How the Ginch stole Christmas from SBA lenders and borrowers

By a 193-165 vote, the House passed the Continuing Resolution last night which included an extension of the SBA loan fee waivers that were set to expire on 12/31/10.

The Continuing Resolution stated that SBA fee waivers will now be in place through 3/4/11 or until the remaining funds are exhausted from the initial $505 million in the September Jobs Act.

SBA has now indicated that the remaining funds are so limited it is unlikely they will last past the initial 12/31/10 expiration date. In fact, the current backlog of loans at SBA may utilize all of the remaining funds.

An early Christmas present for SBA Lenders and Borrowers- Fee Waiver extended!

The Senate is considering a longer term Continuing Resolution (CR) that will provide the federal government authority to continue operating.

Included in that CR is an extension of SBA's authority to grant fee waivers to 7(a) and 504 small business applicants and to offer higher guarantees (up to 90%) on 7(a) loans THROUGH MARCH 4, 2011, or until funds are expended, whichever occurs first!

More info can be found here- http://library.constantcontact.com/download/get/file/1102418459773-245/CR_summary.pdf

Merry Christmas

The SBA and the Fed- Exceptionally low interest rates for an extended period

The Federal Open Market Committee said the other day that they will keep interest rates "exceptionally low" for an "extended period."

That means the variable rate of a SBA 7(a) loan offers an unique opportunity for borrowers that will persist for some time.

So how long is an "extended period?"

For that answer, you might want to check this out-http://idosbaloans.blogspot.com/2010/06/when-will-fed-raise-rates.html

SBA 7(a) Weekly Lending Update

$1,023,395,000 in SBA 7(a) loans were approved last week by SBA.

A billion dollars in one week is an amazing pace. Clearly lenders and borrowers are sending in everything they can right now to take advantage of the increased guarantee and guarantee fee waiver.

So far this fiscal year, which began October 1st, SBA has approved $5,072,834,000 in SBA 7(a) loans.

SBA recently provided an information notice telling lenders that a loan has be approved by year end to take advantage of the increased guarantee and guarantee fee waiver.

504 debenture rate

SBA 504 Debenture Rate for December

The debenture rate is 3.72% but note rate is 3.77% and effective yield is only 5.571%.

Note that debenture fees have increased. The effective rate chart now includes the higher borrower fee, which is an additional 0.749%.

The SBA and dizen

dizen
(DY-zuhn, DIZ-uhn)
1. To attire with finery.
2. To dress or decorate in a gaudy manner.
From Old English dis- (a bunch of flax on a distaff for spinning).
‘Tis the season for dizen
_____________________________________________________

TIP OF THE WEEK

The increased guaranty and guaranty fee waiver for SBA 7(a) loans is scheduled to expire December 31, 2010.

SBA released an information notice indicating that most 7(a) loans should be submitted by December 15th.
________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate December 2010 = 3.27%
SBA Fixed Base Rate December 2010 = 5.77%
________________________________________________
504 Debenture Rate for November
The debenture rate is 3.25% but note rate is 3.30% and effective yield is only 5.102%.
________________________________________________
AHEAD OF THE YIELD CURVE

The Federal Reserve Open Market Committee meets tomorrow.

Last month when they met they said that interest rates would remain “exceptionally low” for “extended period.”

One of the reasons the Fed is keeping rates low is because of “low rates of resource utilization.” Keep your eyes and ears open for Wednesday’s release on capacity utilization. This is one of the Federal Reserve’s favorite measures of inflationary expectations. Back in September it had dropped for the first time in almost a year. Last month it was flat.

The Federal Reserve also said that it would buy $600 billion of U.S. government debt to spur job growth and avoid deflation.

The Fed said it will focus about 86 percent of its purchases in notes due in 2.5 years to 10 years. As a result, the 30 year Treasury bond has become the benchmark for the world’s biggest debt investors. The 30 year Treasury bond will also be the only government debt that most closely reflects market expectations for inflation and future growth.

Since the Fed’s November 3rd announcement about these debt purchases, the 30-year yield has risen about ¼ percentage point. The interest rate on the 30 year bond has risen about 100 percentage points from a 17-month low of 3.46 percent August 25th.

The 30-year bond yield was little changed at 4.39 percent Friday after dropping six basis points Thursday, when the $13 billion U.S. sale of the debt drew the highest demand since August. The yield increased to the seven-month high of 4.50 percent on December 8th, making it extremely attractive to Treasury bond investors. Back in April it was up to 4.77 percent.

