Newtek Business Services Corp.
Newtek Business Services Corp. (Form: 497, Received: 01/24/2017 17:28:22)

This preliminary prospectus supplement relates to an effective registration statement under the Securities Act of 1933, as amended, but the information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell and are not soliciting an offer to buy these securities in any jurisdiction where the offer and sale is not permitted.

Filed Pursuant to Rule 497
Registration No. 333-212436

Subject to Completion
Preliminary Prospectus Supplement dated January 24, 2017

PRELIMINARY PROSPECTUS SUPPLEMENT
(to Prospectus dated August 26, 2016)

1,500,000 Shares

Newtek Business Services Corp.

Common Stock



 

Newtek Business Services Corp. is an internally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Along with its wholly owned subsidiary and controlled portfolio companies, Newtek provides a wide range of business services and financial products under the Newtek® brand to the small- and medium-sized business market. Newtek’s products and services include: Business Lending, including SBA 7(a) and 504 lending, Electronic Payment Processing, Managed Technology Solutions (Cloud Computing), eCommerce, Accounts Receivable and Inventory Financing, Insurance Solutions, Web and Ecommerce Solutions, Data Backup, Storage and Retrieval, and Payroll and Benefit Solutions.

As a BDC, our investment objective is to generate both current income and capital appreciation primarily through loans originated by our business finance platform and our equity investments in certain portfolio companies that we control.

We are offering for sale 1,500,000 shares of our common stock. We have granted the underwriters a 30-day option to purchase up to 225,000 additional shares of our common stock at the public offering price, less the underwriting discounts and commissions.

Our common stock is listed on the Nasdaq Global Market under the symbol “NEWT”. On January 23, 2017, the last reported sales price on the Nasdaq Global Market for our common stock was $15.88 per share.

An investment in our common stock is subject to risks and involves a heightened risk of total loss of investment. In addition, the companies in which we invest are subject to special risks. For example, we invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “high yield” or “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. See “Risk Factors” beginning on page 22 of the accompanying prospectus to read about factors you should consider, including the risk of leverage, before investing in our common stock.

In addition to the sections outlined in this form of prospectus supplement, each prospectus supplement actually used in connection with an offering conducted pursuant to the registration statement to which this form of prospectus supplement is attached will be updated to include such other information as may then be required to be disclosed therein pursuant to applicable law or regulation as in effect as of the date of each such prospectus supplement, including, without limitation, information particular to the terms of each security offered thereby and any related risk factors or tax considerations pertaining thereto. This form of prospectus supplement is intended only to provide a rough approximation of the nature and type of disclosure that may appear in any actual prospectus supplement used for the purposes of offering securities pursuant to the registration statement to which this form of prospectus supplement is attached, and is not intended to and does not contain all of the information that would appear is any such actual prospectus supplement, and should not be used or relied upon in connection with any offer or sale of securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus supplement and the accompanying prospectus contain important information about us that a prospective investor should know before investing in our common stock. Please read this prospectus supplement and the accompanying prospectus before investing and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). This information is available free of charge by contacting us by mail at 1981 Marcus Avenue, Suite 130, Lake Success, NY 11042, by telephone at (212) 356-9500 or on our website at http://www.NewtekOne.com . The SEC also maintains a website at http://www.sec.gov that contains such information. Information contained on our website or on the SEC’s website about us is not incorporated by reference into this prospectus supplement and the accompanying prospectus, and you should not consider that information contained on our website or on the SEC’s website to be part of this prospectus supplement and the accompanying prospectus.

   
  Per Share   Total
Public Offering Price   $          $       
Sales Load (Underwriting Discounts and Commissions)   $     $  
Proceeds to us (before expenses) (1) (2)   $     $  

(1) We will incur approximately $160,000 of estimated expenses, excluding the sales load, in connection with this offering. Our stockholders will bear such expenses, including the sales load.
(2) To the extent that the underwriters sell more than 1,500,000 shares of our common stock, the underwriters have the option to purchase up to an additional 225,000 shares of our common stock at the public offering price, less the sales load, within 30 days of the date of this prospectus supplement. If the underwriters exercise this option in full, the total public offering price, sales load and proceeds to us will be $  , $   and $  , respectively.

The underwriters expect to deliver the shares on or about January   , 2017.

Joint Bookrunners

       
  Keefe, Bruyette & Woods 
A Stifel Company 
  Raymond James   UBS Investment Bank     

January   , 2017


 
 

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TABLE OF CONTENTS
 
PROSPECTUS SUPPLEMENT

 
  Page
ABOUT THIS PROSPECTUS SUPPLEMENT     S-1  
PROSPECTUS SUPPLEMENT SUMMARY     S-2  
THE OFFERING     S-18  
FEES AND EXPENSES     S-21  
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS     S-23  
CAPITALIZATION     S-24  
RISK FACTORS     S-25  
USE OF PROCEEDS     S-27  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION     S-28  
UNDERWRITING     S-51  
LEGAL MATTERS     S-54  
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     S-54  
AVAILABLE INFORMATION     S-54  
INDEX TO FINANCIAL STATEMENTS     FS-1  

PROSPECTUS

 
  Page
About this Prospectus     1  
Prospectus Summary     2  
The Offering     8  
Fees and Expenses     17  
Selected Consolidated Financial and Other Data     19  
Financial Highlights     21  
Risk Factors     22  
Cautionary Statement Regarding Forward-Looking Statements and Projections     55  
Use of Proceeds     56  
Price Range of Common Stock and Distributions     57  
Ratio of Earnings to Fixed Charges     60  
Management’s Discussion and Analysis of Financial Condition and Results of Operation     61  
Senior Securities     99  
Business     102  
Portfolio Companies     129  
Management     175  
Executive Compensation     183  
Certain Relationships and Transactions     201  
Sales of Common Stock Below Net Asset Value     202  

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  Page
Security Ownership of Certain Beneficial Owners and Management     207  
Regulation     209  
Determination of Net Asset Value     215  
Dividend Reinvestment Plan     217  
Material U.S. Federal Income Tax Considerations     218  
Description of Our Capital Stock     226  
Description of Our Preferred Stock     233  
Description of Our Subscription Rights     234  
Description of Our Warrants     236  
Description of Our Debt Securities     237  
Plan of Distribution     250  
Brokerage Allocation and Other Practices     252  
Custodian, Transfer and Distribution Paying Agent and Registrar     252  
Legal Matters     252  
Independent Registered Public Accounting Firm     252  
Available Information     253  
Index to Financial Statements     F-1  

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ABOUT THIS PROSPECTUS SUPPLEMENT

You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. Neither we nor the underwriters have authorized any other person to provide you with different information from that contained in this prospectus supplement or the accompanying prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any shares of our common stock by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information contained in this prospectus supplement and the accompanying prospectus is complete and accurate only as of their respective dates, regardless of the time of their delivery or sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since those dates. This prospectus supplement may add, update or change information contained in the accompanying prospectus. This prospectus supplement supersedes the accompanying prospectus to the extent it contains information different from or additional to the information in that prospectus.

This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of common stock and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information and disclosure. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control. Please carefully read this prospectus supplement and the accompanying prospectus together with any exhibits and the additional information described under “Available Information” and in the “Prospectus Supplement Summary” section (including the “— Summary Risk Factors” section) of this prospectus supplement and the “Risk Factors” section of the accompanying prospectus before you make an investment decision.

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PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights some of the information in this prospectus supplement and the accompanying prospectus. It is not complete and may not contain all of the information that you may want to consider before deciding to invest in the Notes. You should read carefully the more detailed information set forth under “Risk Factors” and the other information included in this prospectus supplement and the accompanying prospectus and the documents to which we have referred. Throughout this prospectus, we refer to Newtek Business Services Corp., its consolidated subsidiaries and its predecessor, Newtek Business Services, Inc., as the “Company,” “we,” “us,” “our,” and “Newtek.”

Our Business

We are an internally managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. Additionally, we elected to be treated as a regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) for U.S. federal income tax purposes, beginning with our 2015 tax year. Our investment activities are managed by our executive officers and supervised by our board of directors (the “Board”).

Our investment objective is to generate both current income and capital appreciation primarily through loans originated by our business finance platform and our equity investments in certain portfolio companies that we control. We currently are the largest non-bank financial institution licensed by the U.S. Small Business Administration (“SBA”) under the federal Section 7(a) loan program (“SBA 7(a) Loans”) based on dollar lending volume. We generally structure our loans so that we can both sell the government guaranteed portions of loans and securitize the unguaranteed portions. This structure generally allows us to recover our capital and earn excess capital on each loan, typically within a year. We may in the future determine to retain the government guaranteed or unguaranteed portions of loans pending deployment of excess capital. Additionally, we and our controlled portfolio companies provide a wide range of business and financial products to small- and medium-sized business (“SMB”) accounts, including electronic payment processing, managed technology solutions (cloud computing), e-commerce, accounts receivable and inventory financing, The Secure Gateway, personal and commercial insurance services, web services, data backup, storage and retrieval and payroll and benefits solutions. We support the operations of our controlled portfolio companies by providing access to our proprietary and patented technology platform, including NewTracker®, our patented prospect management software.

We define SMBs as companies having revenues of $1 million to $100 million, and we estimate the SMB market to be over 27 million businesses in the U.S. While our primary investments include making loans and providing business services to the SMB market through our controlled portfolio companies, we also may make opportunistic investments in larger or smaller companies. We expect to generate returns through a combination of realized gains on the sale of the government guaranteed portions of SBA 7(a) loans, contractual interest payments on debt investments, dividends from our controlled portfolio companies, equity appreciation (through direct investment in our controlled portfolio companies), servicing income and other income. We can offer no assurance that we will achieve our investment objective.

Organizational Overview

On November 12, 2014, our predecessor, Newtek Business Services, Inc. (“Newtek NY”), merged with and into Newtek Business Services Corp. for the purpose of reincorporating the Company in the state of Maryland in anticipation of the election by the Company to be regulated as a BDC under the 1940 Act (the “BDC Conversion”). In addition, on October 22, 2014, we effectuated a 1 for 5 reverse stock split (the “Reverse Stock Split”) to attract institutional investors. As a result of the BDC Conversion, Newtek NY ceased to exist and the Company succeeded to Newtek NY’s operations as the sole surviving entity.

The Company is a Maryland corporation that is an internally managed, non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to meet regulatory tests, including the requirement to invest at least 70% of our gross assets in “qualifying assets.” Qualifying assets generally include securities of private or thinly traded U.S. companies and cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. See “Regulation” in the accompanying prospectus. In addition, we have elected to

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be treated for U.S. federal income tax purposes, and intend to qualify annually thereafter, as a RIC under the Code. See “Material U.S. Federal Income Tax Considerations” in this prospectus.

Set forth below is a diagram of our current organizational structure:

[GRAPHIC MISSING]

(1) Consolidated subsidiary that is part of the Company’s business finance platform, and operates as a nationally licensed SBA lender under the federal Section 7(a) program with preferred lender program status.
(2) Consists of indirect and direct SBA 7(a) Loans to small businesses.
(3) Wholly-owned portfolio company that is part of the Company’s business finance platform. Provides receivables financing, management services, and managerial assistance to SMBs.
(4) Wholly-owned portfolio company that markets credit and debit card processing services, check approval services, processing equipment, and software.
(5) Wholly-owned portfolio company that provides website hosting, dedicated server hosting, cloud hosting, web design and development, internet marketing, ecommerce, data storage and backup, and other related services.
(6) Wholly-owned portfolio company that is part of the Company’s business finance platform. Provides third-party loan services for SBA and non-SBA loans.
(7) Wholly-owned portfolio company that markets credit and debit card processing services, check approval services, processing equipment, and software.
(8) Includes: (i) Newtek Insurance Agency, LLC, a wholly-owned portfolio company which is a retail and wholesale brokerage insurance agency specializing in the sale of commercial and health/benefits lines insurance products to the SMB market as well as various personal lines of insurance. It is licensed in all 50 states; (ii) Newtek Payroll and Benefits Solutions, a wholly-owned portfolio company which offers an array of industry standard and competitively priced payroll management, payment and tax reporting services to SMBs; (iii) banc-serv Partners, LLC, a wholly-owned portfolio company which provides lending institutions with outsourced solutions for the entire SBA lending process, including credit analysis, structuring and eligibility, packaging, closing compliance and servicing.

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Business Finance Platform

Our portfolio consists of guaranteed and unguaranteed non-affiliate SBA loan investments that were made through our business finance platform, which includes Newtek Small Business Finance, LLC (“NSBF”), a nationally licensed SBA lender under the federal Section 7(a) loan program. SBA 7(a) loans are partially guaranteed by the SBA, an independent government agency that facilitates one of the nation’s largest sources of SMB financing. SBA guarantees typically range between 75% and 90% of the principal and interest due. NSBF has a dedicated Senior Lending Team that originates, sells and services SBA 7(a) loans to qualifying SMBs. NSBF sells the guaranteed portions of its SBA 7(a) loans, typically within two weeks of origination, and retains the unguaranteed portion until accumulating sufficient loans for a securitization. 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 of 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 dissolved when the securitization notes are paid in full.

NSBF has received preferred lender program (“PLP”) status, a designation whereby the SBA authorizes the most experienced SBA lenders to place SBA guarantees on loans without seeking prior SBA review and approval. PLP status allows NSBF to serve its clients in an expedited manner since it is not required to present applications to the SBA for concurrent review and approval.

NSBF maintains a diversified pool of loans by making smaller loans, approximately $1.0 million or less, that are dispersed both geographically and among industries, thereby limiting NSBF’s exposure to regional and industry-specific economic downturns. NSBF supports its lending activities with lines of credit for the unguaranteed and guaranteed portions of SBA 7(a) Loans. See Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources — Capital One Facility.

NSBF evaluates the credit quality of its loan portfolio by employing a risk rating system that is similar to the Uniform Classification System, which is the asset classification system adopted by the Federal Financial Institution Examinations Council. NSBF’s risk rating system is granular with multiple risk ratings in both the Acceptable and Substandard categories. NSBF assigns ratings based on numerous factors, including credit risk scores, collateral type, loan to value ratios, industry, financial health of the business, payment history, other internal metrics/analysis, and qualitative assessments. NSBF refreshes risk ratings as appropriate based upon considerations such as market conditions, loan characteristics, and portfolio trends. Refer to “Business —  Ongoing Relationships with Portfolio Companies” for a description of our risk rating system.

The business finance platform also includes Newtek Business Credit Solutions (“NBC”), a wholly-owned portfolio company that provides financing services to businesses through receivables financing and, beginning in 2015, originates loans under the SBA 504 loan program. NBC 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. NBC also offers managerial assistance to SMBs, including offering back office receivables services, such as billing and cash collections.

An additional wholly-owned portfolio company, Small Business Lending, LLC (“SBL”), engages in third party loan servicing for SBA and non-SBA loans. NSBF, along with SBL, manages a portfolio of approximately $1.2 billion of SBA 7(a) loans, which as of September 30, 2016 included approximately $280.2 million of SBA 7(a) loans that SBL services on behalf of third parties.

Controlled Portfolio Companies

In addition to our debt investments in portfolio companies, we also hold controlling equity interests, either directly or through our business finance platform, in certain portfolio companies that, as of September 30, 2016, represented approximately 37% of our total investment portfolio. Specifically, we hold a controlling equity interest in SBL, NBC, ADR Partners d/b/a banc-serv Partners, LLC (“BSP”), Universal Processing Services of Wisconsin, LLC d/b/a Newtek Merchant Solutions (“NMS” or “UPSW”), Premier Payments LLC d/b/a Newtek Payment Solutions (“Premier”), CrystalTech Web Hosting, Inc. d/b/a Newtek

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Technology Solutions (“NTS”), PMTWorks Payroll, LLC d/b/a Newtek Payroll and Benefits Solutions (“NPS”) and Newtek Insurance Agency, LLC (“NIA”). We refer to these entities (among others), collectively, as our “controlled portfolio companies.” Our controlled portfolio companies provide us with an extensive network of business relationships that supplement our referral sources and that we believe will help us to maintain a robust pipeline of lending opportunities and expand our business finance platform. 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.

