SecProbe.io

CORRESP
1
filename1.htm

CYNTHIA M. KRUS

DIRECT LINE: 202.383.0218

E-mail: Cynthia.krus@sutherland.com

August 24, 2016

Via
EDGAR

U.S. Securities and Exchange Commission

Attention: James O’Connor / Anthony Burak

100 F Street, N.E.

Washington, D.C. 20549

    Re:

        Newtek Business Services Corp.

        Registration Statement on Form N-2 (File No. 333-212436)

Dear Messrs. O’Connor and Burak:

On behalf
of Newtek Business Services Corp. (the “Company”), set forth below are the Company’s responses
to the oral comments provided by the Staff of the Division of Investment Management (the “Staff”) of
the Securities and Exchange Commission (the “SEC”) on July 21, 2016 and August 17, 2016, regarding the
Company’s Registration Statement on Form N-2 (File No. 333- 212436) and the prospectus
contained therein (the “Prospectus”). The Staff’s comments are set forth below in bold italics
and are followed by the Company’s responses.

 1. On page 2, please more fully describe the nature of the kinds of SMBs to which the Company lends. For example, please
explain why is the Company is dependent on real estate collateral.

Response: The Company advises the Staff
that it invests in a wide range of “small businesses,” as defined by SBA regulations. As an SBA 7(a) lender, under
SBA regulations, the Company is required to consider the nature and value of collateral provided to support SBA loans. The Company
generally considers real estate to be a relatively desirable form of collateral, regardless of borrower’s business type.
On pages 65 and 86, the Company has provided a list of our loans to SMBs, distributed by primary collateral type. On page 105,
the Company provides NSBF’s investments by industry type.

 2. On page 3, please provide a chart that shows and includes an explanation of the purpose of each consolidated company,
controlled company, and other entity in which the Company invests.

    1

Response: The Company has included
footnotes with the previously provided chart.

 3. On page 4, please discuss the extent to which NSBF is leveraged.

Response: The Company advises the
Staff that, as of June 30, 2016, NSBF had $7,850,000 and $17,200,000 outstanding under unguaranteed and guaranteed lines of credit,
respectively. The Company discusses NSBF’s leverage in detail in the Management’s Discussion and Analysis of Financial
Condition. The Company has added the following disclosure on page 4:

NSBF supports its lending activities with lines
of credit for its unguaranteed and guaranteed portions of SBA 7(a) Loans, which, as of June 30, 2016, had outstanding balances
of $7,850,000 and $17,200,000, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Capital Resources – Capital One Facility.”

 4. On page 4, please discuss the extent to which NBC engages in receivables financing.

Response: The Company
advises the Staff that NBC is a portfolio company that provides financing services to businesses through receivables financing
and, beginning in 2015, originates loans under the U.S. Small Business Administration’s (“SBA”) 504 loans program.
NBC also provides billing and accounts receivable maintenance services to businesses, as well as inventory financing services to
businesses via prime plus interest lending based on eligible inventory balances. The Company has revised the disclosure to reflect
the information above.

 5. On page 5, please discuss the services provided by valuation firms.

Response: The Company has revised
final two sentences of the second paragraph under the caption “Controlled Portfolio Companies” on page 5 to read as
follows:

In addition, the Company has engaged third party
valuation firms to provide valuation consulting services for the valuation of certain of our controlled portfolio companies for
which there is not a readily available market value. Specifically, the Board has directed the Company to engage independent valuation
firms to assist in valuing certain portfolio investments without a readily available market quotation at least once during a trailing
twelve-month period under a valuation policy and a consistently applied valuation process. See “Critical Accounting and
Estimates – Fair Value Measurement.” Please refer to the response to Comment 37, below.

 6. On page 5, please describe the Capco program, and why such entities are certified. Please clarify the difference between
Capcos and controlled portfolio companies.

Response: The Company added the
following disclosure on page 5 regarding Capcos:

Certified
capital companies, or “Capcos,” are companies that Newtek created pursuant to state-sponsored programs, which are designed
to encourage investment in small and new businesses and to create economic activity and jobs in designated geographic areas. See
“Business – Organizational Overview – Certified Capital Companies (Capcos).”