The bond’s average yield was 4.49 percent from Dec. 31, 2007, through Sept. 12, 2008, just before the collapse of Lehman Brothers.

It is now at 4.44 percent.

Here is what the 30 year bond has been doing:
2001- 5.49
2002- 5.43
2003- ND
2004- ND
2005- ND
2006- 4.91
2007- 4.84
2008- 4.18
2009- 3.89
2010- 4.61

What a minute, why no numbers for 2003, 2004, and 2005?

One month after the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury mothballed the 30-year bond in 2001, experts speculated it was trying to drive down long-term interest rates, which had remained stubbornly high while the Federal Reserve was slashing short-term interest rates to revive the economy. When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis points in one day. Why? A shrinking supply of the 30-year Treasury bond caused increased demand to drive rates down.

What does all this mean?

I don’t know.

Fed policy makers may signal tomorrow that they are open to boosting debt purchases beyond the $600 billion already announced.

It would appear that the savings from low variable rates of interest should continue for an "extended" period.
_________________________________________________
OFF BASE

There are exactly twelve days until Christmas. Does that mean the twelve days of Christmas start today?

Not quite. It’s not the twelve days before Christmas, but the twelve days after Christmas. It ends on January 6th on what is known as the Epiphany (with a big E) which celebrates when the three wise men came with gifts for the baby Jesus. This day was once as celebrated as Christmas.

If Christmas is almost here, that means the first day of winter is almost here. It is also the shortest day of the year. In ancient times, the winter solstice was observed with much more fervor than it is today. Centuries ago in some cultures, elaborate festivals were held. Alarmed by the colder weather, shorter days with less and less sunlight, and long, dark nights, some were convinced that they had done some terrible wrong and as punishment, the sun was leaving the sky never to return. Large bonfires were lit with rituals held pleading to whatever god they believed in to make the sun return. These solstice festivals evolved into Christmas as we now know it.


Is There a Santa Claus?
Is There a Santa Claus? was the title of an editorial appearing in the September 21, 1897 edition of the New York Sun. The editorial, which included the famous reply "Yes, Virginia, there is a Santa Claus", has become an indelible part of popular Christmas lore in the United States. Here is the editorial:
"DEAR EDITOR: I am 8 years old.
"Some of my little friends say there is no Santa Claus.
"Papa says, 'If you see it in THE SUN it's so.'
"Please tell me the truth; is there a Santa Claus?
"VIRGINIA O'HANLON.
"115 WEST NINETY-FIFTH STREET."

VIRGINIA,
your little friends are wrong. They have been affected by the skepticism of a skeptical age. They do not believe except [what] they see. They think that nothing can be which is not comprehensible by their little minds. All minds, Virginia, whether they be men's or children's, are little. In this great universe of ours man is a mere insect, an ant, in his intellect, as compared with the boundless world about him, as measured by the intelligence capable of grasping the whole of truth and knowledge.
Yes, VIRGINIA, there is a Santa Claus. He exists as certainly as love and generosity and devotion exist, and you know that they abound and give to your life its highest beauty and joy. Alas! how dreary would be the world if there were no Santa Claus. It would be as dreary as if there were no VIRGINIAS. There would be no childlike faith then, no poetry, no romance to make tolerable this existence. We should have no enjoyment, except in sense and sight. The eternal light with which childhood fills the world would be extinguished.
Not believe in Santa Claus! You might as well not believe in fairies! You might get your papa to hire men to watch in all the chimneys on Christmas Eve to catch Santa Claus, but even if they did not see Santa Claus coming down, what would that prove? Nobody sees Santa Claus, but that is no sign that there is no Santa Claus. The most real things in the world are those that neither children nor men can see. Did you ever see fairies dancing on the lawn? Of course not, but that's no proof that they are not there. Nobody can conceive or imagine all the wonders there are unseen and unseeable in the world.
You may tear apart the baby's rattle and see what makes the noise inside, but there is a veil covering the unseen world which not the strongest man, nor even the united strength of all the strongest men that ever lived, could tear apart. Only faith, fancy, poetry, love, romance, can push aside that curtain and view and picture the supernal beauty and glory beyond. Is it all real? Ah, VIRGINIA, in all this world there is nothing else real and abiding.
No Santa Claus! Thank God! he lives, and he lives forever. A thousand years from now, Virginia, nay, ten times ten thousand years from now, he will continue to make glad the heart of childhood.