Neither the controlled portfolio companies nor their operating revenues are consolidated in our financial reporting. The revenues that our controlled portfolio companies generate, after deducting operational expenses, may be distributed to us. As a BDC, our Board will determine quarterly the fair value of our controlled portfolio companies in a similar manner as our other investments. In particular, our investments in our controlled portfolio companies are valued using a valuation methodology that incorporates both the market approach (guideline public company method) and the income approach (discounted cash flow analysis). In following these approaches, factors that we may take into account in determining the fair value of our investments include, as relevant: available current market data, including relevant and applicable market trading comparables, the portfolio company’s earnings and discounted cash flows, comparisons of financial ratios of peer companies that are public, and enterprise values, among other factors. 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.”

Certified Capital Companies (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).”

Historically, our Capcos invested in SMBs and generated interest income, investment returns, non-cash income from tax credits, and non-cash expenses (i.e., interest, insurance, and cash management fees and expenses). We have de-emphasized our Capco business in favor of growing our controlled portfolio companies and do not anticipate creating any new Capcos. We continue to invest in and lend to SMBs through our existing Capcos and intend to meet the goals of the Capco programs.

As the Capcos reach 100% investment we will seek to de-certify them as Capcos and liquidate their remaining assets, which will reduce their operational costs (particularly compliance costs). Six of our original sixteen Capcos have reached this stage. See “Risk Factors — Risks Relating to Our Capco Business.”

Newtek Branding

We use an integrated multi-channel marketing approach featuring direct, indirect and outbound solicitation efforts. Our direct marketing efforts feature a line of products and services that were branded with our “go-to market” brand, The Small Business Authority® , and which was supported by a marketing campaign built around this brand, and our former web presence, www.thesba.com . We have rolled out our new “go to market” brand, Your Business Solutions Company®, which is being supported by a new marketing campaign and our new web domain, NewtekOne.com TM .

We market indirectly through referrals from our strategic alliance partners, which include banks, insurance companies, credit unions, and other affinity groups, using our patented NewTracker® referral system. The NewTracker® system provides for security and transparency between referring parties, and allows us and our alliance partners to review in real time the status of any referral as well as to provide real time compliance oversight by the respective alliance partner. We own the NewTracker® patent, as well as all trademarks and other patented intellectual property used by us or our controlled portfolio companies.

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We obtain referrals from individual professionals in geographic markets that have signed up to provide referrals and earn commissions through our BizExec and TechExec Programs, which include traditional information technology professionals, CPAs, independent insurance agents and sales and/or marketing professionals. We also market our electronic payment processing services through independent sales agents, and web technology and eCommerce services through internet-based marketing and third-party resellers.

Senior Lending Team and Executive Committee

Each of the key members of our Senior Lending Team, which include Barry Sloane, Peter Downs, David Leone, Robert Hawes, Gary Golden and Gary Taylor (our “Senior Lending Team”), has over 25 years of experience in finance-related fields. We believe that each member brings a complementary component to a team well-rounded in finance, accounting, operations, strategy, business law and executive management.

Our executive officers include Barry Sloane, Peter Downs, Jennifer C. Eddelson, Michael A. Schwartz, John Raven and Nilesh Joshi (our “Executive Committee”), which manage the Company, under the supervision of our Board. While our portfolio companies are independently managed, our Executive Committee oversees our controlled portfolio companies and, to the extent that we may make additional equity investments in the future, the Executive Committee will also have primary responsibility for identifying, screening, reviewing and completing such investments. We do not expect to focus our resources on investing in additional stand-alone equity investments, but may elect to do so from time to time on an opportunistic basis, if such opportunities arise. Messrs. Sloane and Downs have been involved together in the structuring and management of equity investments for the past ten years.

Market Opportunity

We believe that the limited amount of capital and financial products available to SMBs, coupled with the desire of these companies for flexible and partnership-oriented sources of capital and other financial products, create an attractive investment environment for us to further expand our business finance platform and overall brand. We believe the following factors will continue to provide us with opportunities to grow and deliver attractive returns to stockholders.

The SMB market represents a large, underserved market.   We believe that the SMB market, which we estimate to be over 27 million mostly privately-held businesses, is relatively underserved by traditional capital providers such as commercial banks, finance companies, hedge funds and collateralized loan obligation funds. 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. As the largest non-bank originator of SBA 7(a) loans by dollar volume and currently the seventh largest SBA 7(a) lender in the U.S., we believe we and our controlled portfolio companies are well positioned to provide financing to SMBs, and have the technology and infrastructure in place to do so it cost effectively, in all 50 states, and across many industries.

Recent credit market dislocation for SMBs has created an opportunity for attractive risk-weighted returns.   We believe the credit crisis that began in 2007, and the subsequent exit of traditional capital sources, such as commercial banks, finance companies, hedge funds and collateralized loan obligation funds, has resulted in an increase in opportunities for alternative funding sources such as our SMB lending platform. We believe that the reduced competition in our market and an increased opportunity for attractive risk-weighted returns positions us well for future growth. The remaining lenders and investors in the current environment are requiring lower amounts of senior and total leverage, increased equity commitments and more comprehensive covenant packages than was customary in the years leading up to the credit crisis.

Future refinancing activity is expected to create additional investment opportunities.   A high volume of financings completed between 2005 and 2008 will mature in the coming years. We believe this supply of opportunities coupled with limited financing providers focused on SMBs will continue to offer investment opportunities with attractive risk-weighted returns.

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The increased capital requirements and other regulations placed on banks may reduce lending by traditional large financial institutions and community banks.   We believe that debt financing through traditional large financial institutions will continue to be constrained for several years as U.S. and international regulators continue to phase in financial reforms, such as Basel III, and U.S. regulators promulgate rules and regulations under the Dodd-Frank Wall Street Reform and the Consumer Protection Act. We believe that these regulations will increase capital requirements and have the effect of further limiting the capacity of traditional financial institutions to hold non-investment grade loans on their balance sheets. As a result, we believe that many of these financial institutions have de-emphasized their service and product offerings to SMBs, which we believe will make a higher volume of deal flow available to us.

Increased demand for comprehensive, business-critical SMB solutions.   Increased competition and rapid technological innovation are creating an increasingly competitive business environment that requires SMBs to fundamentally change the way they manage critical business processes. This environment is characterized by greater focus on increased quality, lower costs, faster turnaround and heightened regulatory scrutiny. To make necessary changes and adequately address these needs, we believe that companies are focusing on their core competencies and utilizing cost-effective outsourced solutions to improve productivity, lower costs and manage operations more efficiently. Our controlled portfolio companies provide critical business solutions such as business lending, receivables financing, including inventory financing and health care receivables, electronic payment processing, managed IT solutions (including eCommerce, webhosting and datacenters), personal and commercial insurance services and full-service payroll and benefit solutions. We believe that each of these market segments is underserved for SMBs and since we are able to provide comprehensive solutions under one platform, we are well positioned to continue to realize growth from these product offerings.

Competitive Advantages

We believe that we are well positioned to take advantage of investment opportunities in SMBs due to the following competitive advantages:

Internally Managed Structure and Significant Management Resources.   We are internally managed by our executive officers under the supervision of our Board and do not depend on an external investment advisor. As a result, we do not pay investment advisory fees and all of our income is available to pay our operating costs, which include employing investment and portfolio management professionals, and to make distributions to our stockholders. We believe that our internally managed structure provides us with a lower cost operating expense structure, when compared to other publicly traded and privately-held investment firms which are externally managed, and allows us the opportunity to leverage our non-interest operating expenses as we grow our investment portfolio.
Business Model Enables Attractive Risk-Weighted Return on Investment in SBA Lending.   Our SBA 7(a) loans are structured so as to permit rapid sale of the U.S. government guaranteed portions, often within weeks of origination, and the unguaranteed portions have been successfully securitized and sold, usually within a year of origination. The return of principal and premium may result in an advantageous risk-weighted return on our original investment in each loan. We may determine to retain the government guaranteed or unguaranteed portions of loans pending deployment of excess capital.
State of the Art Technology.   Our patented NewTracker® software enables us to board a SMB customer, process the application or inquiry, assemble necessary documents, complete the transaction and create a daily reporting system. This system enables us to identify a transaction, then process the business transaction and generate internal reports used by management and external reports for strategic referral partners. It allows our referral partners to have digital access into our back office and follow on a real time, 24/7 basis the processing of their referred customers. This technology has been made applicable to all of the service and product offerings we make directly or through our controlled portfolio companies.

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Established Direct Origination Platform with Extensive Deal Sourcing Infrastructure.   We have established a direct origination pipeline for investment opportunities without the necessity for investment banks or brokers as well as broad marketing channels that allow for highly selective underwriting. Over the past twelve years, the combination of our brand, our portal, our patented NewTracker® technology, and our web presence as The Small Business Authority® has created an extensive deal sourcing infrastructure. We anticipate that our new web presence, Your Business Solutions Company®, supported by our new web domain, NewtekOne.com TM , will continue this trend. We pay fees for loan originations that are referred to us by our alliance partners and our investment team works directly with the borrower to assemble and underwrite loans. We rarely invest in pre-assembled loans that are sold by investment banks or brokers. As a result, we believe that our unique national origination platform allows us to originate attractive credits at a low cost. We anticipate that our principal source of investment opportunities will continue to be in the same types of SMBs to which we currently provide financing. Our Executive Committee and Senior Lending Team will also seek to leverage their extensive network of additional referral sources, including alliance partners, law firms, accounting firms, financial, operational and strategic consultants and financial institutions, with whom we have completed investments. We believe our current infrastructure and expansive relationships should continue to enable us to review a significant amount of high quality, direct (or non-brokered) investment opportunities.
Experienced Senior Lending Team with Proven Track Record.   We believe that, under the direction of our Senior Lending Team, NSBF has become one of the leading capital providers to SMBs. Since we acquired NSBF in 2003, through September 30, 2016, NSBF has invested in excess of $1.7 billion in 1,999 transactions. Our Senior Lending Team has expertise in managing the SBA process and has managed a diverse portfolio of investments with a broad geographic and industry mix. While our primary focus is to expand the debt financing activities of NSBF in SBA 7(a) loans, we expect SBA 504 loans to be a growth opportunity, although there can be no assurances that such growth will occur.
Flexible, Customized Financing Solutions for Seasoned, Smaller Businesses.   While our primary focus as a BDC is to expand NSBF’s lending by providing SBA 7(a) loans to SMBs, we also seek to offer SMBs a variety of attractive financing structures, as well as cost effective and efficient business services, to meet their capital needs through our subsidiaries and controlled portfolio companies. In particular, CDS offers larger loans, between $5.0 to $10.0 million, than available with the SBA guarantee, but with a higher interest rate to compensate for the increased risk. Unlike many of our competitors, we believe we have the platform to provide a complete package of business services and financing options for SMBs, which allows for cross-selling opportunities and improved client retention. We expect that a large portion of our capital will be loaned to companies that need growth capital, acquisition financing or funding to recapitalize or refinance existing debt facilities. Our lending will continue to focus on making loans to SMBs that:
º have 3 to 10 years of operational history;
º significant experience in management;
º credit worthy owners who provide a personal guarantee for our investment;
º show a strong balance sheet including primarily real estate to collateralize our investments; and
º show sufficient cash flow to be able to service the payments on our investments comfortably.

We generally seek to avoid investing in high-risk, early-stage enterprises that are only beginning to develop their market share or build their management and operational infrastructure with limited collateral. We also believe our SBA license, combined with our PLP designation, provides us with a distinct competitive advantage over other SMB lenders that have not overcome these significant barriers-to-entry in our primary loan market.

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Disciplined Underwriting Policies and Rigorous Portfolio Management.   We pursue rigorous due diligence of all prospective investments originated through our platform. Our Senior Lending Team has developed an extensive underwriting due diligence process, which includes a review of the operational, financial, legal and industry performance and outlook for the prospective investment, including quantitative and qualitative stress tests, review of industry data and consultation with outside experts regarding the creditworthiness of the borrower. These processes continue during the portfolio monitoring process, when we will conduct field examinations, review compliance certificates and covenants and regularly assess the financial and business conditions and prospects of portfolio companies. Our controlled portfolio company SBL is a Standard & Poor’s rated servicer for commercial loans, offers servicing capabilities with a compact timeline for loan resolutions and dispositions and has attracted various third-party portfolios.

Summary Risk Factors

The value of our assets, as well as the market price of our shares, will fluctuate. Our investments may be risky, and you may lose all or part of your investment in us. Investing in Newtek involves other risks, including the following:

Risk Related to Our Business and Structure

Throughout our 18 year history we have never operated as a BDC until we converted on November 12, 2014.
Our investment portfolio is recorded at fair value, with our Board having final responsibility for overseeing, reviewing and approving, in good faith, its estimate of fair value and, as a result, there is uncertainty as to the value of our portfolio investments.
Our financial condition and results of operations will depend on our ability to manage and deploy capital effectively.
We are dependent upon our Senior Lending Team and our Executive Committee for our future success, and if we are unable to hire and retain qualified personnel or if we lose any member of our Senior Lending Team or our Executive Committee our ability to achieve our investment objective could be significantly harmed.
We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
If we are unable to source investments effectively, we may be unable to achieve our investment objective.
Our business model depends to a significant extent upon strong referral relationships, and our inability to maintain or further develop these relationships, as well as the failure of these relationships to generate investment opportunities, could adversely affect our business.
Any failure on our part to maintain our status as a BDC would reduce our operating flexibility.
Regulations governing our operation as a BDC affect our ability to raise additional capital and the way in which we do so. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.
Because we intend to distribute substantially all of our income to our stockholders to maintain our tax treatment as a RIC, we will continue to need additional capital to finance our growth, and regulations governing our operation as a BDC will affect our ability to, and the way in which we, raise additional capital and make distributions.
Because we borrow money, the potential for loss on amounts invested in us is magnified and may increase the risk of investing in us.
To the extent we borrow money to finance our investments, changes in interest rates will affect our cost of capital and net investment income.
We may experience fluctuations in our quarterly and annual results.

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Our Board may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
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.
We may not be able to pay distributions to our stockholders, our distributions may not grow over time and a portion of our distributions may be a return of capital.
We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
We may in the future choose to pay dividends in our own stock, in which case investors may be required to pay tax in excess of the cash they receive.
Internal control deficiencies could impact the accuracy of our financial results or prevent the detection of fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
We have specific risks associated with SBA loans.
Curtailment of the government-guaranteed loan programs could adversely affect our results of operations.
Curtailment of our ability to utilize the SBA 7(a) Loan Program by the Federal government could adversely affect our results of operations.
Our loans under the Section 7(a) Loan Program involve a high risk of default and such default could adversely impact our results of operations.
The loans we make under the Section 7(a) Loan Program face competition.
NSBF, our wholly-owned subsidiary, is subject to regulation by the SBA.
There can be no assurance that NSBF will be able to maintain its status as a PLP or that NSBF can maintain its SBA 7(a) license.
If NSBF fails to comply with SBA regulations in connection with the origination, servicing, or liquidation of an SBA 7(a) loan, liability on the SBA guaranty, in whole or part, could be transferred to NSBF.
Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that are costly and could adversely affect our business and financial results.
If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending and investment activities, our net asset value could decrease and our level of distributions and liquidity could be affected adversely.
Capital markets may experience periods of disruption and instability and we cannot predict when these conditions will occur. Such market conditions could materially and adversely affect debt and equity capital markets in the United States and abroad, which could have a negative impact on our business, financial condition and results of operations.
We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our securities and our ability to make distributions to our stockholders.
Terrorist attacks, acts of war or natural disasters may affect any market for our securities, impact the businesses in which we invest and harm our business, operating results and financial condition.
We face cyber-security risks.

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We could be adversely affected by information security breaches or cyber-security attacks.
The failure of our cyber-security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning, could impair our ability to conduct business effectively.

Risks Related to Our Investments Generally

Our investments are very risky and highly speculative.
An investment strategy focused primarily on smaller privately held companies involves a high degree of risk and presents certain challenges, including the lack of available information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns.
Our investments in leveraged portfolio companies may be risky, and you could lose all or part of your investment.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
If we make subordinated investments, the obligors or the portfolio companies may not generate sufficient cash flow to service their debt obligations to us.
The disposition of our investments may result in contingent liabilities.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
Economic recessions could impair our portfolio companies and harm our operating results.
The lack of liquidity in our investments may adversely affect our business.
Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
Our portfolio may lack diversification among portfolio companies which may subject us to a risk of significant loss if one or more of these companies defaults on its obligations under any of its debt instruments.
We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we may invest a significant portion of our assets in a relatively small number of issuers, which subjects us to a risk of significant loss if any of these issuers defaults on its obligations under any of its debt instruments or as a result of a downturn in the particular industry.
Our portfolio may be concentrated in a limited number of industries, which may subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our investments are concentrated.
Because we may not hold controlling equity interests in certain of our portfolio companies, we may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.
Defaults by our portfolio companies will harm our operating results.
If we and our portfolio companies are unable to protect our intellectual property rights, our business and prospects could be harmed, and if we and our portfolio companies are required to devote significant resources to protecting their intellectual property rights, the value of our investment could be reduced.

