Filed Pursuant to Rule 497

Securities Act File No. 333-212436

 

NEWTEK BUSINESS SERVICES CORP.

 

 

Supplement No. 6, dated May 14, 2018

to

Prospectus Supplement, dated September 6, 2017

 

This supplement contains information which amends, supplements or modifies certain information contained in the Prospectus of Newtek Business Services Corp. (the “Company”), dated August 29, 2017 (the “Prospectus”), as supplemented by the Prospectus Supplement dated September 6, 2017, the Prospectus Supplement dated October 20, 2017, the Prospectus Supplement dated November 14, 2017, the Prospectus Supplement dated November 29, 2017, the Prospectus Supplement dated December 6, 2017, and the Prospectus Supplement dated March 23, 2018 (together, the “Prospectus Supplements”), which relate to the sale of shares of common stock of the Company in an “at the market” offering pursuant to an equity distribution agreement, dated as of September 6, 2017, with JMP Securities LLC, Compass Point Research & Trading, LLC, Ladenburg Thalmann & Co. Inc., and D.A. Davidson & Co. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus Supplements or Prospectus, as applicable.

 

You should carefully consider the “Risk Factors” below and beginning on page 23 of the Prospectus before you decide to invest.

 

Status of Our Offerings

 

On March 20, 2017, we established an at the market program to which this Supplement No. 6, dated May 14, 2018, and the Prospectus Supplements relate, and through which we may sell, from time to time at our sole discretion, up to 2,900,000 shares of our common stock. As of the date hereof, we have sold 1,244,773 shares of our common stock for net proceeds of approximately $21,476,000, after sales commissions to the Placement Agents of $438,000 and offering costs, under the at the market program. As a result, 1,655,227 shares of our common stock remain available for sale under the at the market program.

 

Recent Developments

 

Second Quarter 2018 Dividend

 

On May 11, 2018, the Company announced that its board of directors (the “Board”) declared a second quarter 2018 cash dividend of $0.42 per share.⁽¹⁾ The second quarter 2018 dividend is payable on June 29, 2018 to shareholders of record as of June 15, 2018.  The Company also reiterated its 2018 annual cash dividend forecast of $1.70¹ per share, which would represent a 3.7% increase over the Company’s 2017 annual dividend of $1.64 per share.

 

⁽¹⁾ The amount and timing of dividends, if any, remain subject to the discretion of the Board.

 

Increase to Leverage Limitation

 

On March 23, 2018, President Trump signed the Consolidated Appropriations Act of 2018, which includes the Small Business Credit Availability Act (the “Act”), into law. The Act amends the Investment Company Act of 1940, as amended (the “1940 Act”) to permit a business development company (a “BDC”) to reduce the required minimum asset coverage ratio applicable to it from 200% to 150%, subject to certain requirements described therein.

 

On April 27, 2018, the Board of the Company recommended the submission of a proposal for shareholders to approve the application of the 150% minimum asset coverage ratio to the Company at a Special Meeting of Shareholders.  

 

On that same day, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved application to the Company of the asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as modified by the Act. As a result, the Company’s asset coverage requirements for senior securities will change from 200% to 150%, effective April 27, 2019. However, if shareholders approve the proposal by the required majority of votes at the Special Meeting of Shareholders, the 150% minimum asset coverage ratio will be effective on the day after such approval. The Special Meeting of Shareholders is expected to be held on July 26, 2018.

 

 

Risk Factors

 

Because we have received the approval of our Board, we will be subject to a 150% asset coverage ratio beginning on April 27, 2019, unless shareholders approve the 150% asset coverage ratio before that date.

 

The 1940 Act generally prohibits us from incurring indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). However, recent legislation has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. Under the legislation, we are allowed to increase our leverage capacity if shareholders representing at least a majority of the votes cast, when quorum is met, approve a proposal to do so. If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively, the legislation allows a “required majority” (as defined in Section 57(o) of the 1940 Act) of our directors to approve an increase in our leverage capacity, and such approval would become effective after one year from the date of approval. In either case, we would be required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage.

               

On April 27, 2018 our Board of directors approved the application of the reduced asset coverage ratio to us. As a result, we will be able to increase our leverage up to an amount that reduces our asset coverage ratio from 200% to 150% (i.e., the amount of debt may not exceed 66 2/3% of the value of our assets) beginning on April 27, 2019, assuming that additional borrowings are available. Our Board also recommended that the Company submit a proposal to approve the 150% asset coverage limitation to shareholders at a special meeting of shareholders, which is expected to take in July 2018. If shareholders approve any such proposal, we will be able to reduce our assets coverage ratio from 200% to 150% effective the day after such shareholder approval.

 

Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partially finance our investments, you will experience increased risks of investing in our securities. If the value of our assets increases, then the additional leverage would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not increased our leverage. Conversely, if the value of our assets decreases, the additional leverage would cause net asset value to decline more sharply than it otherwise would have had we not increased our leverage. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the additional leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not increased our leverage. Such a decline could negatively affect our ability to pay common stock dividends, scheduled debt payments or other payments related to our securities. Leverage is generally considered a speculative investment technique. See “Risk Factors - Risks Related to Our Business and Structure - We finance our investments with borrowed money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us” in the accompanying prospectus.

 

In addition, the ability of BDCs to increase their leverage will increase the capital available to BDCs and thus competition for the investments that we seek to make. This may negatively impact pricing on the investments that we do make and adversely affect our net investment income and results of operations.

 

Form 10-Q

        

On May 9, 2018, we filed our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 (the “Form 10-Q”) with the Securities and Exchange Commission. We have attached the Form 10-Q as Annex A to this supplement.

 

Annex A

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•	our future operating results;

•	our business prospects and the prospects of our prospective portfolio companies;

•	the impact of investments that we expect to make;

•	our informal relationships with third parties;

•	the dependence of our future success on the general economy and its impact on the industries in which we invest;

•	our ability to access debt markets and equity markets;

•	the ability of our portfolio companies to achieve their objectives;

•	our expected financings and investments;

•	our regulatory structure and tax status;

•	our ability to operate as a BDC and a RIC;

•	our ability to maintain our license under the SBA 7(a) program;

•	the adequacy of our cash resources and working capital;

•	the timing of cash flows, if any, from the operations of our portfolio companies;

•	the timing, form and amount of any dividend distributions;

•	the impact of fluctuations in interest rates on our business;

•	the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and

•	our ability to recover unrealized losses.

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