SBA 7(a) Weekly Lending Update

Another $558,183,000 in SBA 7(a) loans were approved last week.

That brings the total to $4,049,439,000 in SBA 7(a) loans so far this fiscal year, which began October 1st. That's almost FOUR times the volume two years ago.

Borrowers and lenders are rushing to get in as many deals as they can by the end of the year when the increased guarantee and guarantee fee waiver end.

SBA 7(a) Rate Update

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate December 2010 = 3.27%
SBA Fixed Base Rate December 2010 = 5.77%
Lenders can charge up to 2.75% over these indices.

SBA 7(a) Weekly Lending Update

Another $364,611,000 in SBA 7(a) loans were approved last week despite Thanksgiving. That brings the year to date total for the SBA 7(a) loan program to $3,491,256,000.

Demand for SBA 7(a) loans remains high due to the lack of credit elsewhere, the increased guarantee percentage and the SBA guarantee fee waiver.

The SBA and oniomania

oniomania

(O-nee-uh-MAY-nee-uh, -MAYN-yuh)

Compulsive shopping; excessive, uncontrollable desire to buy things.

From Latin, from Greek xnios (for sale), from onos (price) + -mania.

Oniomania is another word for the urge to shop till you drop and the thrill of the bill. According to a pearl of ancient wisdom, we don't acquire things, things acquire us. In the case of oniomaniacs, it is perhaps the fun of acquiring things that acquires them.
_____________________________________________________
TIP OF THE WEEK
Oniomania has not yet returned to commercial real estate but it appears that the market might be starting to rebound.

Last week, Moody’s Investors Service said U.S. commercial property prices rose 4.3 percent in September from the previous month, the biggest gain in a decade of records.

The Moody’s/REAL Commercial Property Price Index climbed 0.3 percent from a year earlier as a small number of high-priced deals drove up values. The measure had fallen to an eight-year low in August.

The Moody’s/REAL index is still 43 percent below its October 2007 peak. The gauge measures overall commercial property values on a monthly basis and breaks the numbers down by property type once each quarter. The changes are based on repeat sales transactions. It is possible that commercial real prices have bottomed - in general - but it is hard to tell because the number of transactions still is very low and there are a number of distressed sales.

If you would like a copy of this Moody's report, let me know.

Keep in mind that the fee waiver for SBA borrowers only have 32 days left.
________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate November 2010 = 3.25%
SBA Fixed Base Rate November 2010 = 5.32%
________________________________________________

504 Debenture Rate for November
The debenture rate is 3.25% but note rate is 3.30% and effective yield is only 5.102%.
________________________________________________
AHEAD OF THE YIELD CURVE

Oniomania might be helping the economy.

Payrolls climbed 151,000 last month following a revised 41,000 drop the prior month. The September figure was revised from an initially reported decline of 95,000.

Leading the pack were retailers who took on 27,900 workers as they prepared for the holiday shopping season.

Consumer spending accounts for about 70 percent of U.S. gross domestic product.

Keep your eye on Friday’s payroll report from the Department of Labor.

Here is a summary of payroll employment and this week’s interesting little table of data:

October 151,000

September (41,000)

August (1,000)

July (66,000)

June (175,000)

May 431,000

April 218,000

March 230,000

February (36,000)

January (26,000)

2009

December (150,000)

November (11,000)

October (111,000)

September (215,000)

August (201,000)

July (304,000)

June (443,000)

May (322,000)

April (504,000)

March (699,000)

February (651,000)

January (655,000)

2008

December (681,000)

November (597,000)

October (423,000)

September (403,000)

August (127,000)

July (67,000)

June (100,000)

May (47,000)

April (67,000)

March (88,000)

February- (83,000)

January- (76,000)

What does all this mean?

I don’t know.

Until job gains are sustained, the Federal Reserve will have to keep interest rates low.

In the meantime, get out there and buy something.
_________________________________________________
OFF BASE

Oniomania is often triggered by a limited time offer.

For example, the McRib, McDonald’s miracle of a processed pork BBQ sandwich, is available only through this weekend.

SBA 7(a) Weekly Lending Update

Wow! SBA loan volume has exploded. Last week $509,303,000 in SBA 7(a) loans were approved, bringing the year to date total to $3,126,645,000.