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Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
We may not realize gains from our equity investments.
We may expose ourselves to risks if we engage in hedging transactions.
An increase in non-performing assets would reduce our income and increase our expenses.
If the assets securing the loans that we make decrease in value, then we may lack sufficient collateral to cover losses.
We could be adversely affected by weakness in the residential housing and commercial real estate markets.

Risks Relating to Our Controlled Portfolio Companies — Newtek Merchant Solutions (NMS)

We could be adversely affected if either of NMS’ two bank sponsorships is terminated.
If NMS or its processors or bank sponsors fail to adhere to the standards of the Visa® and MasterCard® bankcard associations, its registrations with these associations could be terminated and it could be required to stop providing payment processing services for Visa® and MasterCard®.
On occasion, NMS experiences increases in interchange and sponsorship fees. If it cannot pass along these increases to its merchants, its profit margins will be reduced.
Unauthorized disclosure of merchant or cardholder data, whether through breach of our computer systems or otherwise, could expose us to liability and business losses.
NMS is liable if its processing merchants refuse or cannot reimburse charge-backs resolved in favor of their customers.
NMS has potential liability for customer or merchant fraud.
NMS payment processing systems may fail due to factors beyond its control, which could interrupt its business or cause it to lose business and likely increase costs.
The electronic payment processing business is undergoing very rapid technological changes which may make it difficult or impossible for NMS or Premier Payments to compete effectively.
NMS and others in the payment processing industry have come under increasing pressures from various regulatory agencies seeking to use the leverage of the payment processing business to limit or modify the practices of merchants which could lead to increased costs and liabilities.
Increased regulatory focus on the payments industry may result in costly new compliance burdens on NMS’ clients and on NMS itself, leading to increased costs and decreased payments volume and revenues.

Risks Related to Our Controlled Portfolio Companies — Newtek Technology Solutions (NTS)

NTS operates in a highly competitive industry in which technological change can be rapid.
NTS’ technology solutions business depends on the efficient and uninterrupted operation of its computer and communications hardware systems and infrastructure.
NTS’ inability to maintain the integrity of its infrastructure and the privacy of confidential information would materially affect its business.
NTS could be adversely affected by information security breaches or cyber-security attacks.
NTS’ business depends on Microsoft Corporation and others for the licenses to use software as well as other intellectual property in the managed technology solutions business.

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NTS’ managed technology business is built on technological platforms relying on the Microsoft Windows® products and other intellectual property that NTS currently licenses. As a result, if NTS is unable to continue to have the benefit of those licensing arrangements or if the products upon which its platform is built become obsolete, its business could be materially and adversely affected.

Risks Related to Our Controlled Portfolio Companies — Newtek Insurance Agency (NIA)

NIA depends on third parties, particularly property and casualty insurance companies, to supply the products marketed by its agents.
If NIA fails to comply with government regulations, its insurance agency business would be adversely affected.
NIA does not have any control over the commissions it earns on the sale of insurance products which are based on premiums and commission rates set by insurers and the conditions prevalent in the insurance market.

Risks Related to Our Controlled Portfolio Companies — Newtek Payroll and Benefits Solutions (NPS)

Unauthorized disclosure of customer employee data, whether through a cyber-security breach of our computer systems or otherwise, could expose NPS to liability and business losses.
NPS is subject to risks surrounding Automated Clearing House (“ACH”) payments.
NPS’ systems may be subject to disruptions that could adversely affect its business and reputation.
If NPS fails to adapt its technology to meet client needs and preferences, the demand for its services may diminish.
NPS could incur unreimbursed costs or damages due to delays in processing inherent in the banking system.
NPS could incur unreimbursed costs or damages due to delays in processing customer payrolls or payroll taxes.

Risks Related to Our Controlled Portfolio Companies — Newtek Business Credit Solutions (NBC)

An unexpected level of defaults in NBC’s accounts receivables portfolio would reduce its income and increase its expenses.
NBC’s reserve for credit losses may not be sufficient to cover unexpected losses.
NBC depends on outside financing to support its receivables financing business.

Legal Proceedings — Portfolio Companies

Our portfolio companies may, from time to time, be involved in various legal matters, including the 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.

Risks Relating to Our CAPCO Business

The Capco programs and the tax credits they provide are created by state legislation and implemented through regulation, and such laws and rules are subject to possible action to repeal or retroactively revise the programs for political, economic or other reasons. Such an attempted repeal or revision would create substantial difficulty for the Capco programs and could, if ultimately successful, cause us material financial harm.

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Because our Capcos are subject to requirements under state law, a failure of any of them to meet these requirements could subject the Capco and our stockholders to the loss of one or more Capcos.
We know of no other publicly-held company that sponsors and operates Capcos as a part of its business. As such, there are, to our knowledge, no other companies against which investors may compare our Capco business and its operations, results of operations and financial and accounting structures.

Risks Relating to Our Securities

As of January 23, 2017, two of our stockholders, one a current and one a former executive officer, each beneficially own approximately 7% of our common stock, and are able to exercise significant influence over the outcome of most stockholder actions.
Our common stock price may be volatile and may decrease substantially.
Future issuances of our common stock or other securities, including preferred shares, may dilute the per share book value of our common stock or have other adverse consequences to our common stockholders.
Our stockholders may experience dilution upon the repurchase of common shares.
The authorization and issuance of “blank check” preferred shares could have an anti-takeover effect detrimental to the interests of our stockholders.
Our business and operation could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price.
Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
If we issue preferred stock, the net asset value and market value of our common stock will likely become more volatile.
Stockholders may incur dilution if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock or issue securities to subscribe to, convert to or purchase shares of our common stock.

Risk Related to Our Publicly-Traded Debt

The 7.5% notes due 2022 (the “2022 Notes”) and the 7.00% notes due 2021 (the “2021 Notes,” and together with the 2022 Notes, the “Notes”) are unsecured and therefore are effectively subordinated to any secured indebtedness we have outstanding or may incur in the future.
The Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
The indenture under which the Notes were issued contains limited protection for holders of the Notes.
If we default on our obligations to pay other indebtedness that we may incur in the future, we may not be able to make payments on the Notes.
We may choose to redeem the Notes when prevailing interest rates are relatively low.
The trading market or market value of our publicly traded debt securities may fluctuate.
Pending legislation may allow us to incur additional leverage.

See “Risk Factors” beginning on page 22 of the accompanying prospectus, and the other information included in this prospectus supplement, for additional discussion of factors you should carefully consider before deciding to invest in our securities.

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Recent Developments

Securitization

On November 15, 2016, the Company closed its seventh and largest securitization of the unguaranteed portions of SBA 7(a) loans held on our balance sheet. The securitization resulted in the issuance and sale of $43,632,000 of Class A Notes and $9,812,000 Class B Notes, rated “A” and “BBB+”, respectively, by Standard and Poor’s Financial Services LLC.

December 31, 2016 Update

For the quarter ended December 31, 2016, the Company funded $91.4 million of SBA 7(a) loans, an increase of 22.4% over the same period one year ago.

For the year ended December 31, 2016, the Company funded $309.1 million in SBA 7(a) loans, an increase of 27.5% over the same period one year ago.

The Company’s portfolio company, Newtek Business Credit Solutions, closed $7.3 million in SBA 504 loans for the quarter ended December 31, 2016.

The Company received $2.8 billion of loan referrals during the fourth quarter of 2016 as compared to $1.4 billion for the fourth quarter of 2015, through its patented NewTracker® referral system.

The Company had $8.6 billion in loan referrals for the year ended December 31, 2016, an increase of 67.7% over the same period one year ago.

As of January 1, 2017, the Company had $71 million of SBA 7(a) loans in the pipeline approved pending closing, as compared to $27.8 million as of January 1, 2016, a 155.4% increase over the same period a year ago.

The Company paid a quarterly dividend of $0.40 per share on December 30, 2016 to shareholders of record as of December 15, 2016. For 2016, the Company paid $1.53 per share in dividends to shareholders. The Company has elected to be treated as a RIC under Subchapter M of the Code for U.S. federal income tax purposes, and intends to continue to qualify annually as a RIC. In order to avoid certain excise taxes imposed on RICs, the Company intends to distribute to its shareholders approximately 90% to 98% of the Company’s 2016 taxable income. The determination of the tax attributes of the Company’s distributions is made annually as of the end of the year based on its taxable income for the full year and distributions paid for the full year.

The Company expects to release its audited financial statements and file its Form 10-K for the year ended December 31, 2016 on or about March 16, 2017. The preliminary year end information provided above is subject to the completion of the Company’s financial closing procedures, the Company’s audited financial statements and Form 10-K. The Company advises that its actual results may differ materially from these estimates as a result of the completion of the Company’s financial closing procedures, final adjustments and other developments arising between now and the time that the Company’s financial results for the year ended December 31, 2016 are finalized.

Repurchase Program

On November 21, 2016, the Company announced that its Board approved a repurchase program under which the Company may repurchase up to 200,000 shares of the Company's common stock through open market purchases, including block purchases, in such a manner as will comply with the provisions of the 1940 Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Unless extended or terminated by its board of directors, the Company expects the termination date for the repurchase plan will be on May 21, 2017.

In addition, on November 21, 2016, the Company announced that its Board approved a repurchase program under which the Company may repurchase up to 10%, or $832,400 in aggregate principal amount, of its 7.5% notes due 2022 and up to 10%, or $4,025,000 in aggregate principal amount, of its 7.0% notes due 2021 through open market purchases, including block purchases, in such manner as will comply with the provisions of the 1940 Act and the Exchange Act. Unless extended or terminated by its board of directors, the Company expects the termination date for the repurchase plan will be on May 21, 2017.

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Legal Matters

The Company’s controlled portfolio companies are currently involved in various litigation matters, including as follows:

During the quarter ended June 30, 2013, the Federal Trade Commission (the “FTC”) amended an existing complaint in the matter Federal Trade Commission v. WV Universal Management, LLC et al., in the United States District Court for the Middle District of Florida (the “Court”), to add UPSW as an additional defendant on one count of providing substantial assistance in violation of the Telemarketing Sales Rule. On November 18, 2014, the Court issued an Order granting the FTC’s motion for summary judgment against UPSW on the single count. Subsequently, the FTC filed motions for a permanent injunction and equitable monetary relief against UPSW and the other remaining defendants. Prior to the Court hearing on the motions, UPSW and the FTC reached a settlement on the FTC’s motion for a permanent injunction. On May 19, 2015, the Court entered an equitable monetary judgment against UPSW for approximately $1,735,000, which has been deposited with the Court pending the outcome of UPSW’ s appeal of the judgment. The $1,735,000 was fully expensed in 2014 by UPSW. On June 14, 2016, the United States Court of Appeals for the Eleventh Circuit set aside the Court’s judgment awarding joint and several liability for equitable monetary relief in the amount of approximately $1,735,000 against UPSW, and remanded the case to the Court for findings of fact and conclusions of law as to whether and why UPSW should be jointly and severally liable for restitution, and in what amount, if any. On October 18, 2016, the Court ordered that the $1.735 million payment be returned to UPSW. On October 26, 2016, the Court entered an equitable monetary judgment against UPSW for approximately $1,735,000. UPSW has filed a notice of appeal of the judgment.

UPSW instituted an action against a former independent sales agent in Wisconsin state court for, among other things, breach of contract. The former sales agent answered the complaint and filed counterclaims against UPSW. The court recently granted certain aspects of defendants’ motions for summary judgment, dismissing certain of the claims asserted by UPSW. The case has been stayed pending certain matters under appeal to the Wisconsin Supreme Court. UPSW intends to vigorously pursue its claims against the former sales agent and defend the counterclaims asserted.

In October 2015, NTS was served with an amended complaint filed by a former customer of NTS alleging claims in connection with a server leased by the customer from NTS. In April 2016, the court denied NTS’ motion to dismiss the action. In order to avoid the continued burdens and expense of further litigation, NTS settled the litigation, which settlement expense was covered by NTS’ insurance carrier.

For more information, see “Legal Proceedings” in the accompanying prospectus.

West Hempstead Lease

As previously disclosed, the Company incurred a one-time expense in 2016 when it vacated its office space in West Hempstead, New York. In December 2016, the Company entered into subleases for the entire office space in West Hempstead for the remainder of the April 2019 term, and expects to be able to recognize approximately $750,000 in rental income over the remaining term of the subleases.

NSBF Revolving Credit Facility

In January 2017, NSBF signed a letter of intent to increase its existing revolving credit facility through Capital One, N.A. by $25 million to $75 million, as well as to reduce the borrowing rate by approximately 1.0%. The upsize of the credit facility and rate reduction are subject to final documentation and approval from the U.S. Small Business Administration.

Operating and Regulatory Structure

The Company is a Maryland corporation that is an internally managed, non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to meet regulatory tests, including the requirement to invest at least 70% of our gross assets in “qualifying assets.” Qualifying assets generally include securities of private or thinly traded U.S. companies and cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. See “Regulation” in the accompanying prospectus. In addition, we have elected to

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be treated for U.S. federal income tax purposes, and intend to qualify annually thereafter, as a RIC under the Code. See “Material U.S. Federal Income Tax Considerations” in this prospectus supplement and the accompanying prospectus.

Our Corporate Information

Our principal executive offices are located at 1981 Marcus Avenue, Suite 130, Lake Success, NY 11042, our telephone number is (212) 356-9500 and our website may be found at http://www.NewtekOne.com. Information contained in our website is not incorporated by reference into this prospectus, and you should not consider that information to be part of this prospectus.

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THE OFFERING

Common Stock Offered by us    
    1,500,000 shares, excluding 225,000 shares of common stock issuable pursuant to the option to purchase additional shares granted to the underwriters.
Common Stock Outstanding Prior to This Offering    
    14,629,974 shares.
Common Stock Outstanding After This Offering    
    16,129,974 shares, excluding 225,000 shares of common stock issuable pursuant to the option to purchase additional shares granted to the underwriters.
Use of Proceeds    
    We intend to use the net proceeds from selling our securities for funding investments in debt and equity securities in accordance with our investment objective and strategies described in this prospectus supplement and the accompanying prospectus. Additionally, we may use net proceeds for general corporate purposes, which include funding investments, repaying any outstanding indebtedness, acquisitions, and other general corporate purposes. We anticipate that substantially all of the net proceeds of any offering of our securities will be used for the above purposes within six to nine months from the consummation of the offering, depending on the availability of appropriate investment opportunities consistent with our investment objective and market conditions. We cannot assure you we will achieve our targeted investment pace. We expect that it may take more than three months to invest all of the net proceeds of an offering of our securities, in part because investments in private companies often require substantial research and due diligence.
    Pending such investments, we will invest the net proceeds primarily in cash, cash equivalents, U.S. government securities and other high-quality temporary investments that mature in one year or less from the date of investment. See “Regulation — Temporary Investments” in the accompanying prospectus and “Use of Proceeds” in this prospectus supplement and the accompanying prospectus for additional information about temporary investments we may make while waiting to make longer-term investments in pursuit of our investment objective.
Nasdaq Global Market Symbol    
    “NEWT”
Distributions    
    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 each calendar year. See “Price Range of Common Stock and Distributions” in the accompanying prospectus.

