Commercial Finance Firms' Risk Rises

"Business conditions have certainly moderated and a recession is admittedly likely to entail substantially higher percentages of non-performers," Shanahan wrote in the note. "However, we are closer to reaching a point where valuations fully reflect the pending credit problems, in our view, absent a complete collapse in business conditions."

Shanahan said commercial finance firms, which provide loans and invest in other companies, will be most affected by financing companies that provide services in the housing, real estate, financial, auto and consumer sectors.

Newstar Financial Inc. and CapitalSource Inc. have the greatest exposure to those markets, Shanahan said. CapitalSource is experiencing credit weakness in corporate finance and commercial real estate, Shanahan said.

CapitalSource shares fell 48 cents, or 4.3 percent, to $10.79 in afternoon trading.

Shares of Newstar Financial rose 9 cents to $4.84.

Shanahan said Ares Capital Corp. and BlackRock Kelso Capital Corp. have the least exposure to the troubled sectors. Despite its more limited exposure, Ares Capital in the fourth quarter increased the number of loans it categorizes as underperforming, Shanahan wrote in the note.

Ares Capital shares fell 3 cents to $12.74.

Shares of BlackRock Kelso Capital fell 77 cents, or 6.3 percent, to $11.47.

Shanahan did add that despite short-term problems the companies might face, the sector's long-term outlook is solid.