    2

The Company
has added the following disclosure on page 108-109:

Under state-created
Capco programs, states provides a Capco with tax credits generally equal to the amount of funds the Capco raises from insurance
company investors. The Capcos then issue the tax credits to its investors – a process which is designed to reduce the Capco’s
investors’ state tax liabilities. In exchange for receiving the tax credits, the Capco is obligated to invest the funds raised
in certain qualified businesses, which generally are defined by statute to include only businesses that meet certain criteria related
to the size, location, number of employees, and other characteristics of the business. If a Capco fails to comply with the performance
requirements of each state’s different Capco program, the tax credits are subject to forfeiture.

Under state law, a Capco that has invested in
qualified businesses an amount equal to 100% of its initial certified capital, it is able to decertify (i.e., terminate its status
as a Capco) and no longer be subject to any state Capco regulation. Upon voluntary decertification, the programs in about half
of the states require that a Capco share any distributions to its equity holders with the state sponsoring the Capco. For those
states that require a share of distributions, the sharing percentages vary, but are generally from 10% to 30%, usually on distributions
above a specified internal rate of return for the equity owners of the Capco.

Based on the above and that the Capcos were formed
to make investments in businesses, the entities were determined to be investment companies and are therefore consolidated subsidiaries
of Newtek.

 7. On page 5, please describe how a Capco creates tax credits.

Response: Please refer to the response
to Comment 6, above.

 8. On page 6, please define the phrase “enterprise valuation cushion,” or substitute a plain English phrase.

Response: The Company has revised
the sentence to read as follows:

Further, we believe that such companies generally
possess conservative capital structures with significantly less debt to equity, as compared to larger companies with more financing
options.

 9. Regarding pages 8, 13, 33, and 39, please explain why the SMB balance sheet includes primarily real estate? Please also
describe the types of companies in which NSBF primarily lends.

Response: Please refer to the response
to Comment 1, above.

 10. Regarding page 9, please describe whether or not it is likely that significant book /tax differences will exist. Please
disclose whether the Company may make distributions in excess of GAAP earnings and profits - returns of paid-in capital net of
Company fees and expenses.

    3

Response: The Company advises the
Staff that significant book to tax differences may exist primarily due to changes in valuation of investments. We intend to pay
quarterly distributions to our stockholders out of assets legally available for distribution. The quarterly distributions, if any,
will be determined by our Board. The distributions we pay to our stockholders in a year may exceed our taxable income for that
year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes.
The specific tax characteristics of our distributions will be reported to stockholders after the end of the calendar year.

 11. On page 11, please revise the 5th bullet point to read as follows: “We will be subject to corporate-level income
tax if we are unable to qualify as a RIC or are unable to make the distributions required to maintain RIC tax treatment.”

Response: The Company as revised
the disclosure accordingly.

 12. Before page 12 and on page 38, please explain what bank sponsorship is and why it is required by NMS.

Response: The Company has revised
the disclosures on pages 4 and 39, respectively, as follows:

Page 4, the following was added as the last sentence
to the first paragraph under the caption “Controlled Portfolio Companies”:

For example, NMS has entered into agreements
with two chartered banks (“bank sponsorships”), which allow NMS to access the Visa® and MasterCard® networks
in order to process bankcard transactions.

Pages 39 and 40, the following language has been
added to the first paragraph under the caption “We could be adversely affected if either of NMS’ two bank sponsors
is terminated”:

A Bank sponsorship is an agreement under which
a financial institution that has a membership with MasterCard®, Visa® or American Express® sponsors an independent
sales organization, like NMS, that accepts sales payments from credit card companies, and gain access the Visa®, MasterCard®,
and American Express® networks.

 13. On page 14, please reference the ongoing UPS litigation.

Response: The first bullet point
under the caption “Legal Proceedings – Portfolio Companies” has been revised as follows:

Our portfolio companies may, from time to time,
be involved in various legal matters, including a currently pending case - Federal Trade Commission v. WV Universal Management,
LLC et al., which may have an adverse effect on their operations and/or financial condition.

The Company advises the Staff that Federal
Trade Commission v. WV Universal Management, LLC et al. is discussed in detail in “Recent Developments.”

    4

 14. Please include the discussion of risks related to Capcos on page 14 in the initial disclosure regarding the Capcos. On
pages 14, 45, and 46, please better describe the nature and purpose of Capcos.

Response: The Company has revised
the disclosure. Please refer to the Company’s response to Comment 6, above.