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Lock-Up Agreements    
    We, along with certain of our executive officers and directors, will enter into lock-up agreements with the representatives of the Underwriters. Under these agreements, subject to certain exceptions, we and each of these persons will agree not to, without the prior written approval of the representatives of the Underwriters, offer, sell, offer to sell, contract or agree to sell, hypothecate, hedge, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock. These restrictions will be in effect for a period of 90 days after the date of this prospectus. At any time and without public notice, the representatives may in their sole discretion release some or all of the securities from these lock-up agreements.
Taxation    
    We have elected to be treated for U.S. federal income tax purposes, beginning with our 2015 tax year, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. As a RIC, we generally do not pay corporate-level federal income taxes on any ordinary income or capital gains that we distribute to our stockholders. To maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements, and distribute annually at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. See “Price Range of Common Stock and Distributions” and “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus.
Dividend Reinvestment Plan    
    We have adopted an “opt out” dividend reinvestment plan. If your shares of common stock are registered in your own name, your distributions will automatically be reinvested under our dividend reinvestment plan in additional whole and fractional shares of common stock, unless you “opt out” of our dividend reinvestment plan so as to receive cash dividends by delivering a written notice to our dividend paying agent. If your shares are held in the name of a broker or other nominee, you should contact the broker or nominee for details regarding opting out of our dividend reinvestment plan. Stockholders who receive distributions in the form of stock will be subject to the same federal, state and local tax consequences as stockholders who elect to receive their distributions in cash. See “Dividend Reinvestment Plan” in the accompanying prospectus.
Trading    
    Shares of closed-end investment companies, including BDCs, frequently trade at a discount to their net asset value. The risk that our shares may trade at a discount to our net asset value is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our shares will trade above, at or below net asset value. As of January 23, 2017, our common stock closed at $15.88, a 11.36% premium to our net asset value of $14.26 per share as of September 30, 2016.

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Leverage    
    As of January 23, 2017, we had an aggregate of $173.7 million of debt outstanding, including $6.0 million outstanding under our $50.0 million credit facility with Capital One (the “Credit Facility”), securitization notes payable of $117.7 million, $8.3 million of Notes due 2022, and $40.3 million of Notes due 2021 and $1.4 million of related party notes payable. We may seek additional forms of leverage and borrow funds to make investments, including before we have fully invested the proceeds of this offering. As a result, we will be exposed to the risks of leverage, which may be considered a speculative investment technique. The use of leverage magnifies the potential for loss on amounts invested and therefore increases the risks associated with investing in our securities. The costs associated with our borrowings are borne by our common stockholders. See “Risk Factors” in the accompanying prospectus.
Certain Anti-Takeover Provisions    
    Our charter and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from making an acquisition proposal for us. These anti-takeover provisions may inhibit a change in control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price for our common stock. See “Description of Our Capital Stock” in the accompanying prospectus.
Available Information    
    We have filed with the SEC a registration statement on Form N-2 together with all amendments and related exhibits under the Securities Act. The registration statement contains additional information about us and the shares of common stock being offered by this prospectus supplement and the accompanying prospectus.
    We are required to file periodic reports, current reports, proxy statements and other information with the SEC. This information is available at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549 and on the SEC’s website at http://www.sec.gov . You may obtain information on the operation of the SEC’s public reference room by calling the SEC at 1-800-SEC-0330. This information is also available free of charge by contacting us at Newtek Business Services Corp., 1981 Marcus Avenue, Suite 130, Lake Success, New York 11042, by telephone at (212) 356-9500 or on our website at http://www.NewtekOne.com . Information contained on our website or on the SEC’s website about us is not incorporated into this prospectus and you should not consider information contained on our website or on the SEC’s website to be part of this prospectus.

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FEES AND EXPENSES

The following table is intended to assist you in understanding the costs and expenses that you will bear directly or indirectly. We caution you that many of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you,” “us” or “Newtek,” or that “we” will pay fees or expenses, the Company will pay such fees and expenses out of our net assets and, consequently, you will indirectly bear such fees or expenses as an investor in Newtek Business Services Corp. However you will not be required to deliver any money or otherwise bear personal liability or responsibility for such fees or expenses.

 
Stockholder transaction expenses:
        
Sales load (as a percentage of offering price)        (1)  
Offering expenses borne by us (as a percentage of offering price)        (2)  
Dividend reinvestment plan fees        (3)  
Total stockholder transaction expenses (as a percentage of offering price)        %  
Annual expenses (as a percentage of net assets attributable to common stock) (4) :
        
Operating expenses     15.35 % (5)  
Interest payments on borrowed funds     4.08 % (6)  
Other expenses     0.01 % (7)  
Acquired funds fees and expenses     None (8)  
Total annual expenses     19.44 % (9)  

(1) Represents the commission with respect to the shares of our common stock being sold in this offering, which we will pay in connection with sales of shares of our common stock effected in this offering.
(2) The offering expenses of this offering are estimated to be approximately $160,000.
(3) The expenses of the dividend reinvestment plan are included in “other expenses.”
(4) The Company has not included proceeds from this offering in the calculation of the annual expenses. The annualized expenses are based on our annualized expenses and net asset value as of September 30, 2016.
(5) “Operating expenses” represents an estimate of our annual operating expense. We do not have an investment advisor. We are internally managed by our executive officers under the supervision of our Board. As a result, we do not pay investment advisory fees. Instead we pay the operating costs associated with employing investment management professionals.
(6) Interest Payments on Borrowed Funds” represents estimated interest and fee payments on borrowed funds by estimating our annualized interest, fees and other debt-related expenses incurred for the year ended December 31, 2016, including our bank notes payable, Notes due 2021, Notes due 2022, related party notes payable and securitization notes payable.
(7) “Other expenses” consist of stock transfer expenses related to our distribution reinvestment plan.
(8) We have no current intention to invest in the securities of other investment companies. However, we are permitted to make such investments in limited circumstances under the 1940 Act. If we were to make such investments, we would incur fees and our stockholders would pay two levels of fees. As we have no current expectation of making any such investments, any estimate of the amount of such fees would be highly speculative.
(9) The holders of shares of our common stock indirectly bear the cost associated with our annual expenses.

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Example

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above.

       
  1 Year   3 Years   5 Years   10 Years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return   $ 161     $ 508     $ 890     $ 2,027  

The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown.

While the example assumes, as required by the SEC, a 5.0% annual return, our performance will vary and may result in a return greater or less than 5.0%. Further, while the example assumes reinvestment of all dividends and distributions at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock, generally determined by dividing the total dollar amount of the dividend payable to a participant by the market price per share of our common stock at the close of trading on the dividend payment date, which may be at, above or below net asset value. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.

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CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS AND PROJECTIONS

This prospectus supplement and accompanying prospectus contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about the Company, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this prospectus supplement and accompanying prospectus involve risks and uncertainties, including statements as to:

our future operating results;
our business prospects and the prospects of our portfolio companies;
the impact of investments that we expect to make;
our contractual arrangements and relationships with third parties;
the dependence of our future success on the general economy and its impact on the industries in which we invest;
the ability of our portfolio companies to achieve their objectives;
our expected financings and investments;
our ability to obtain exemptive relief from the SEC to co-invest and to engage in joint restructuring transactions or joint follow-on investments;
the adequacy of our cash resources and working capital; and
the timing of cash flows, if any, from the operations of our portfolio companies.

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

an economic downturn could impair our portfolio companies’ ability to continue to operate or repay their borrowings, which could lead to the loss of some or all of our investments in such portfolio companies;
a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;
interest rate volatility could adversely affect our results, particularly if we use leverage as part of our investment strategy; and
the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this prospectus supplement, accompanying prospectus, and in our filings with the SEC.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus supplement of the accompanying prospectus should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Risk Factors” in the accompanying prospectus and elsewhere in this prospectus supplement and accompanying prospectus. You should not place undue reliance on these forward-looking statements, which apply only as of the respective dates of this prospectus supplement and accompanying prospectus. However, we will update this prospectus supplement and accompanying prospectus to reflect any material changes to the information contained herein. The forward-looking statements and projections contained in this prospectus are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1933, as amended.

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CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2016:

on an actual basis; and
on an as adjusted basis to give effect to the sale of    shares of our common stock in this offering at an assumed public offering price of $15.88 per share (the last reported closing price of our common stock on January 23, 2017), after deducting the estimated underwriting discounts and commissions of approximately $   and estimated offering expenses of approximately $160,000 payable by us.

You should read this table together with “Use of Proceeds” and financial statements and related notes thereto included elsewhere in this prospectus supplement and the accompanying prospectus.

   
  As of
September 30, 2016
     Actual   As Adjusted
(unaudited) (1)
     (in thousands)
Assets:
                 
Cash and cash equivalents   $ 2,718     $       
Investments at fair value     326,853           
Other assets     75,278             
Total assets   $ 404,849     $       
Liabilities:
                 
Credit Facilities payable   $ 49,919     $  
Securitization notes payable   $ 73,471     $  
Notes due 2022     7,832           
Notes due 2021     38,680           
Notes payable – related party     7,400           
Other liabilities   $ 19,375     $       
Total liabilities   $ 196,677     $       
Net assets   $ 208,172     $       
Stockholders’ equity:
                 
Common stock, par value $0.02 per share; 200,000,000 shares authorized, 14,509,000 shares outstanding   $ 292     $  
Capital in excess of par value   $ 188,647     $       
Undistributed net investment income     (3,150 )             
Net unrealized appreciation, net of deferred taxes     14,128             
Net realized gains     8,255             
Total stockholders’ equity   $ 208,172     $       

(1) The Company paid a quarterly dividend of $0.40 per share on December 30, 2016 to shareholders of record as of December 15, 2016. This dividend is not reflected in this table. Individuals who purchase stock in this offering will not be eligible to receive this dividend.

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RISK FACTORS

To the extent we borrow money to finance our investments, changes in interest rates will affect our cost of capital and net investment income.

To the extent we borrow money to finance investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income in the event we borrow money to finance our investments. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and/or long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. If we do not implement these techniques properly, we could experience losses on our hedging positions, which could be material. In addition, depending on the frequency and magnitude of rising interest rates, these interest rate increases could negatively impact premiums received on the sale of guaranteed SBA loans, and further, could increase prepayment speeds on outstanding SBA loans, potentially negatively impacting the Company’s financial results.

Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.

We will be subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity; most of our SBA loans do not carry prepayment penalties. When this occurs, we will generally reinvest these proceeds in temporary investments or repay outstanding debt, depending on future investment in new portfolio companies. Temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments could negatively impact our returnon equity, which could result in a decline in the market price of our securities.

Because we borrow money, the potential for loss on amounts invested in us is magnified and may increase the risk of investing in us.

Borrowings, also known as leverage, magnify 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 leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged our business. 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 leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not borrowed. 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.

Illustration: The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below:

Assumed Return on Our Portfolio (1)
(net of expenses)

         
  (10)%   (5)%   0%   5%   10%
Corresponding net return to stockholders (2)     (23.45 )%       (13.72 )%       (4.00 )%       5.72 %       15.45 %  

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(1) Assumes $404,849,000 in total assets, $181,443,000 in debt, $208,172,000 in net assets as of September 30, 2016, and an average cost of funds of 4.59%. Actual interest payments may be different.
(2) In order for us to cover our annual interest payments on indebtedness, we must achieve annuals returns on our September 30, 2016 total assets of at least 2.06%.

Our ability to achieve our investment objective may depend in part on our ability to access additional leverage on favorable terms, and there can be no assurance that such additional leverage can in fact be achieved.

We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we may invest a significant portion of our assets in a relatively small number of issuers, which subjects us to a risk of significant loss if any of these issuers defaults on its obligations under any of its debt instruments or as a result of a downturn in the particular industry.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, and therefore we may invest a significant portion of our assets in a relatively small number of issuers in a limited number of industries. As of September 30, 2016, our three largest investments, Newtek Merchant Solutions, Newtek Technology Solutions and Premier Payments LLC equaled approximately 15%, 5% and 5%, respectively, of the fair value of our total assets. Beyond the asset diversification requirements associated with our qualification as a RIC, we do not have fixed guidelines for diversification, and while we are not targeting any specific industries, relatively few industries may become significantly represented among our investments. To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer, changes in fair value over time or a downturn in any particular industry. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company.

Our stockholders may experience dilution upon the repurchase of common shares.

The Company has a program which allows the Company to repurchase up to 150,000 of the Company’s outstanding common shares on the open market. Under the program, purchases may be made at management’s discretion from time to time in open-market transactions, in accordance with all applicable securities laws and regulations. During the nine months ended September 30, 2016, the Company repurchased and retired 70,000 common shares in open market transactions for approximately $866,000. This program terminated on June 3, 2016. On May 11, 2016, the Company announced that its Board approved a new share repurchase program under which the Company may repurchase up to 150,000 of the Company’s outstanding common shares on the open market. This program terminated on November 11, 2016. On November 21, 2016 the Company announced that its Board approved a new share repurchase program under which the Company may repurchase up to 200,000 of the Company’s outstanding common shares on the open market. Unless extended or terminated by the Board, the Company expects the termination date for this new repurchase program will be on May 21, 2017. If we were to repurchase shares at a price above net asset value, such repurchases would result in an immediate dilution to existing common stockholders due to a reduction in our earnings and assets due to the repurchase that is greater than the reduction in total shares outstanding.

As of January 23, 2017, two of our stockholders, one a current and one a former executive officer, each beneficially own approximately 7% of our common stock, and are able to exercise significant influence over the outcome of most stockholder actions.

Although there is no agreement or understanding between them, because of their ownership of our stock, Barry Sloane, our Chairman, Chief Executive Officer and President, and Jeffrey G. Rubin, former president of the Company, will be able to exercise significant influence over actions requiring stockholder approval, including the election of directors, the adoption of amendments to the certificate of incorporation, approval of stock incentive plans and approval of major transactions such as a merger or sale of assets. This could delay or prevent a change in control of the Company, deprive our stockholders of an opportunity to receive a premium for their common stock as part of a change in control and have a negative effect on the market price of our common stock.

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USE OF PROCEEDS

We estimate that we will receive net proceeds from the sale of the 1,500,000 shares of our common stock in this offering of approximately $   million, or approximately $   million if the underwriters exercise their option to purchase additional shares in full (in each case using the last reported closing price of our common stock on January 23, 2017 of $15.88 per share), after deducting estimated offering expenses of approximately $160,000 payable by us.

We intend to use the net proceeds from selling shares of our common stock for funding investments in debt and equity securities in accordance with our investment objective and strategies described in this prospectus supplement and accompanying prospectus. Additionally, we may use net proceeds for general corporate purposes, which include funding investments, repaying any outstanding indebtedness, acquisitions, and other general corporate purposes. The supplement to this prospectus relating to an offering will more fully identify the use of proceeds from such offering.

We anticipate that substantially all of the net proceeds of any offering shares of our common stock will be used for the above purposes within six to nine months from the consummation of the offering, depending on the availability of appropriate investment opportunities consistent with our investment objective and market conditions. We cannot assure you we will achieve our targeted investment pace. We expect that it may take more than three months to invest all of the net proceeds of an offering of our securities, in part because investments in private companies often require substantial research and due diligence.

Pending such investments, we will invest the net proceeds primarily in cash, cash equivalents, U.S. government securities and other high-quality temporary investments that mature in one year or less from the date of investment. See “Regulation — Temporary Investments” for additional information about temporary investments we may make while waiting to make longer-term investments in pursuit of our investment objective.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this prospectus supplement and the accompanying prospectus. In addition to historical information, the following discussion and other parts of this prospectus supplement and the accompanying prospectus contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Forward-Looking Statements and Projections” appearing elsewhere in this prospectus supplement and under “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in the accompanying prospectus.

Overview

We are a leading national non-bank lender and own and control certain portfolio companies under the Newtek® brand (our “controlled portfolio companies,” as defined below) that provide a wide range of business and financial products to small- and medium-sized businesses (“SMBs”). Newtek’s products and services include: Business Lending including U.S. Small Business Administration (“SBA”) 7(a) lending, Electronic Payment Processing, Managed Technology Solutions (Cloud Computing), eCommerce, Accounts Receivable Financing, The Secure Gateway, The Newtek Advantage®, personal and commercial Insurance Services, Web Services, Data Backup, Store and Retrieval and Payroll Solutions to SMB accounts across all industries. We have an established and reliable platform that is not limited by client size, industry type, or location. As a result, we believe we have a strong and diversified client base across every state in the U.S and across a variety of different industries. In addition, we have developed a financial and technology based business model that enables us and our controlled portfolio companies to acquire and process our SMB clients in a very cost effective manner. This capability is supported in large part by NewTracker®, our patented prospect management technology software, which is similar to but we believe better than the system popularized by Salesforce.com. We believe that this technology and business model distinguishes us from our competitors.

