricted cash and the broker receivable totaled $24.2 million for the quarter end, down $1.6 million from $25.8 million at year end. The increase in bank notes payable reflects an increase in the credit line that supports our receivable purchases offset by principal payments on the term loan.

I would now like to review the performance by segment. You can turn your attention to slide 54 in the PowerPoint presentation. You'll see the comparison of our Third Quarter 2010 results versus third quarter of 2009. Electronic Payment Processing segment revenue increased by $2.4 million, or 13% in the Third Quarter of 2010, to $20.5 million, predominantly due to organic revenue growth from a combination of growth in our merchant accounts and an increase of our process volume per merchant. Pre-tax income increased 24% to $1.3 million for the Third Quarter of 2010 compared to $1.1 million for the third quarter of 2009. Although the amount of revenues less Electronic Payment Processing costs our margin as a percent of sales declined quarter over quarter and this decline is decelerated from previous periods, our margin increased $300,000 in dollar terms. This improvement in dollar margin, although slightly offset by costs other than Electronic Payment Processing costs increasing 3% resulted between years, resulted in improved pre-tax income.

Web Hosting segment revenue increased by $54,000, or 1% in the Third Quarter of 2010, to $4.8 million from $4.7 million in 2009. The increase is due to a combination of improved revenue per plan, organic growth of virtual instances and an increase in sales of customer website development services, which overcame a decrease in plan accounts period over period. Management's intent is to grow revenue through higher service offerings to customers to drive greater revenue and margin per plan, although this may result in lower numbers of plans sold overall. Pre-tax income increased 24%, or $250,000, to $1.3 million for the Third Quarter of 2010 from $1 million in 2009. The $200,000 decrease in expenses, primarily through reduction of salaries and benefits, facilitated the improvement in profitability.

Small Business Finance segment revenue for the Third Quarter of 2010 increased by $1.5 million from 2009, or 105%, to $3 million due primarily to the recognition of $1.2 million of premium income for loans sold in the First and Second Quarter because the warranty period had expired in the current quarter, as well as $314,000 increase in servicing fee income primarily associated with the FDIC contract. The segment recorded pre-tax income of $404,000 for the Third Quarter of 2010, an improvement of $1.2 million as compared to the pre-tax loss of $756,000 in 2009. For the Third Quarter of 2010 the All Other segment had a tax loss of $194,000, or $77,000 decrease from 2009, primarily as a result of decreased expenses.

In the Third Quarter of 2010 the Corporate Activities segment recorded revenue of $453,000, a $259,000 decrease from $712,000 one-year ago. This decrease is primarily due to the expected reduction in Capco management fees. Total expenses increased by $213,000 period over period primarily due to and increase in headcount count for general corporate purposes. As a result of the decrease in management fees and increase in expenses, the Corporate segment increased its pre-tax loss to $1.8 million compared to a loss of $1.3 million in 2009. For the 2010 -- for 2010 the pre-tax loss in Capco segment decreased to $800,000, or 8%, compared to a pre-tax loss of $873,000 in 2009. $73,000 decrease in loss primarily reflects reduced management fee expense period over period.

Slide 55 reflects that we are narrowing the range of our previously-issued guidance of 2010 to show that we expect to earn a profit for the year. Based on operations to date and our forecast for the remainder of the year we have narrowed our range for consolidated revenue to $112.4 million to $113.1 million, and for pre-tax income a break-even to $1 million. Continued improvements in Electronic Payment Processing and Small Business Finance segments primarily drove the change.

Finally, slide 57 reflects our newly-issued guidance for 2011. Based on current operating performance, implementing the marketing sales plans to be launched in 2011 which were previously described by Barry, and assuming we obtain additional financing for SBA lender, as also described by Barry, we are forecasting for 2011 consolidated revenues of $124.4 million to $130.8 million and consolidated pre-tax income of $2 million to $5 million. Expected performance in the core Electronic Payment Processing, Web Hosting and Small Business Finance segment both substantially drive the forecasted improvements and consolidated pre-tax income over forecasts in 2010 and account for the large range in forecasted pre-tax income.

I would now like to turn it back to Barry.

Thank you, Seth. Operator, we'll now take questions and answers.

Thank you, sir. (Operator Instructions) I am showing no questions at this time. I'm sorry, we do have a question from [Harold Ellish] with UBS.

Barry?

Hey, Harry, how are you?

I'm well, yourself?

Good. Good, thank you.

With respect to both Web Hosting and EPP, when you look at the increase in revenues, how much of that is an increase in same-store sales and how much of that is a result of bringing on more participants and more people that you're servicing?

