Norwest offering securitization of excess small-business loans. (new program, called Norwest Loan Partners, helps banks stay within loan concentration limits)

By JOHN R. ENGEN Special to the American Banker

MINNEAPOLIS -- A small manufacturer asks your loan department for $15 million to expand. The company has been a good customer, but your credit risk analysis shows that a loan to this borrower in excess of $10 million would violate the bank's loan concentration limits. What do you do?

The alternatives aren't too pleasant. You could walk away from the deal, saying it's too big. You could underwrite the full amount, taking on more risk than you're comfortable carrying in the hope of selling off the excess credit. Or you could say you'll try arrange the additional credit in the future - and risk losing the business altogether.

Soon, there may be another option.

With the help of a sophisticated analytical model, Norwest Corp. is rolling out a new program that will buy excess concentration in small-business loans from banks, provided they meet a series of underwriting requirements. Those excess amounts will be pooled together and sold, either as securities or a mutual fund to …