We are an internally-managed, closed-end, non-diversified investment company that has elected to be regulated as a business development company (“BDC”) under the 1940 Act. In addition, for U.S. federal income tax purposes, we have elected to be treated as a RIC under the Code beginning in the 2015 tax year. As a BDC and a RIC, we are also subject to certain constraints, including limitations imposed by the 1940 Act and the Code. We converted to a BDC in November 2014. As a result, previously consolidated subsidiaries are now recorded as investments in controlled portfolio companies, at fair value. NSBF is a consolidated subsidiary and originates loans under the SBA’s 7(a) program.

We consolidate the following wholly-owned subsidiaries:

Newtek Small Business Finance, LLC
Newtek Asset Backed Securities, LLC
The Whitestone Group, LLC
Wilshire Colorado Partners, LLC
Wilshire DC Partners, LLC
Wilshire Holdings I, Inc.
Wilshire Louisiana Bidco, LLC
Wilshire Louisiana Partners II, LLC
Wilshire Louisiana Partners III, LLC
Wilshire Louisiana Partners IV, LLC
Wilshire New York Advisers II, LLC
Wilshire New York Partners III, LLC

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Wilshire New York Partners IV, LLC
Wilshire New York Partners V, LLC
Wilshire Partners, LLC
CCC Real Estate Holdings, LLC
Banc-Serv Acquisition, Inc.
Exponential Business Development Co., Inc.
Newtek LSP Holdco, LLC
Newtek Business Services Holdco 1, Inc.

Our common shares are currently listed on the Nasdaq Global Market under the symbol “NEWT”.

NSBF has been granted Preferred Lender Program (“PLP”) status and originates, sells and services SBA 7(a) small business loans and is authorized to place SBA guarantees on loans without seeking prior SBA review and approval. Being a national lender, PLP status allows NSBF to expedite loans since NSBF is not required to present applications to the SBA for concurrent review and approval. The loss of PLP status could adversely impact our marketing efforts and ultimately loan origination volume which could negatively impact our results of operations.

As a BDC, our investment objective is to generate both current income and capital appreciation primarily through loans originated by our business finance platform and our equity investments in certain portfolio companies that we control.

We target our debt investments, which are principally made through our business finance platform under the SBA 7(a) program, to produce a coupon rate of prime plus 2.75% which enables us to generate rapid sales of loans in the secondary market. We typically structure our debt investments with the maximum seniority and collateral along with personal guarantees from portfolio company owners, in many cases collateralized by other assets including real estate. In most cases, our debt investment will be collateralized by a first lien on the assets of the portfolio company and a first or second lien on assets of guarantors, in both cases primarily real estate. All SBA loans are made with personal guarantees from any owner(s) of 20% or more of the portfolio company’s equity.

We typically structure our debt investments to include non-financial covenants that seek to minimize our risk of capital loss such as lien protection and prohibitions against change of control. Our debt investments have strong protections, including default penalties, information rights and, in some cases, board observation rights and affirmative, negative and financial covenants. Debt investments in portfolio companies, including the controlled portfolio companies, have historically and are expected to continue to comprise the majority of our overall investments in number and dollar volume.

While the vast majority of our investments have been structured as debt, we have in the past and expect in the future to make selective equity investments primarily as either strategic investments to enhance the integrated operating platform or, to a lesser degree, under the Capco programs. For investments in our controlled portfolio companies, we focus more on tailoring them to the long term growth needs of the companies than to immediate return. Our objectives with these companies is to foster the development of the businesses as a part of the integrated operational platform of serving the SMB market, so we may reduce the burden on these companies to enable them to grow faster than they would otherwise and as another means of supporting their development.

We regularly engage in discussions with third parties with respect to various potential transactions. We may acquire an investment or a portfolio of investments or an entire company or sell a portion of our portfolio on an opportunistic basis. We, our subsidiaries, or our affiliates may also agree to manage certain other funds that invest in debt, equity or provide other financing or services to companies in a variety of industries for which we may earn management or other fees for our services. We may also invest in the equity of these funds, along with other third parties, from which we would seek to earn a return and/or future incentive allocations. Some of these transactions could be material to our business. Consummation of any such

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transaction will be subject to completion of due diligence, finalization of key business and financial terms (including price) and negotiation of final definitive documentation as well as a number of other factors and conditions including, without limitation, the approval of our board of directors and required regulatory or third party consents and, in certain cases, the approval of our stockholders. Accordingly, there can be no assurance that any such transaction would be consummated. Any of these transactions or funds may require significant management resources either during the transaction phase or on an ongoing basis depending on the terms of the transaction.

Revenues

We generate revenue in the form of interest, dividend, servicing and other fee income on debt and equity investments. Our debt investments typically have a term of 10 to 25 years and bear interest at prime plus a margin. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. We receive servicing income related to the guaranteed portions of SBA investments which we sell into the secondary market. These recurring fees are earned daily and recorded when earned. In addition, we may generate revenue in the form of packaging, prepayment, legal and late fees. We record such fees related to loans as other income. Dividends are recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income is recorded at the time dividends are declared. Distributions of earnings from portfolio companies are evaluated to determine if the distribution is income, return of capital or realized gain.

We recognize realized gains or losses on investments based on the difference between the net proceeds from the disposition and the cost basis of the investment without regard to unrealized gains or losses previously recognized. We record current period changes in fair value of investments and assets that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments or servicing assets, as appropriate, in the condensed consolidated statements of operations.

Expenses

Our primary operating expenses are salaries and benefits, interest expense and other general and administrative costs, such as professional fees, marketing, loan related costs and rent. Since we are an internally-managed BDC with no outside adviser or management company, the BDC incurs all the related costs to operate the Company.

Loan Portfolio Asset Quality and Composition

The following tables set forth distribution by business type of the Company’s SBA 7(a) loan portfolio at September 30, 2016 and December 31, 2015, respectively (in thousands):

As of September 30, 2016

Distribution by Business Type

       
Business Type   # of
Loans
  Balance   Average Balance   % of
Balance
Existing Business     860     $ 164,045     $ 191       80.3 %  
Business Acquisition     166       29,563       178       14.5 %  
Start-Up Business     132       10,851       82       5.2 %  
Total     1,158     $ 204,459     $ 177       100.0 %  

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As of December 31, 2015

Distribution by Business Type

       
Business Type   # of
Loans
  Balance   Average Balance   % of Balance
Existing Business     679     $ 130,692     $ 192       78.4 %  
Business Acquisition     144       26,763       186       16.0 %  
Start-Up Business     125       9,297       74       5.6 %  
Total     948     $ 166,752     $ 176       100.0 %  

The following tables set forth distribution by borrower’s credit score of the Company’s SBA 7(a) loan portfolio at September 30, 2016 and December 31, 2015, respectively (in thousands):

As of September 30, 2016

Distribution by Borrower Credit Score

       
Credit Score   # of
Loans
  Balance   Average Balance   % of Balance
500 to 550     16     $ 1,618     $ 101       0.8 %  
551 to 600     38       6,332       167       3.1 %  
601 to 650     149       31,215       209       15.3 %  
651 to 700     324       59,684       184       29.2 %  
701 to 750     350       62,062       177       30.4 %  
751 to 800     234       36,769       157       18.0 %  
801 to 850     40       4,326       108       2.1 %  
Not available     7       2,453       350       1.1 %  
Total     1,158     $ 204,459     $ 177       100.0 %  

As of December 31, 2015

Distribution by Borrower Credit Score

       
Credit Score   # of
Loans
  Balance   Average Balance   % of Balance
500 to 550     12     $ 1,085     $ 90       0.6 %  
551 to 600     32       4,957       155       3.0 %  
601 to 650     113       22,597       200       13.6 %  
651 to 700     262       41,901       160       25.1 %  
701 to 750     291       57,101       196       34.2 %  
751 to 800     198       31,870       161       19.1 %  
801 to 850     34       4,942       145       3.0 %  
Not available     6       2,299       383       1.4 %  
Total     948     $ 166,752     $ 176       100.0 %  

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The following tables set forth distribution by primary collateral type of the Company’s SBA 7(a) loan portfolio at September 30, 2016 and December 31, 2015, respectively (in thousands):

As of September 30, 2016

Distribution by Primary Collateral Type

       
Collateral Type   # of
Loans
  Balance   Average Balance   % of Balance
Commercial Real Estate     552     $ 123,667     $ 224       60.5 %  
Machinery and Equipment     192       35,203       183       17.2 %  
Residential Real Estate     250       19,282       77       9.4 %  
Other     44       12,885       293       6.3 %  
Accounts Receivable and Inventory     77       11,864       154       5.8 %  
Liquid Assets     12       425       35       0.2 %  
Furniture and Fixtures     10       397       40       0.2 %  
Unsecured     21       736       35       0.4 %  
Total     1,158     $ 204,459     $ 177       100.0 %  

As of December 31, 2015

Distribution by Primary Collateral Type

       
Collateral Type   # of
Loans
  Balance   Average Balance   % of Balance
Commercial Real Estate     444     $ 94,013     $ 212       56.5 %  
Machinery and Equipment     173       32,423       187       19.4 %  
Residential Real Estate     197       15,545       79       9.3 %  
Other     40       11,284       282       6.8 %  
Accounts Receivable and Inventory     66       12,583       191       7.5 %  
Liquid Assets     12       451       38       0.3 %  
Unsecured     9       240       27       0.1 %  
Furniture and Fixtures     7       213       30       0.1 %  
Total     948     $ 166,752     $ 176       100.0 %  

The following tables set forth distribution by days delinquent of the Company’s SBA 7(a) loan portfolio at September 30, 2016 and December 31, 2015, respectively (in thousands):

As of September 30, 2016

Distribution by Days Delinquent

       
Delinquency Status   # of
Loans
  Balance   Average Balance   % of Balance
Current     1,037     $ 180,565     $ 174       88.3 %  
1 to 30 days     32       5,943       186       2.9 %  
31 to 60 days     15       3,079       205       1.5 %  
61 to 90 days                       %  
91 days or greater     74       14,872       201       7.3 %  
Total     1,158     $ 204,459     $ 177       100.0 %  

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As of December 31, 2015

Distribution by Days Delinquent

       
Delinquency Status   # of
Loans
  Balance   Average Balance   % of Balance
Current     856     $ 151,950     $ 178       91.2 %  
1 to 30 days     23       3,525       153       2.1 %  
31 to 60 days     10       2,190       219       1.3 %  
61 to 90 days                       %  
91 days or greater     59       9,087       154       5.4 %  
Total     948     $ 166,752     $ 176       100.0 %  

Consolidated Results of Operations

As a BDC and a RIC, we are subject to certain constraints on our operations, including limitations imposed by the 1940 Act and the Code. The condensed consolidated results of operations described below may not be indicative of the results we report in future periods.

Comparison of the three months ended September 30, 2016 and 2015

Investment Income

     
(in thousands)   Three Months
Ended
September 30,
2016
  Three Months
Ended
September 30,
2015
  Change
Investment income:
                          
Interest income   $ 2,675     $ 2,211     $ 464  
Dividend income     2,933       3,093       (160 )  
Servicing income     1,551       1,262       289  
Other income     692       472       220  
Total investment income   $ 7,851     $ 7,038     $ 813  

Interest Income

The increase in interest income was attributable to the average outstanding performing portfolio of SBA non-affiliate investments increasing to $196,481,000 from $140,702,000 for the three months ended September 30, 2016 and 2015, respectively. The increase in the average outstanding performing portfolio resulted from the origination of new SBA non-affiliate investments period over period. The increase was also attributed to the increase in the Prime Rate from 3.25% to 3.50% in December 2015.

Dividend Income

The decrease in dividend income is primarily related to a one-time dividend generated by Exponential Business Development Co., Inc. of $1,080,000 during the three months ended September 30, 2015. The decrease was offset by an increase in dividends generated from UPSW, Premier and a new controlled portfolio company investment, banc-serv. Dividend income is dependent on portfolio company earnings. Current quarter dividend income may not be indicative of future period dividend income.

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NSBF Servicing Portfolio and Related Servicing Income

The following table represents NSBF originated servicing portfolio and servicing income earned for the three months ended September 30, 2016 and 2015:

     
(in thousands):   Three Months
Ended
September 30,
2016
  Three Months
Ended
September 30,
2015
  Change
Total NSBF originated servicing portfolio (1)   $ 902,604     $ 723,778     $ 178,826  
Total servicing income earned   $ 1,551     $ 1,262     $ 289  

(1) Of this amount, the total average NSBF originated portfolio earning servicing income was $645,906,000 and $532,817,000 for the three months ended September 30, 2016 and 2015, respectively.

The increase in servicing income was attributable to the increase in total portfolio investments for which we earn servicing income. The portfolio earning servicing income increased $113,089,000 period over period. The increase was a direct result of increased investments in SBA non-affiliate investments from 2015 to 2016.

Other Income

Other income relates primarily to legal, packaging, and late fees earned from SBA loans. The increase is related to the increase in the number of loans originated to 96 for the three months ended September 30, 2016, from 75 during the three months ended September 30, 2015. This increase resulted in an increase in legal and packaging fees earned.

Adjusted Net Investment Income

We utilize adjusted net investment income as a measure of our current and future financial performance. Adjusted net investment income is a non-GAAP financial measure and is not intended as an alternative measure of investment income as determined in accordance with GAAP. In addition, our calculation of adjusted net investment income is not necessarily comparable to similar measures as calculated by other companies that do not use the same definition or implementation guidelines. The table below reconciles net investment loss to adjusted net investment income.

   
(in thousands)   Three Months
Ended
September 30,
2016
  Three Months
Ended
September 30,
2015
Net investment loss   $ (2,125 )     $ (1,491 )  
Loss on lease     (152 )       (74 )  
Stock-based compensation     226        
Net realized gains on SBA non-affiliate debt investments     8,712       6,620  
Adjusted net investment income   $ 6,661     $ 5,055  

We believe this is a useful measure as it depicts the current income generated from our investment activities during the period. We include net realized gains on non-affiliate debt investments because they are recurring income related to the sale of SBA guaranteed non-affiliate investments in the secondary market. The 2016 loss on lease is a one-time expense related to vacating our office space in West Hempstead, New York. The lease loss adjustment was added back to adjusted net investment income when recognized in April 2016, the resulting monthly amortization of the lease loss will be deducted from adjusted net investment income through the remaining term of the lease. The 2015 loss on lease adjustment was related to the amortization of the lease loss on our former New York City principal office, which was exited in October 2011. We exclude the loss on lease because it is a non-recurring, non-cash expense when the initial loss is recorded, and the remaining rental expense is recognized each period. We exclude stock-based compensation as it is a non-cash expense.

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Expenses:

     
(in thousands)   Three Months
Ended
September 30,
2016
  Three Months
Ended
September 30,
2015
  Change
Expenses:
                          
Salaries and benefits   $ 3,439     $ 3,444     $ (5 )  
Stock-based compensation     226             226  
Interest     2,341       1,864       477  
Depreciation and amortization     84       87       (3 )  
Loss on lease     (152 )       (74 )       (78 )  
Other general and administrative costs     4,038       3,208       830  
Total expenses   $ 9,976     $ 8,529     $ 1,447  

Salaries and Benefits

Salaries and benefits were essentially unchanged period over period. Salaries and benefits increased $147,000 primarily due to an increase in headcount at NSBF. The additional headcount relates primarily to employees performing loan processing, loan closing or loan servicing functions as a result of the increase in loan originations. The increase was offset by a $152,000 increase in managerial assistance fees charged to controlled affiliates which are credited to salaries and benefits.

Stock-Based Compensation

During the three months ended September 30, 2016, the Company granted 100,050 restricted stock awards to certain employees which resulted in the recognition of $226,000 of stock-based compensation. There was no stock-based compensation expense recognized during the three months ended September 30, 2015.