Over the same period last year $2,268,868,000 in SBA 7(a) loans were approved and the year before that only $1,042,0914,000 in loans had been approved.

Obviously the increased guarantee and the guarantee fee waiver are working.

Big changes for SBA loans

Recent legislation has increased the maximum SBA loan amounts up to $5,000,000 for the SBA 7(a) loan program and the SBA 504 loan program.

The SBA 7(a) program can be used for a broad variety of purposes such as real estate purchase, debt refinance, equipment purchase, business acquisition and working capital. A bank lends the borrower the money, and the SBA guarantees a portion of the loan.

Rates on a SBA 7(a) loan are a variable rate usually tied to prime and adjusting on a quarterly basis.

The term of the SBA 7(a) loan is based upon the use of proceeds as follows:
Real estate purchase or real estate debt refinance- 25 years
Debt refinance- 10 years
Equipment purchase- 10 years
Working capital- 10 years


The SBA 504 program is for real estate purchase or construction. A 504 loan consists of a conventional bank first trust deed and a SBA debenture in second trust deed position. Rates on a 504 loan are fixed.

The typical 504 structure is usually:
Down payment- 10%
Bank 1st- 50%
504 2nd- 40%

With the debenture now going up to $5,000,000, a SBA 504 loan could conceivably finance a real estate deal up to $12,500,000.

Not only has the loan amounts increased, so has the SBA definition of a small business. Now for both the 504 and 7(a) loan programs, SBA defines a small business as one where the net worth of the company does not exceed $15,000,000 and the net profits of the company are less than $5,000,000 averaged over the last two years.

This increase in loan size and the definition of a small business may very well keep small business afloat during the coming tidal wave of commercial real estate debt that is coming due.

Most commercial estate real loans are not fully amortized. They typically have a balloon come due in five years. As commercial estate declines in value, many borrowers are unable to refinance their commercial estate loan since the loan to value is now too high.

Any commercial real estate loan with a balloon is eligible for refinance with a SBA loan. The owner of the property just needs to also be the owner of the business occupying the building.

The primary qualifying criteria is not loan to value but cash flow. As long as the business can generate sufficient cash flow to repay the loan, it is a viable candidate. Business cash flow in the SBA lending world is typically defined as net profits plus depreciation plus rent (if rent is paid to the owner).

The fully amortizing nature of SBA loans makes them one less thing for borrowers to worry about.

504 debenture rate

SBA 504 Debenture Rate for November

The debenture rate is 3.25% but note rate is 3.30% and effective yield is only 5.102%.

Note that debenture fees have increased. The effective rate chart now includes the higher borrower fee, which is an additional 0.749%.

SBA 7(a) Rate Update

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate November 2010 = 3.25%
SBA Fixed Base Rate October 2010 = 5.32%

Lenders can charge up to 2.75% over these indices.

SBA 7(a) Weekly Lending Update

Another $327,346,000 in SBA 7(a) loans were approved last week, bringing the year to date total to $2,617,342,000.

Demand for SBA 7(a) loans remains strong as a result of the increased guaranty, guaranty fee waiver, the attractive low rate, and the lack of other lending options.

The SBA and vitiate

vitiate
(VISH-ee-ayt)
1. To impair or spoil the effectiveness of.
2. To corrupt.
From Latin vitiare (to spoil, injure), from vitium (blemish). Earliest recorded use: 1534.
_____________________________________________________
TIP OF THE WEEK

The vitiation of SBA loans is imminent.

There are only 46 days left until the 90 percent guaranty and fee waiver for SBA 7(a) loans end.

There is an SBA public meeting this week on the use of 504 loans for debt refinance from which the SBA wants comments. They will then develop proposed regulations which will then be published for a 30-day public comment period from which the SBA will then write final regulations which will then be published with a stated future effective date.
_________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2010 = 3.26%
SBA Fixed Base Rate October 2010 = 5.36%
________________________________________________

504 Debenture Rate for October
The debenture rate is 3.11% but note rate is 3.16% and effective yield is only 4.521%.
________________________________________________
AHEAD OF THE YIELD CURVE

Are you worried about inflation?

The Federal Reserve isn’t.

At their last meeting on monetary policy they said “…measures of underlying inflation have trended lower in recent quarters.”