 15. On page 17, please remove or revise footnote 8 to eliminate possible redundancy with footnote 3.

Response: The Company has revised
footnote 8 to provide that “other expenses” consist of stock transfer agent fees related to the Company’s dividend
reinvestment plan.

 16. On page 21, please include a statement of financial highlights in the prospectus, calculated according to the Instructions
to Item 4.1 of Form N-2.

Response: The Company revised the
disclosure to provide a statement of financial highlights.

 17. On page 26, please revise the last sentence of the first paragraph under the caption “We will be subject to corporate-level
income tax if we are unable to qualify as a RIC” as follows: To obtain and maintain our tax treatment as a RIC, we must meet
certain source-of-income, asset diversification, and distribution requirements.

Response: The Company has revised
the disclosure accordingly.

 18. On page 46 and throughout the document, to avoid confusion, please refer to Universal Processing Services of Wisconsin
as “UPSW.”

Response: The Company has revised
the disclosure accordingly.

 19. Regarding page 48, please describe the circumstance under which the Company would repurchase shares above NAV?

Response: The Company advises the
Staff that the extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety
of factors, including market conditions, regulatory requirements, and other corporate considerations, as determined by the Company’s
management team. The Company’s repurchasing activities will depend on, among other things, the fair value of the Company’s
common stock and the other available capital deployment opportunities.

 20. On pages 49 and 231, it is the published position of the Staff that the Maryland Control Share Acquisition Act is inconsistent
with the wording of, and purposes underlying, Section 18(i), specifically, and of the 1940 Act generally. See Boulder Total Return
Fund, Inc. (November 15, 2010). Please revise the disclosure to state explicitly that the Company will not amend its bylaws to
repeal the current exemption from the Maryland Control Share Acquisition Act without a formal determination by the Board that doing
so would be in the best interests of the stockholders and without the Company first notifying the staff.

Response: The Company has revised
the disclosure accordingly.

    5

 21. On page 57, please revise footnote 2, to provide that the high and low sales price to NAV is calculated as follows: “calculated
as the respective high or low sales price divided by net asset value minus 1.”

Response: The Company has revised
the disclosure accordingly.

 22. On page 59, to avoid confusion, please revise the first sentence to clarify that distributions in excess of current and
accumulated earnings and profits are non-taxable returns of capital. Please also clarify that a return of capital
is a return of a shareholders investment net of the Company's fees and expenses.

Response: The Company has revised
the disclosure accordingly.

 23. On page 59, please briefly explain how a RIC is treated for tax purposes.

Response: The Company has added
the following disclosure:

As a RIC, we generally will not be subject to
corporate-level federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends.

 24. On page 59, please explain whether the Company will be required to pay the 4% excise tax is if retains capital gains.

Response: The Company has revised
the disclosure to clarify that a RIC is not subject to the 4% excise tax on capital gains amounts that are treated as deemed distributions
to shareholders.

 25. On page 61, please explain whether Newtek Small Business Finance, LLC is NSBF.

Response: The Company has clarified
that Newtek Small Business Finance, LLC is NSBF.

 26. Regarding page 61, please explain whether Newtek Small Business Finance is a securitization vehicle. Please provide a
chart with an explanation of all the subsidiaries and controlled companies.

Response: The Company advises the
Staff that NSBF is not a securitization vehicle. The Company has provided a chart and footnotes explaining the Company’s
ownership of controlled portfolio companies and other entities. Please refer to the Company’s response to Comment 2, above.

 27. On page 63, please delete the phrase “of earnings” under the caption “Revenues.”

Response: The Company has revised
the disclosure accordingly.

 28. Regarding 68, please provide more disclosure in the summary about the Company's securitization process.

Response: The Company has revised
the disclosure under the caption “Small Business Finance Platform” on pages 3 and 4 by adding the following:

    6

NSBF’s securitization process is as follows.
After accumulating sufficient loans, the loans are transferred to a special purpose vehicle (a “Trust”), which in turn
issues notes against the Trust’s assets in a private placement. The Trust’s primary source income for repaying the
securitization notes is the cash flows generated from the unguaranteed portion of SBA 7(a) loans now owned by the Trust; principal
on the securitization notes will be paid by cash flow in excess of that needed to pay various fees related to the operation of
the Trust and interest on the debt. Securitization notes have an expected maturity of about five years, and the Trust is disso