Interest Expense

The following is a summary of interest expense by facility for the three months ended September 30, 2016 and 2015:

     
(in thousands)   Three Months
Ended
September 30,
2016
  Three Months
Ended
September 30,
2015
  Change
Notes payable – Securitization Trusts   $ 929     $ 971     $ (42 )  
Bank notes payable     393       376       17  
Notes due 2022     177       15       162  
Notes due 2021     810             810  
Notes payable – related parties     19       461       (442 )  
Notes payable in credits in lieu of cash     11       27       (16 )  
Other     2       14       (12 )  
Total interest expense   $ 2,341     $ 1,864     $ 477  

In September 2015 and April 2016, the Company issued $8,324,000 of 7.5% Notes due 2022, and $40,250,000 of 7.0% Notes due 2021 (collectively, the “Notes), respectively. The Company incurred $987,000 in related interest expense during the three months ended September 30, 2016 on the Notes. Interest expense on notes payable — related parties was $19,000 and $461,000 during the three months ended September 30, 2016 and 2015, respectively, and represents interest on amounts borrowed under an unsecured revolving line of credit extended by UPSW and NTS. The decrease is attributed to a decrease in the average outstanding balance on Notes payable — related parties during the period.

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Loss on Lease

In April 2016, the Company moved its headquarters to Lake Success, New York. As a result, the Company vacated its spaces in West Hempstead, New York and New York, New York. The Company recorded a loss related to the remaining liabilities under the West Hempstead lease, offset by any future rental income. Amounts recorded during the three months ended September 30, 2016 represent amortization of the loss. The Company has sublet its space in New York, New York and continues to market its space for sublease in West Hempstead, New York.

Other General and Administrative Costs

Other general and administrative costs include professional fees, marketing, loan related costs and rent. The increase in other general and administrative costs is primarily related to an increase in loan related costs. Loan related costs include referral fees, servicing expenses, appraisal fees, legal fees, search fees and other collateral preservation costs. Loan related costs increase as the number of loans we originate and service increase. At September 30, 2016, our loan portfolio consists of 1,158 SBA 7(a) loans as compared to 897 at September 30, 2015. Other increases include rent expenses as a result of the move to our Lake Success offices, increases in insurance and increases in tax and accounting fees.

Net Realized Gains and Net Unrealized Appreciation and Depreciation

Net realized gains or losses on investments are measured by the difference between the net proceeds from the repayment or sale and the cost basis of our investments without regard to unrealized appreciation or depreciation previously recognized and includes investments charged off during the period, net of recoveries. Realized gains for the three months ended September 30, 2016 and 2015 were $9,489,000 and $6,848,000, respectively. Realized losses were $777,000 and $228,000 during the three months ended September 30, 2016 and 2015, respectively. The net change in unrealized appreciation or depreciation on investments primarily reflects the change in portfolio investment fair values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses become realized.

Net Realized Gains on SBA Non-Affiliate Investments

       
  Three Months Ended
     September 30, 2016   September 30, 2015
(in thousands)   # of Debt
Investments
  $ Amount   # of Debt
Investments
  $ Amount
SBA non-affiliate investments originated during the quarter     96     $ 85,895       75     $ 64,245  
SBA guaranteed non-affiliate investments sold during the quarter     98     $ 66,453       76     $ 50,155  
Realized gains recognized on sale of SBA guaranteed non-affiliate investments         $ 9,489           $ 6,848  
Average sale price as a percent of principal balance (1)           111.84 %             111.34 %  

(1) Realized gains greater than 110.00% must be split 50/50 with the SBA in accordance with SBA regulations. The realized gains recognized above reflects amounts net of split with the SBA.

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Net Unrealized Appreciation (Depreciation) on Investments

     
(in thousands)   Three Months
Ended
September 30,
2016
  Three Months
Ended
September 30,
2015
  Change
Net unrealized depreciation on SBA guaranteed non-affiliate investments   $ (78 )     $ (48 )     $ (30 )  
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments     1,418       (531 )       1,949  
Net unrealized appreciation on controlled investments     4,638       770       3,868  
Change in provision for deferred taxes on unrealized gains on investments     (2,028 )             (2,028 )  
Net unrealized depreciation on credits in lieu of cash and notes payable in credits in lieu of cash     (1 )       (6 )       5  
Total net unrealized appreciation on investments   $ 3,949     $ 185     $ 3,764  

Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments relates to guaranteed portions of SBA debt investments made which the Company sells into a secondary market. Unrealized appreciation of SBA guaranteed investments represents the fair value adjustment of guaranteed portions of loans which have not yet been sold. Unrealized depreciation represents the reversal of unrealized appreciation when the loans are sold.

Net unrealized appreciation on SBA unguaranteed non-affiliate investments resulted from a decrease in discount rates on performing and non-performing SBA unguaranteed non-affiliate investments. The discount rate decreased from 5.38% to 5.05% period over period on performing SBA unguaranteed non-affiliate investments. The discount rate decreased from 8.50% to 6.24% period over period on non-performing SBA unguaranteed non-affiliate investments.

Net unrealized appreciation on controlled investments for the three months ended September 30, 2016 consisted of unrealized appreciation of $750,000 and $5,852,000 on our investments in Premier and UPSW, respectively, offset by unrealized depreciation of $1,305,000 and $700,000 on our investments in NTS and NBC. The primary driver of the increases were increases in multiples of comparable companies and increases in revenue growth projections for the three months ended September 30, 2016 compared to the three months ended September 30, 2015. The decreases at NTS and NBC were based on weaker than projected financial performance. Net unrealized appreciation on controlled investments was $770,000 for the three months ended September 30, 2015. This consisted primarily of $600,000, $215,000 and $200,000 of unrealized appreciation on the Company’s investments in UPSW, SBL and Newtek Insurance Agency, LLC (“NIA”), respectively. Unrealized appreciation was offset by unrealized depreciation of $50,000 and $208,000 on the Company’s investments in NTS and NBC. The primary driver of the increase in UPSW and NIA was better than projected financial performance. The primary driver of the increase in SBL was better than projected financial performance and the addition of a new third-party servicing contract which provides a longer-term stable revenue stream. The primary driver of the decrease in NTS and NBC was weaker than projected financial performance.

Provision for Deferred Taxes on Unrealized Appreciation of Investments

Certain consolidated subsidiaries are subject to U.S. federal and state income taxes. These taxable subsidiaries are not consolidated with the Company for income tax purposes, but are consolidated for GAAP purposes, and may generate income tax liabilities or assets from temporary differences in the recognition of items for financial reporting and income tax purposes at the subsidiaries. During the three months ended September 30, 2016, the Company recognized a provision for deferred taxes on unrealized gains of $2,028,000.

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Net Unrealized Depreciation on Servicing Assets

     
(in thousands)   Three Months
Ended
September 30,
2016
  Three Months
Ended
September 30,
2015
  Change
Net unrealized depreciation on servicing assets   $ (500 )     $ (565 )     $ 65  

Comparison of the nine months ended September 30, 2016 and 2015

Investment Income

     
(in thousands)   Nine Months
Ended
September 30,
2016
  Nine Months
Ended
September 30,
2015
  Change
Investment income:
                          
Interest income   $ 7,655     $ 6,711     $ 944  
Dividend income     7,719       5,967       1,752  
Servicing income     4,581       3,373       1,208  
Other income     1,913       1,343       570  
Total investment income   $ 21,868     $ 17,394     $ 4,474  

Interest Income

The increase in interest income was attributable to the average outstanding performing portfolio of SBA non-affiliate investments increasing to $182,637,000 from $132,758,000 for the nine months ended September 30, 2016 and 2015, respectively. The increase in the average outstanding performing portfolio resulted from the origination of new SBA non-affiliate investments period over period. The increase also was attributed to the increase in the Prime Rate from 3.25% to 3.50% in December 2015.

Dividend Income

The increase in dividend income is primarily related to an increase of dividends generated from Premier of $1,050,000, an increase of $900,000 in dividends generated from UPSW, an increase of $390,000 in dividends generated from NTS and $240,000 of dividends generated from banc-serv, a new wholly owned controlled portfolio company investment. The increase in 2015 was the result of a one-time dividend generated by Exponential Business Development Co., Inc. of $1,080,000 in the prior period. Dividend income is dependent on portfolio company earnings. Current period dividend income may not be indicative of future period dividend income.

NSBF Servicing Portfolio and Related Servicing Income

The following table represents NSBF originated servicing portfolio and servicing income earned for the nine months ended September 30, 2016 and 2015:

     
(in thousands):   Nine Months
Ended
September 30,
2016
  Nine Months
Ended
September 30,
2015
  Change
Total NSBF originated servicing portfolio (1)   $ 902,604     $ 723,778     $ 178,826  
Total servicing income earned   $ 4,581     $ 3,373     $ 1,208  

(1) Of this amount, the total average NSBF originated portfolio earning servicing income was $613,817,000 and $507,746,000 for the nine months ended September 30, 2016 and 2015, respectively.

The increase in servicing income was attributable to the increase in total portfolio investments for which we earn servicing income. The portfolio earning servicing income increased $106,071,000 period over period. The increase was a direct result of increased investments in SBA non-affiliate investments from 2015 to 2016.

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Other Income

Other income relates primarily to legal, packaging, prepayment, and late fees earned from SBA loans. The increase is related to the increase in the number of loans originated to 295 for the nine months ended September 30, 2016 from 208 during the nine months ended September 30, 2015. This increase resulted in an increase in legal and packaging fees earned.

Adjusted Net Investment Income

We utilize adjusted net investment income as a measure of our current and future financial performance. Adjusted net investment income is a non-GAAP financial measure and is not intended as an alternative measure of investment income as determined in accordance with GAAP. In addition, our calculation of adjusted net investment income is not necessarily comparable to similar measures as calculated by other companies that do not use the same definition or implementation guidelines. The table below reconciles net investment loss to adjusted net investment income.

   
(in thousands)   Nine Months
Ended
September 30,
2016
  Nine Months
Ended
September 30,
2015
Net investment loss   $ (7,586 )     $ (6,262 )  
Loss on lease     1,335       (218 )  
Stock-based compensation     226        
Net realized gains on SBA non-affiliate debt investments     22,517       21,659  
Adjusted net investment income   $ 16,492     $ 15,179  

We believe this is a useful measure as it depicts the current income generated from our investment activities during the period. We include net realized gains on non-affiliate debt investments because they are recurring income related to the sale of SBA guaranteed non-affiliate investments in the secondary market. The 2016 loss on lease is a one-time expense related to vacating our office space in West Hempstead, New York. The lease loss adjustment was added back to adjusted net investment income when recognized in April 2016, and the resulting monthly recognition of income will be deducted from adjusted net investment income through the remaining term of the lease. The 2015 loss on lease adjustment was related to the amortization of the lease loss on our former New York City principal office, which was exited in October 2011. We exclude the loss on lease because it is a non-recurring, non-cash expense when the initial loss is recorded, and the remaining rental expense is recognized each period. We exclude stock-based compensation as it is a non-cash expense.

Expenses:

     
(in thousands)   Nine Months
Ended
September 30,
2016
  Nine Months
Ended
September 30,
2015
  Change
Expenses:
                          
Salaries and benefits   $ 10,412     $ 9,600     $ 812  
Stock-based compensation     226             226  
Interest     5,804       4,948       856  
Depreciation and amortization     209       257       (48 )  
Loss on lease     1,335       (218 )       1,553  
Other general and administrative costs     11,468       9,069       2,399  
Total expenses   $ 29,454     $ 23,656     $ 5,798  

Salaries and Benefits

Salaries and benefits increased $1,221,000 primarily due to an increase in headcount at NSBF. The additional headcount relates primarily to employees performing loan processing, loan closing or loan servicing functions as a result of the increase in loan originations. The increase was offset by a $409,000 increase in managerial assistance fees charged to controlled affiliates which are credited to salaries and benefits.

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Stock-Based Compensation

During the nine months ended September 30, 2016, the Company granted 100,050 restricted stock awards to certain employees which resulted in the recognition of $226,000 of stock-based compensation. There was no stock-based compensation expense recognized during the nine months ended September 30, 2015.

Interest Expense

The following is a summary of interest expense by facility for the nine months ended September 30, 2016 and 2015:

     
(in thousands)   Nine Months Ended September 30, 2016   Nine Months Ended September 30, 2015   Change
Notes payable – Securitization Trusts   $ 2,808     $ 2,804     $ 4  
Bank notes payable     840       970       (130 )  
Capital One term loan and line of credit (NBS)           564       (564 )  
Notes due 2022     531       15       516  
Notes due 2021     1,389             1,389  
Notes payable – related parties     196       491       (295 )  
Notes payable in credits in lieu of cash     38       63       (25 )  
Other     2       41       (39 )  
Total interest expense   $ 5,804     $ 4,948     $ 856  

In September 2015 and April 2016, the Company issued $8,324,000 of 7.5% Notes due 2022, and $40,250,000 of 7.0% Notes due 2021, respectively. The Company incurred $1,920,000 in related interest expense during the nine months ended September 30, 2016 on the Notes. Interest expense on notes payable — related parties was $196,000 and $491,000 during the nine months ended September 30, 2016 and 2015, respectively, and represents interest on amounts borrowed under an unsecured revolving line of credit extended by UPSW and NTS. The decrease is attributed to a decrease in the average outstanding balance on Notes payable — related parties during the period. In June 2014, the Company entered into a four year $20,000,000 credit agreement with Capital One consisting of a $10,000,000 term loan and a revolving line of credit of up to $10,000,000. The NBS Capital One term loan and line of credit were paid in full and extinguished in June 2015, and as such, no interest expense was incurred during the nine months ended September 30, 2016. The decrease in interest expense related to the NSBF Capital One lines of credit was a result of a decrease in the average outstanding balance during the nine months ended September 30, 2016 when compared to September 30, 2015.

Loss on Lease

In April 2016, the Company moved its headquarters to Lake Success, New York. As a result, the Company vacated its spaces in West Hempstead, New York and New York, New York. The Company recorded a loss of $1,335,000 (net of $303,000 of amortization), related to the remaining liabilities under the West Hempstead lease, offset by any future rental income, during the nine months ended September 30, 2016. The Company has sublet its space in New York, New York and continues to market its space for sublease in West Hempstead, New York.

Other General and Administrative Costs

Other general and administrative costs include professional fees, marketing, loan related costs and rent. The increase in other general and administrative costs is primarily related to an increase in loan related costs. Loan related costs include referral fees, servicing expenses, appraisal fees, legal fees, search fees and other collateral preservation costs. Loan related costs increase as the number of loans we originate and service increase. At September 30, 2016, our loan portfolio consists of 1,158 SBA 7(a) loans as compared to 897 at September 30, 2015. Other increases include rent expenses as a result of the move to our Lake Success offices, increases in insurance and increases in tax and accounting fees.

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Net Realized Gains and Net Unrealized Appreciation and Depreciation

Net realized gains or losses on investments are measured by the difference between the net proceeds from the repayment or sale and the cost basis of our investments without regard to unrealized appreciation or depreciation previously recognized and includes investments charged off during the period, net of recoveries. Realized gains for the nine months ended September 30, 2016 and 2015 were $23,299,000 and $22,287,000, respectively. Realized losses were $763,000 and $628,000 during the nine months ended September 30, 2016 and 2015, respectively. The net change in unrealized appreciation or depreciation on investments primarily reflects the change in portfolio investment fair values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Net Realized Gains on SBA Non-Affiliate Investments

       
  Nine Months Ended
     September 30, 2016   September 30, 2015
(in thousands)   # of Debt
Investments
  $
Amount
  # of Debt
Investments
  $
Amount
SBA non-affiliate investments originated during the quarter     295     $ 217,779       208     $ 167,756  
SBA guaranteed non-affiliate investments sold during the period     287     $ 160,171       219     $ 154,687  
Realized gains recognized on sale of SBA guaranteed non-affiliate investments         $ 23,280           $ 22,287  
Average sale price as a percent of principal balance (1)              112.09 %                112.09 %  

(1) Realized gains greater than 110.00% must be split 50/50 with the SBA in accordance with SBA regulations. The realized gains recognized above reflects amounts net of split with the SBA.

Net Unrealized Appreciation (Depreciation) on Investments

     
(in thousands)   Nine Months
Ended
September 30,
2016
  Nine Months
Ended
September 30,
2015
  Change
Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments   $ 690     $ (3,210 )     $ 3,900  
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments     869       (1,667 )       2,536  
Net unrealized appreciation on controlled investments     10,362       10,289       73  
Change in provision for deferred taxes on unrealized gains on investments     (4,469 )             (4,469 )  
Net unrealized depreciation on credits in lieu of cash and notes payable in credits in lieu of cash     (2 )       (4 )       2  
Net unrealized depreciation on non-control/non-affiliate investments     (43 )             (43 )  
Total net unrealized appreciation on investments   $ 7,407     $ 5,408     $ 1,999  

Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments relates to guaranteed portions of SBA debt investments made which the Company sells into a secondary market. Unrealized appreciation of SBA guaranteed investments represents the fair value adjustment of guaranteed portions of loans which have not yet been sold. Unrealized depreciation represents the reversal of unrealized appreciation when the SBA 7(a) loans are sold.