One of the Federal Reserve’s favorite gauges of the economy is the capacity utilization rate. The Federal Reserve watches capacity utilization rates to see if production constraints are threatening to cause inflationary pressures. Bottlenecks or shortages often lead to inflationary pressures that would drive prices even higher. Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.

In September, the capacity utilization rate slipped down to 74.7 percent.

Keep your eye on Tuesday’s report from the Federal Reserve on Industrial Production and Capacity Utilization for the month of October.

It just might slip again. Last week, according to a new report released by Ceridian-UCLA their index of up-to-the-minute diesel fuel purchases by commercial trucks fell 0.6% in October after declining 0.5% in September. Diesel purchases have come to be a good proxy for the state of commerce across the country. An increase in sales means more goods are being trucked and fewer diesel purchases suggest commerce is slowing.

Here is what capacity utilization rates have done:



1997- 83.6

1998- 83.0

1999- 82.4

2000- 82.6

2001- 77.4

2002- 75.6

2003- 74.6

2004- 79.2

2005- 80.7

2006- 82.4

2007- 81.5

2008- 79.9

2009- 69.9

2010- 74.8





What does all this mean?


I don’t know.


Capacity utilization at 74.7% is still far below normal - and well below the pre-recession levels of 81.2% in November 2007.


As the Federal Reserve keeps telling us, interest rates will be at exceptionally low levels for an extended period.
_________________________________________________
OFF BASE

I always thought the Friday after Thanksgiving kicked off the holiday shopping season and was the biggest shopping day of the year.

It is also the day I am supposed to start on the Christmas lights and all the decorations.

According to the 44,000 member International Council of Shopping centers, the day after Thanksgiving is not the hottest shopping day. The records of the Council say the busiest day is the Saturday before Christmas as last-minute shoppers hit the stores. They figure that the day after Thanksgiving ranks fifth.

It turns out the Friday after Thanksgiving is also Native American Heritage Day. Last year Congress passed the Native American Heritage Day Act of 2009 which establishes that the Friday after Thanksgiving is to “to honor the achievements and contributions of Native Americans to the United States, and for other purposes.”

The Friday after Thanksgiving might be the closest we get to a college football playoff. Three of the four top teams in the country play that day. The top ranked team in the country, Oregon plays Arizona. The second top team in the country, Auburn, plays last year’s champion Alabama.

And the best team in the country, Boise State, plays Nevada. Boise State has won 23 games in a row, the longest winning streak in the country.

Nevada has a legitimate shot at an upset mainly because the game isn't being played on the blue carpet in Idaho. Instead it's in Reno. Nevada proved in its 52-31 victory over Cal that it can take care of a decent Pac-10 team. No one else has scored as many points against Boise State as Nevada has over the past three years—135 to be exact. Nevada lost all three games by a narrow combined margin of only 20 points.

The secret to Nevada is their pistol offense. In the pistol offense, the quarterback lines up four yards behind the center rather than seven yards, as with the shotgun formation. The running back lines up three yards directly behind the quarterback, as opposed to next to him as in the shotgun. Using the Pistol Offense last season, the Nevada Wolf Pack led the nation in rushing at 345 yards a game. The Wolf Pack also became the first team in college football history with three 1,000-yard rushers in the same season.

UCLA attempted to adopt the pistol offense this season but you need a quarterback who can throw and run. UCLA also plays on the Friday after Thanksgiving against Arizona State.

I guess the Christmas lights are going to have to wait that day.

The SBA and ending the recession ONE LOAN AT A TIME

Here is a neat story about someone we helped:

http://jan.ocregister.com/2010/11/13/o-c-manufacturer-enjoys-turnaround/49286/

They obtained a SBA 7(a) loan.

SBA 7(a) Weekly Lending Update

Another $366,966,000 in SBA 7(a) loans were approved last week. The total so far for this fiscal year is $2,289,996,000. The fiscal year began October 1st.

This is a significant increase over last year when over the same period $1,383,738,000 in SBA 7(a) loans had been approved. The year before that only $750,228,000 in SBA 7(a) loans had been approved.

Obviously the Recovery Act enhancements of the 90 percent guaranty and the fee waiver are working. Interestingly the average SBA 7(a) loan amount has been $348,100. Last year it was $239,610 while the year before it was $199,600.

Businesses can take advantage of the no fees, low variable rates currently offered with the SBA 7(a) loan program.