Okay. I think I'll have you help me with that one.

Sure, let's do EPP first. Looks like about 2.3 and EPP 9% of the increase in revenue is an increase in our merchants under con -- average number of merchants. In addition, another 3% is an improvement in the volume that we -- of processing for those merchants. So that accounts for most of the -- those two items account for most of the change. 9% for the change in the number of merchants, the increase, and 3% in the other.

And, Seth, is -- are your rates steady or are you raising rates on these people as you go along?

I think that what you're seeing from the customer base is an increased amount of volume. We're also providing additional services to some of these customers and that's what accounts for the growing amount of revenue per customer.

Great, okay.

I think you're seeing the same thing in the Hosting business. We seem to be losing more customers at the bottom end of the trough and our average revenue per customer is increasing. So we're actually providing more services and getting a higher dollar price and we feel a better margin off of our customers when they are trading up. Our goal is to clearly -- obviously we do business with all customers, whether it's a single proprietary or whether it's 100 or 500 employees, but we clearly do a great job on the back end of servicing and I think that in a tough economic environment some of the bigger players tend to cut costs in the customer service area and the better quality customers are coming to us and sticking with us.

And, in fact, Barry, are you seeing a higher incidence of the cross selling that -- essentially the synergy that's the whole basis for the business, or is that -- are clients who are in one area tending to gravitate into the other areas, as well?

Yes, there's no question and I think we'll start to release some of those results on the annual call. And when you look at our rollout of our new website, thesba.com, you'll see that as customers are coming to us seeking to get help in growing revenues, and that's a category; reducing their expenses, as a category; and reducing their risks, as a category, you're going to be able to see a multitude of different ways that we can help them and that we're not just a service provider. But we're extremely consultative in terms of trying to help the small business grow what we view as one of the three key commandments of their day-to-day operating, which is reduce your expenses, grow your sales and reduce your risk. I think that we will demonstrate in the fourth quarter a certain amount of revenues that we've been able to quantify from putting the second or third or fourth product into the customer.

Great, I appreciate it. Thanks very much.

Thank you.

Thank you. (Operator Instructions) Our next question comes from Marc Silk with C. Silk and Sons.

Hi, Barry, nice job and it looks exciting going forward. I have more of a macro question. What have you seen in the difference of your client base, and especially in the summertime, to now regarding the psychology, what they're thinking in the trends and what they're telling you?

That's a fairly small timeframe. Look, the fed continues to ease. If you need to look at it with a microscope, I think generally speaking, people feel better. They feel better because the stock market has continued to rise since that period of time. Interest rates continue to go down. It's enabled a lot of business owners who really co-mingle most of their assets to refinance their home, which in turn is giving them a greater ability to derive some more cash flow on a personal basis, which they can use for their business.

I think that Americans got more and more embolden as it appears that there would be an opportunity to curtail the amount of government spending and government regulation in our lives and it's clearly the expectation at the end of August and September was that the House will turn so that a House, Senate and presidency controlled by a fairly liberal Democratic party that has put a lot of regulation on business would least be stymied. So I wouldn't say it's a -- I wouldn't say it's a major shift, but I think that general feeling of business is better today in mid November than it was in, say, May or June.

Okay, and my other question on the loan side. What percentage of loans are you rejecting? I just want to find out what the quality of loans is out there.

Our statistics are a bit difficult to ascertain because we look at our acceptance rate as a total gross rate. So we have people that put in a referral to apply for a loan and then we'll ask them about their business and they'll say they don't have one. I know that's kind of comical at times, but when you put those numbers in our pot, we wind up approving about 2% in units, not in dollars, of everything that we look at. It's a fairly low number.

With that said, we'll probably fund $65 million to $70 million of SBA loans that year. We probably will have provided somewhere in the neighborhood of $30 million to $40 million of purchases of receivables this year. It'll probably be significantly higher next year. So I think next year we could provide fundings of $125 million to $150 million of businesses. So we're clearly putting money out there. We are the second-largest SBA 7A non-bank lender looking at an October 30 end date, and I think we're in the top ten in making small business loans in New York in front of a lot of major money center banks. So we do -- we are pretty selective. We're looking at credits that are just fantastic credits right now.

That's good to know. Thanks, Barry.

Thank you.

Thank you. I am showing no further questions in the queue. I'd like to turn the call back over to Barry Sloane.

Okay. Thank you, everybody, for participating on our Q3 conference call. We look forward to finishing up the year within our guidance and bringing in a profit for 2010 and continuing to generate great returns for our shareholders. So thank you very much for attending and we appreciate your support.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the conference and you may now disconnect.