The decrease in net unrealized depreciation on SBA unguaranteed non-affiliate investments resulted from a decrease in discount rates on performing and non-performing SBA unguaranteed non-affiliate investments. The discount rate decreased from 5.38% to 5.05% period over period on performing SBA unguaranteed

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non-affiliate investments. The discount rate decreased from 8.50% to 6.24% period over period on non-performing SBA unguaranteed non-affiliate investments.

Net unrealized appreciation on controlled investments for the nine months ended September 30, 2016 consisted of unrealized appreciation of $3,997,000 and $9,552,000 on our investments in Premier and UPSW, respectively offset by unrealized depreciation of $1,000,000, $1,305,000, and $925,000 on our investments in SBL, NTS, and NBC, respectively. The primary driver of the increases were increases in multiples of comparable companies and increases in revenue growth projections. The decrease in SBL, NTS, and NBC was based on weaker than projected financial performance. Net unrealized appreciation on controlled investments for the nine months ended September 30, 2015 consisted primarily of $5,339,000 of unrealized appreciation on the Company’s investment in UPSW and $5,565,000 of unrealized appreciation on the Company’s investment in SBL offset by unrealized depreciation of approximately $420,000 on the Company’s investment in NTS and $408,000 on NBC. The primary driver for the increase in SBL was the addition of a new third-party servicing contract which provides a longer-term stable revenue stream. The primary driver of the increase in UPSW was better than projected financial performance.

Provision for Deferred Taxes on Unrealized Appreciation of Investments

Certain consolidated subsidiaries of ours are subject to U.S. federal and state income taxes. These taxable subsidiaries are not consolidated with the Company for income tax purposes, but are consolidated for GAAP purposes, and may generate income tax liabilities or assets from temporary differences in the recognition of items for financial reporting and income tax purposes at the subsidiaries. During the nine months ended September 30, 2016, the Company recognized a provision for deferred taxes on unrealized gains of $4,469,000.

Net Unrealized Depreciation on Servicing Assets

     
(in thousands)   Nine Months
Ended
September 30,
2016
  Nine Months
Ended
September 30,
2015
  Change
Net unrealized depreciation on servicing assets   $ (1,341 )     $ (1,177 )     $ (164 )  

The increase in unrealized depreciation on servicing assets is primarily related to the increase in the discount rate from 11.57% to 12.03% offset by decreases in the assumed cumulative prepayment and average cumulative default rates. The increase in discount rate is attributed to determining the discount rate based on risk spreads and observable secondary market transactions for the nine months ended September 30, 2016 compared to a weighted average cost of capital and servicing spread for the nine months ended September 30, 2015. The assumed cumulative prepayment rate decreased from 19% to 15.5% and the assumed average cumulative default rate decreased from 25% to 20%.

Liquidity and Capital Resources

Overview

Cash requirements and liquidity needs over the next twelve months are anticipated to be funded primarily through operating results, available cash and cash equivalents, existing credit lines, proposed new credit lines, additional securitizations of the Company’s SBA unguaranteed loan portions and additional issuances of debt or equity securities.

Public Offerings

In April 2016, the Company and U.S. Bank, N.A. (the “Trustee”), entered into the Second Supplemental Indenture (the “Second Supplemental Indenture”) to the Base Indenture between the Company and the Trustee, relating to the Company’s issuance, offer and sale of $35,000,000 aggregate principal amount of 7.0% Notes due 2021 (the “2021 Notes”). The Company granted an overallotment option of up to $5,250,000 in aggregate principal amount of the 2021 Notes. The sale of the Notes generated proceeds of approximately $33,750,000, net of underwriter’s fees and expenses. In May 2016, the underwriters exercised their option to purchase $5,250,000 in aggregate principal amount of notes for an additional $5,066,000 in net proceeds. The 2021 Notes are the Company’s direct unsecured obligations and rank: (i) pari passu with the Company’s other

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outstanding and future unsecured indebtedness; (ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2021 Notes; (iii) effectively subordinated to all the Company’s existing and future secured indebtedness (including indebtedness that is initially unsecured to which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.

The 2021 Notes will mature on March 31, 2021 and may be redeemed in whole or in part at the Company’s option at any time or from time to time on or after April 22, 2017, at a redemption price of 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to but not including the date fixed for redemption. The 2021 Notes bear interest at a rate of 7.0% per year payable quarterly on March 31, June 30, September 30, and December 31 of each year, commencing on June 30, 2016, and trade on the Nasdaq Global Market under the trading symbol “NEWTL.”

The Base Indenture, as supplemented by the Second Supplemental Indenture, contains certain covenants including covenants requiring the Company to comply with (regardless of whether it is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a)(1) of the 1940 Act, to comply with (regardless of whether it is subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a)(1) of the 1940 Act as in effect immediately prior to the issuance of the 2021 Notes, and to provide financial information to the holders of the 2021 Notes and the Trustee if the Company should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These covenants are subject to important limitations and exceptions that are described in the Base Indenture, as supplemented by the First Supplemental Indenture. The Base Indenture provides for customary events of default and further provides that the Trustee or the holders of 25% in aggregate principal amount of the outstanding 2021 Notes may declare such 2021 Notes immediately due and payable upon the occurrence of any event of default after expiration of any applicable grace period. At September 30, 2016, the Company is in compliance with all covenants related to the 2021 Notes.

On October 15, 2015 we completed a public offering of 2,000,000 shares of our common stock at a public offering price of $16.50 per share. We also sold an additional 300,000 shares of common stock at a public offering price of $16.50 per share pursuant to the underwriter’s full exercise of the over-allotment option. Proceeds, net of offering costs and expenses were $35,290,000.

In September 2015, the Company and the Trustee entered into the Base Indenture and the First Supplemental Indenture relating to the Company’s issuance, offer, and sale of $8,324,000, including the underwriter’s partial exercise of their over-allotment option, in aggregate principal amount of the 7.5% Notes due 2022 (the “2022 Notes”). The 2022 Notes are the Company’s direct unsecured obligations and rank: (i) pari passu with the Company’s other outstanding and future unsecured indebtedness; (ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2022 Notes; (iii) effectively subordinated to all the Company’s existing and future secured indebtedness (including indebtedness that is initially unsecured to which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries. The 2022 Notes will mature on September 30, 2022 and may be redeemed in whole or in part at the Company’s option at any time or from time to time on or after September 23, 2018, at a redemption price of 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to but not including the date fixed for redemption. Proceeds net of offering costs and expenses were $7,747,000.

The Base Indenture, as supplemented by the First Supplemental Indenture, contains certain covenants including covenants requiring the Company to comply with (regardless of whether it is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a)(1) of the 1940 Act, to comply with the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a)(1) of the 1940 Act, and to provide financial

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information to the holders of the 2022 Notes and the Trustee if the Company should no longer be subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the Base Indenture, as supplemented by the Second Supplemental Indenture. The Base Indenture provides for customary events of default and further provides that the Trustee or the holders of 25% in aggregate principal amount of the outstanding 2022 Notes may declare such 2022 Notes immediately due and payable upon the occurrence of any event of default after expiration of any applicable grace period. At September 30, 2016, the Company is in compliance with all covenants related to the 2022 Notes.

On November 18, 2014 we completed a public offering of 2,200,000 shares of our common stock at a public offering price of $12.50 per share. We also sold an additional 330,000 shares of common stock at a public offering price of $12.50 per share pursuant to the underwriter’s full exercise of the over-allotment option. Proceeds, net of offering costs and expenses were $27,883,000.

Capital One Facilities

NSBF has a $50,000,000 credit facility with Capital One. The facility provides for a 55% advance rate on the non-guaranteed portions of the SBA 7(a) loans it originates, and a 90% advance rate on the guaranteed portions of SBA 7(a) loans it originates. The interest rate on the portion of the facility collateralized by the government guaranteed portion of SBA 7(a) loans, is set at Prime plus 1.00%, and there is a quarterly facility fee equal to 0.25% on the unused portion of the revolving credit calculated as of the end of each calendar quarter. The interest rate on the portion of the facility collateralized by the non-guaranteed portion of SBA 7(a) loans, is set at Prime plus 1.875%, and there is a quarterly facility fee equal to 0.25% on the unused portion of the revolving credit calculated as of the end of each calendar quarter. In June 2015, we amended the existing facility to eliminate the fixed charge coverage ratio in exchange for a debt service ratio, new EBITDA minimums, the elimination of restrictions on our ability to pay dividends to stockholders, as well as the release of the guarantees of our former subsidiaries (now treated as portfolio companies). In addition, the amendment extended the date on which the facility will convert to a term loan from May 16, 2016 to May 16, 2017 and extended the maturity date of the facility to May 16, 2019. At September 30, 2016, we had $23,519,000 and $26,400,000 outstanding under the unguaranteed and guaranteed lines of credit, respectively. At September 30, 2016, we were in full compliance with all applicable loan covenants.

Related Party Notes Payable

In June 2015, we entered into an unsecured revolving line of credit agreement with UPSW and NTS. Maximum borrowings under the line of credit are $38,000,000. The outstanding balance bears interest at a rate equal to (a) the greater of LIBOR or 50 basis points plus (b) 7% or at a rate equal to (y) the greater of the Prime Rate or 3.5%, plus (z) 6%. At September 30, 2016, the line of credit bears interest at a rate of 7.5%. The revolving line of credit has a maturity date of June 21, 2019. The outstanding borrowings at September 30, 2016 were $7,400,000.

Securitization Transactions

In December 2010, we created a financing channel for the sale of the unguaranteed portions of SBA 7(a) loans held on our balance sheet. We transferred the unguaranteed portions of SBA loans of $19,615,000, and an additional $3,000,000 in loans issued subsequent to the transaction, to a special purpose entity created for this purpose, Newtek Small Business Loan Trust 2010-1 (the “2010 Trust”), which in turn issued notes (the “securitization notes”) for the par amount of $16,000,000 against the assets in a private placement. The Trust is only permitted to purchase the unguaranteed portion of SBA 7(a) loans, issue asset-backed securities, and make payments on the securities. The 2010 Trust issued a single series of securitization notes to pay for the unguaranteed portions it acquired from us and will be dissolved when those securities have been paid in full. The primary source for repayment of the securitization notes is the cash flows generated from the unguaranteed portion of SBA 7(a) loans now owned by the 2010 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 2010 Trust and interest on the debt. At the time of issuance, the securitization notes had an anticipated maturity of about five years based on the expected performance of the underlying collateral and structure of the debt and a legal maturity of 30 years from the date of issuance. The assets of the 2010 Trust are legally isolated and

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are not available to pay our creditors. We continue to retain rights to cash reserves and all residual interests in the 2010 Trust and will receive servicing income. Proceeds from this transaction were used to repay a Capital One loan and for general corporate and lending purposes. Because we determined we are the primary beneficiary of the Trust we needed to consolidate the Trust into our financial statements. We continue to recognize the securitization notes in Notes payable. The investors and the 2010 Trust have no recourse to any of our other assets for failure if the Trust has insufficient funds to pay its obligations when due; however, Newtek had provided a limited guaranty to the investors in the 2010 Trust in an amount not to exceed 10% of the original issuance amount, to be used after all of the assets of the 2010 Trust have been exhausted. This limited guaranty was removed in the subsequent 2015 upsizing of the 2010 Trust, as set forth below. The notes were issued with an “AA” rating from S&P based on the underlying collateral.

In December 2011, we entered into a Supplemental Indenture by which the $16,000,000 of securitization notes issued by the 2010 Trust were amended to reflect a new principal amount of $12,880,000, as a result of principal payments made, and additional notes were issued in an initial principal amount of $14,899,000, so that the initial aggregate principal amount of all notes as of December 31, 2011 totaled $27,779,000. The notes are backed by approximately $40,500,000 of the unguaranteed portions of loans originated, and include an additional $5,000,000 to be originated and issued to the 2010 Trust by us under the SBA loan program. The notes retained their “AA” rating under S&P, and the final maturity date of the amended notes is March 22, 2037. The proceeds of the transaction have been used to repay debt and originate new loans.

In March 2013, we transferred the $23,569,000 of unguaranteed portions of SBA loans of, and an additional $5,900,000 in loans issued subsequent to the transaction, to a special purpose entity, Newtek Small Business Loan Trust 2013-1 (the “2013 Trust”). The 2013 Trust in turn issued securitization notes for the par amount of $20,909,000 against the assets in a private placement. The notes received an “A” rating by S&P; and the final maturity date of the amended notes is June 25, 2038. The proceeds of the transaction have been used to repay debt and originate new loans.

In December 2013, we completed an additional transaction whereby the unguaranteed portions of SBA loans of $23,947,000, and an additional $3,642,000 in loans issued subsequent to the transaction, was transferred to the 2013 Trust. The 2013 Trust in turn issued securitization notes for the par amount of $24,433,000 against the assets in a private placement. The notes received an “A” rating by S&P, and the final maturity date of the amended notes is April 25, 2039. The proceeds of the transaction have been used to repay debt and originate new loans.

In December 2014, we completed an additional transaction which resulted in the transfer of $36,000,000 of unguaranteed portions of SBA loans and an additional $7,500,000 in loans which were issued subsequent to the transaction, to the Newtek Small Business Loan Trust 2014-1 (the “2014 Trust”). The 2014 Trust in turn issued securitization notes for the par amount of $31,700,000 against the assets in a private placement. The notes received an “A” rating by S&P, and the final maturity date of the notes is April 2040. The proceeds of the transaction have been used to repay debt and originate new loans.

In September 2015, we issued additional unguaranteed SBA 7(a) loan-backed notes as part of an upsizing of the 2010 Trust. Note principal amounts of the original and exchanged notes were approximately $8,771,000 with additional notes which totaled approximately $32,028,000 as part of the upsizing. The initial aggregate amount of the senior notes issued by the 2010 Trust were approximately $40,800,000 on the closing date. The notes are collateralized by approximately $46,458,000 of SBA 7(a) unguaranteed portions and include a prefunded amount of $14,679,000 to be originated and transferred subsequently to the Trust. The notes retained their “AA” rating under S&P, and the final maturity of the amended notes is February 25, 2041.

Cash Flows and Liquidity

As of September 30, 2016, the Company’s unused sources of liquidity consisted of $81,000 available through the Capital One facility; $11,719,000 available through notes payable with related parties; $2,718,000 in unrestricted cash and $35,000 in money market funds.

Restricted cash of $24,781,000 as of September 30, 2016 is primarily held in NSBF. The majority, or $23,031,000 of restricted cash, is related to NSBF, and includes reserves in the event payments are insufficient

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to cover interest and/or principal with respect to securitizations, payments collected which are due to loan participants, a reserve established as part of a voluntary agreement with the SBA and amounts owed to the SBA.

The Company generated and used cash as follows:

   
(in thousands)   Nine months
ended
September 30,
2016
  Nine months
ended
September 30,
2015
Net cash used in operating activities   $ (23,048 )     $ (20,989 )  
Net cash used in investing activities     (294 )       (93 )  
Net cash provided by financing activities     21,752       6,367  
Net decrease in cash and cash equivalents     (1,590 )       (14,715 )  
Cash and cash equivalents, beginning of period     4,308       17,813  
Cash and cash equivalents, end of period   $ 2,718     $ 3,098  

During the nine months ended September 30, 2016, operating activities used cash of $23,048,000, consisting primarily of (i) $217,779,000 of SBA 7(a) loan investments, (ii) a $5,400,000 investment in 100% of the membership interests of banc-serv Partners, LLC (iii) a $2,057,000 repurchase of a loan from the SBA, (iv) a debt investment of $750,000 in PMT, and (v) a debt investment of $1,020,000 in Excel WebSolutions, LLC. These decreases were offset by (i) the decrease in broker receivables which arise from the guaranteed portions of SBA 7(a) loans that were traded but had not settled before period end and represent the amount of cash due from the purchasing broker; the amount varies depending on loan origination volume and timing of sales at period end, (ii) $18,045,000 of principal payments from affiliate and non-affiliate investments, (iii) a decrease in restricted cash of $1,923,000, and (iv) $183,452,000 of proceeds from the sale of SBA 7(a) investments.

