Company: NEWTP
Filing Date: 2025-03-17
Form Type: 10-K
Source: 0001587987-25-000050
Chunk: 105

Company: NewtekOne, Inc.
Filing Date: 2025-03-17
Form: 10-K
Item: Item 1
Chunk 105
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, to a lesser degree, under our Certified Capital Company (“Capco”) programs (see below). Historically, for investments in our subsidiaries, we focused more on tailoring them to the long-term growth needs of the companies than to immediate return. Our objective with these companies was to foster the development of the businesses as a part of the integrated operational platform of serving the independent business owner market, so we may have sought to reduce the burden on these companies to enable them to grow faster than they would otherwise as another means of supporting their development and that of the integrated whole.

Under state-created Capco programs, states provide 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. 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 is able to decertify (i.e., terminate its status as a Capco) and no longer be subject to any state Capco regulation. Our Capcos have historically invested in SMBs. We have de-emphasized our Capco business and do not anticipate creating any new Capcos. As the Capcos reach 100% investment we will seek to decertify them as Capcos, liquidate their remaining assets and thereby reduce their operational costs, particularly the legal and accounting costs associated with compliance. Thirteen of our original eighteen Capcos have reached this stage and been de-certified and liquidated. See “RISKS RELATED TO OUR CAPCO BUSINESS.”

Loan Origination Process

The following discussion relates to the Company’s loan origination selection process in connection with SBA 7(a) lending. For more information, see “Item 7. — Management's Discussion and Analysis of Financial Condition and Results of Operations.” The members of our Senior Lending Team and our executive officers are responsible for all aspects of our loan origination selection process. The discussion below describes our procedures. The stages of our selection process for loan originations are as follows:

Loan and Deal Generation/Origination

We believe that