Net cash provided by financing activities was $21,752,000 consisting primarily of (i) proceeds of $38,510,000, net of deferred financing costs from our offer and sale of 7.0% Notes due 2021, (ii) net proceeds of $20,819,000 from borrowings under the Capital One lines of credit, and (iii) Net borrowings of $1,753,000 under related party revolving line of credit. These increases were offset by (i) $22,168,000 of dividend payments, (ii) $16,297,000 of principal payments related to securitizations, and (iii) $866,000 of share repurchases.

Contractual Obligations

The following chart represents the Company’s significant obligations and commitments as of September 30, 2016:

         
(in thousands)   Payments due by period
Contractual Obligations   Total   Less than
1 year
  1 – 3
years
  3 – 5
years
  More than
5 years
Bank notes payable   $ 49,919     $ 26,400     $ 23,519     $     $  
Securitization notes payable (1)     75,550                         75,550  
Notes due 2022 (1)     8,324                         8,324  
Notes due 2021 (1)     40,250                   40,250        
Notes payable – related parties     7,400             7,400              
Employment agreements     563       563                    
Operating leases     14,234       285       3,770       2,416       7,763  
Totals   $ 196,240     $ 27,248     $ 34,689     $ 42,666     $ 91,637  

(1) Amounts represent principal only and are not shown net of unamortized debt issuance costs. See Note 7.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,

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disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

Fair Value Measurements

We value investments for which market quotations are readily available at their market quotations. However, a readily available market value is not expected to exist for many of the investments in our portfolio, and we value these portfolio investments at fair value as determined in good faith by our Board under our valuation policy and process. We may seek pricing information with respect to certain of our investments from pricing services or brokers or dealers in order to value such investments. We also employ independent third party valuation firms for certain of our investments for which there is not a readily available market value.

The application of our valuation methods may include comparisons of our portfolio companies to peer companies that are public, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings, discounted cash flow, the markets in which the portfolio company does business and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we will consider the pricing indicated by the external event to corroborate the private equity valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from values that may ultimately be received or settled.

Our Board is ultimately and solely responsible for determining, in good faith, the fair value of investments that are not publicly traded, whose market prices are not readily available on a quarterly basis or any other situation where portfolio investments require a fair value determination.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels for disclosure purposes. The Company carries all investments at fair value. Additionally, the Company carries its credits in lieu of cash, notes payable in credits in lieu of cash, and servicing assets at fair value. The fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and gives the lowest priority to unobservable inputs (Level 3). An asset or liability’s classification within the fair value hierarchy is based on the lowest level of the significant input to its valuation. The levels of the fair value hierarchy are as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as certain U.S. Treasury, other U.S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government and agency mortgage-backed debt securities, corporate debt securities, derivative contracts and residential mortgage loans held-for-sale.

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Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly structured or long-term derivative contracts.

Valuation of Investments

Level 1 investments are valued using quoted market prices. Level 2 investments are valued using market consensus prices that are corroborated by observable market data and quoted market prices for similar assets and liabilities. Level 3 investments are valued at fair value as determined in good faith by the Board, based on input of management, the audit committee and independent valuation firms that have been engaged at the direction of the Board to assist in the valuation of 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.

When determining fair value of Level 3 debt and equity investments, the Company may take into account the following factors, where relevant: the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons to publicly traded securities, and changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made and other relevant factors. The primary methods for determining enterprise value include a discounted cash flow analysis and a multiple analysis whereby appropriate multiples are applied to the portfolio company’s net income before net interest expense, income tax expense, depreciation and amortization (“EBITDA”) or revenue. The enterprise value analysis is performed to determine the value of equity investments and to determine if debt investments are credit impaired. If debt investments are credit impaired, the Company will use the enterprise value analysis or a liquidation basis analysis to determine fair value. For debt investments that are not determined to be credit impaired, the Company uses a market interest rate yield analysis to determine fair value.

In addition, for certain debt investments, the Company may base its valuation on quotes provided by an independent third party broker.

Due to the inherent uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be received or settled. Further, such investments are generally subject to legal and other restrictions or otherwise are less liquid than publicly traded instruments. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, the Company may realize significantly less than the value at which such investment had previously been recorded.

The Company’s investments are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments are traded.

Income Recognition

Interest on loan investments is accrued and included in income based on contractual rates applied to principal amounts outstanding. Interest income is determined using a method that results in a level rate of return on principal amounts outstanding. When a loan becomes 90 days or more past due, or if we otherwise do not expect to receive interest and principal repayments, the loan is placed on non-accrual status and the recognition of interest income is discontinued. Interest payments received on loans that are on non-accrual status are treated as reductions of principal until the principal is repaid.

We receive servicing income related to the guaranteed portions of SBA loan investments which we sell into the secondary market. These recurring fees are earned daily and recorded when earned. Servicing income is earned for the full term of the loan or until the loan is repaid.

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We receive a variety of fees from borrowers in the ordinary course of conducting our business, including packaging fees, late fees and prepayment fees. All other income is recorded when earned.

Dividend income is recorded at the time dividends are declared. Distributions of earnings from a portfolio companies are evaluated to determine if the distribution is income, return of capital or realized gain.

Income Taxes

Deferred tax assets and liabilities are computed based upon the differences between the financial statement and income tax basis of assets and liabilities using the enacted tax rates in effect for the year in which those temporary differences are expected to be realized or settled. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.

The Company’s U.S. federal and state income tax returns prior to fiscal year 2013 are closed, and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

The Company has elected to be treated as a RIC beginning with the 2015 tax year under the Code and operates in a manner so as to continue to qualify for the tax treatment applicable to RICs. The RIC tax return includes Newtek Business Services Corp. and NSBF, a single member LLC disregarded for tax purposes. None of the Company’s other subsidiaries are included in the RIC return. The Company will evaluate and record any deferred tax assets and liabilities of the subsidiaries that are not part of the RIC. In order to maintain its RIC tax treatment, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each tax year. The Company intends to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes with respect to all income distributed to its stockholders as dividends.

Depending on the level of taxable income earned in a tax year, the Company may choose to retain taxable income in excess of current year dividend distributions, and would distribute such taxable income in the next tax year. The Company would then pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income, determined on a calendar year basis, could exceed estimated current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. For the nine months ended September 30, 2016 and 2015, no U.S. federal excise taxes were due.

The Company’s Taxable Subsidiaries accrue income taxes payable based on the applicable corporate rates on the net unrealized appreciation generated by the controlled investments held by the Taxable Subsidiaries. Such deferred tax liabilities amounted to $5,327,000 and $857,000 at September 30, 2016 and December 31, 2015, respectively, and are recorded as a deferred tax liability on the condensed consolidated statements of assets and liabilities. The change in deferred tax liabilities is included as a component of net unrealized appreciation (depreciation) on investments in the condensed consolidated statements of operations.

New Accounting Standards

In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The ASU is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those periods. Early application is permitted. The Company is currently evaluating the impact this ASU will have on its condensed consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases”, which amends various aspects of existing accounting guidance for leases, including the recognition of a right of use asset and a lease liability for leases with a duration of greater than one year. The ASU is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those periods. Early adoption is permitted. The Company has

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not completed its review of the new guidance; however, the Company anticipates that upon adoption of the standard it will recognize additional assets and corresponding liabilities related to leases on its condensed consolidated statements of assets and liabilities.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”, which, among other things, requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Additionally, the ASU changes the disclosure requirements for financial instruments. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those periods, and early adoption is permitted for certain provisions. The Company is currently evaluating the impact this ASU will have on its condensed consolidated financial statements and disclosures.

Off Balance Sheet Arrangements

There were no off balance sheet arrangements as of September 30, 2016.

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UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus supplement, each underwriter named below has agreed to purchase, and we have agreed to sell to that underwriter, the number of shares set forth opposite the underwriter’s name.

 
Underwriter   Shares
Keefe, Bruyette & Woods, Inc.         
Raymond James & Associates, Inc.         
UBS Securities LLC         
Total            

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares (other than those covered by the overallotment option described below) if they purchase any of the shares.

The underwriters propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this prospectus supplement and some of the shares to dealers at the public offering price less a concession not to exceed $   per share. The underwriting discount of $  per share is equal to   % of the initial offering price. If all of the shares are not sold at the initial offering price, the representatives may change the public offering price and other selling terms. Investors must pay for any shares purchased on or before. The representatives have advised us that the underwriters do not intend to confirm any sales to any accounts over which they exercise discretionary authority.

The underwriters hold an option, exercisable for 30 days from the date of this prospectus supplement, to purchase from us up to an additional 225,000 shares at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering overallotments, if any, in connection with this offering. To the extent such option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment.

We and each of our directors and officers has agreed that, for a period of 90 days from the date of this prospectus supplement (the “Lock-up Period”), such party will not, without the prior written consent of Keefe, Bruyette & Woods, Inc., Raymond James & Associates, Inc. and UBS Securities LLC, offer, sell, offer to sell, contract or agree to sell, hypothecate, hedge, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock, provided, however, that the Company may issue and sell shares pursuant to our dividend reinvestment plan and other limited exceptions. Keefe, Bruyette & Woods, Inc., Raymond James & Associates, Inc. and UBS Securities LLC in their sole discretion may release any of the securities subject to these lock-up agreements at any time.

Our common stock is traded on the Nasdaq Global Market under the symbol “NEWT.”

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The following table shows the underwriting discounts to be paid to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase 225,000 additional shares. This offering will conform with the requirements set forth in Financial Industry Regulatory Authority Rule 2310. The sum of all compensation to the underwriters in connection with this offering of shares, including the underwriting discount, will not exceed 10% of the total public offering price of the shares sold in this offering.

   
  No Exercise   Full Exercise
Per Common Share   $          $       
Total   $     $  

The Company has agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, or to contribute to payments the underwriters may be required to make because of any of those liabilities.

Certain underwriters may make a market in the shares. No underwriter is, however, obligated to conduct market-making activities and any such activities may be discontinued at any time without notice, at the sole discretion of the underwriter. No assurance can be given as to the liquidity of, or the trading market for, the shares as a result of any market-making activities undertaken by any underwriter. This prospectus supplement is to be used by any underwriter in connection with the offering and, during the period in which a prospectus must be delivered, with offers and sales of the shares in market-making transactions in the over-the-counter market at negotiated prices related to prevailing market prices at the time of the sale.

In connection with the offering, Keefe, Bruyette & Woods, Inc., Raymond James & Associates, Inc. and UBS Securities LLC may purchase and sell shares in the open market. These transactions may include short sales, syndicate covering transactions and stabilizing transactions. Short sales involve syndicate sales of shares of shares in excess of the number of shares to be purchased by the underwriters in the offering, which creates a syndicate short position. “Covered” short sales are sales of shares made in an amount up to the number of shares represented by the underwriters’ overallotment option. In determining the source of shares to close out the covered syndicate short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the overallotment option. Transactions to close out the covered syndicate short position involve either purchases of shares in the open market after the distribution has been completed or the exercise of the overallotment option. The underwriters may also make “naked” short sales of shares in excess of the overallotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of shares in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of bids for or purchases of shares in the open market while the offering is in progress.

The underwriters also may impose a penalty bid. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when Keefe, Bruyette & Woods, Inc., Raymond James & Associates, Inc. and/or UBS Securities LLC repurchases shares originally sold by that syndicate member in order to cover syndicate short positions or make stabilizing purchases.

Any of these activities may have the effect of preventing or retarding a decline in the market price of shares. They may also cause the price of shares to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the Nasdaq Global Market, or in the over-the-counter market, or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.

We estimate that the total expenses of this offering, excluding the underwriting discounts, will be approximately $160,000.

A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. The representatives will allocate shares to underwriters that may make

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Internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders.

We anticipate that, from time to time, certain underwriters may act as brokers or dealers in connection with the execution of the Company’s portfolio transactions after they have ceased to be underwriters and, subject to certain restrictions, may act as brokers while they are underwriters.

Certain underwriters may have performed investment banking and advisory services for us and our affiliates from time to time, for which they have received customary fees and expenses. Certain underwriters may, from time to time, engage in transactions with or perform services for us and our affiliates in the ordinary course of business.

The principal business addresses of the underwriters are: Keefe, Bruyette & Woods, Inc., 787 Seventh Avenue, Fourth Floor, New York, New York 10019, Raymond James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, FL and UBS Securities LLC, 1285 Avenue of the Americas, New York, NY 10019.

Each of the underwriters may arrange to sell common shares offered hereby in certain jurisdictions outside the United States, either directly or through affiliates, where they are permitted to do so.

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LEGAL MATTERS

Certain legal matters in connection with the securities offered hereby will be passed upon for us by Sutherland Asbill & Brennan LLP, Washington, District of Columbia. Certain legal matters in connection with the securities offered hereby will be passed upon for the underwriters by Baker & Hostetler LLP.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have selected RSM US LLP (formerly McGladrey LLP) as our independent registered public accounting firm located at 1185 Avenue of the Americas, New York, NY 10036. The consolidated financial statements of Newtek Business Services, Corp. as of and for the years ended December 31, 2015, December 31, 2014, and December 31, 2013 in the accompanying prospectus have been audited by RSM US LLP.

AVAILABLE INFORMATION

We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to the shares of common stock offered by this prospectus supplement and the accompanying prospectus. The registration statement contains additional information about us and the shares of common stock being offered by this prospectus supplement and the accompanying prospectus.

We maintain a website at http://www.NewtekOne.com and intend to make all of our annual, quarterly and current reports, proxy statements and other publicly filed information available, free of charge, on or through our website. Information contained on our website is not incorporated into this prospectus, and you should not consider information on our website to be part of this prospectus. You may also obtain such information by contacting us in writing at 1981 Marcus Avenue, Suite 130, Lake Success, New York 11042. The SEC maintains a website that contains reports, proxy and information statements and other information we file with the SEC at www.sec.gov . Copies of these reports, proxy and information statements and other information may also be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549-0102. Information contained on our website or on the SEC’s website about us is not incorporated into this prospectus and you should not consider information contained on our website or on the SEC’s website to be part of this prospectus supplement and the accompanying prospectus and you should not consider information contained on our website or on the SEC’s website to be part of this prospectus supplement and the accompanying prospectus.

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INDEX TO FINANCIAL STATEMENTS

 
Condensed Consolidated Statements of Assets and Liabilities as of September 30, 2016 (Unaudited) and December 31, 2015     FS-2  
Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2016 and 2015     FS-3  
Condensed Consolidated Statement of Changes in Net Assets (Unaudited) for the nine months ended September 30, 2016     FS-4  
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2016 and 2015     FS-5  
Consolidated Schedule of Investments as of September 30, 2016 (Unaudited) and
December 31, 2015
    FS-7  
Notes to Condensed Consolidated Financial Statements (Unaudited)     FS-96  

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NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(In Thousands, except for Per Share Data)

   
  September 30,
2016
  December 31,
2015
     (Unaudited)   (Note 1)
ASSETS
                 
Investments, at fair value
                 
SBA unguaranteed non-affiliate investments (cost of $204,459 and $166,752, respectively; includes $135,075 and $146,463, respectively, related to securitization trusts)   $ 196,624     $ 158,355  
SBA guaranteed non-affiliate investments (cost of $7,849 and $2,069, respectively)     8,754       2,284  
Controlled investments (cost of $41,094 and $35,781, respectively)     120,420       104,376  
Non-control/non-affiliate investments (cost of $1,020 and $1,847, respectively)     1,020       1,824  
Investments in money market funds (cost of $35 and $35, respectively)     35       35  
Total investments at fair value     326,853       266,874  
Cash and cash equivalents     2,718       4,308  
Restricted cash     24,781       22,869  
Broker receivable     21,495       32,083  
Due from related parties     3,012       3,056  
Servicing assets, at fair value     15,619       13,042  
Credits in lieu of cash, at fair value     216       860  
Other assets     10,155       9,338  
Total assets   $ 404,849     $ 352,430  
LIABILITIES AND NET ASSETS
                 
Liabilities:
                 
Bank notes payable   $ 49,919     $ 29,100  
Notes due 2022 (Note 7)     7,832       7,770  
Notes due 2021 (Note 7)     38,680        
Notes payable – Securitization trusts (Note 7)     73,471       89,244  
Dividends payable           5,802