That's something to be optimistic about (see the below post).

Small-Business Index in U.S. Rises to Highest in Five Months

From Bloomberg:
Confidence among U.S. small businesses rose in October to the highest level in five months as more companies projected sales gains and an improving economy according to The National Federation of Independent Business’s optimism index.

For more of this go to: http://noir.bloomberg.com/apps/news?pid=20603037&sid=a1DC5_Vl5FYA

Ahead of the Yield Curve

Retailers appear to have cut down on shipments to avoid excess holiday inventories, an action that has sapped some of the strength from the economy, according to a new report released by Ceridian-UCLA Tuesday.

The Ceridian-UCLA Pulse of Commerce Index tracks up-to-the-minute diesel fuel purchases by commercial trucks.

Diesel purchases have come to be a good proxy for the state of commerce across the country. An increase in sales means more goods are being trucked and fewer diesel purchases suggest commerce is slowing.

Nationwide, the index fell 0.6% in October after declining 0.5% in September and 1% in August. That was the first three-month drop since January 2009, at the height of the recession.

This is usually a leading indicator of the Fed's report on capacity utilization which is also due out soon.

Based upon this information, it would seem that the savings from a low variable rate with a SBA 7(a) loan should persist for some time.

For more go here: http://www.ceridianindex.com/

The SBA and the Fed- Exceptionally low interest rates for an extended period

The Federal Open Market Committee said yesterday that they will keep interest rates "exceptionally low" for an "extended period."

That means the variable rate of a SBA 7(a) loan offers an unique opportunity for borrowers that will persist for some time.

So how long is an "extended period?"

For that answer, you might want to check this out-
http://idosbaloans.blogspot.com/2010/06/when-will-fed-raise-rates.html

SBA 7(a) Weekly Lending Update

The 90 percent guaranty and guaranty fee waiver for SBA 7(a) loans is obviously working.

So far this fiscal year (it started October 1st) $1,923,050,000 in SBA 7(a) loans have been approved.

That is a $368,060,000 increase over the last week.

The SBA and dibs

dibs

(dibz)

The right or claim on something.

The origin of this term is unclear. Some think it came from shortening of dibstones, a children's game played with pebbles. The 1967 edition of "Dictionary of American Slang" states that the word "dibs" comes from the verb to divvy.
_____________________________________________________
TIP OF THE WEEK

There are only 60 days left until the 90 percent guaranty and guaranty fee waiver expire for SBA 7(a) loans.

Currently the 7(a) loan program has dibs on debt refinance.

If you have maturing debt on owner-user real estate, a SBA 7(a) guaranteed loan can be used to refinance that debt.

Based upon feedback from SBA at the NAGGL conference, the use of 504 loans for debt refinance won't happen for awhile.

With a SBA 7(a) loan, not only can borrowers potentially save up to $166,250 in SBA guarantee fees, they will benefit from a loan that is fully amortized and have a rate of interest that will be "exceptionally" low for an “extended” period of time.
_________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2010 = 3.26%
SBA Fixed Base Rate October 2010 = 5.36%
________________________________________________

504 Debenture Rate for October
The debenture rate is 3.11% but note rate is 3.16% and effective yield is only 4.521%.
________________________________________________
AHEAD OF THE YIELD CURVE

The Federal Reserve Open Market Committee meets this week.

Will they continue to say that they will keep interest rates “exceptionally low” for an “extended period?”

The Fed has repeated the “extended period” language at each meeting since March 2009, well over a year ago.

One of their reasons is because, as they put it, “employers remain reluctant to add to payrolls”.

Keep your eye on Friday’s payroll report from the Department of Labor.

Here is a summary of payroll employment and this week’s interesting little table of data:

September (95,000)
August (57,000)
July (66,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

This extended period of low interest rates will last until the economy begins to demonstrate sustainable improvement in job creation.

In September, employers fired 95,000 workers after a revised 57,000 decrease in August. Most of the job losses actually came from the government as census workers and other government employees were let go. Private payrolls that exclude government agencies climbed 64,000 in September. Companies hired 93,000 workers in August and 117,000 in July.

Things are slowly, too slowly, actually getting better.

In the meantime, interest rates should remain exceptionally low for an extended period.


_________________________________________________
OFF BASE

Happy Birthday Will Rogers.

Thursday is Will Roger’s birthday. Known for his famous quote "I have never yet met a man that I didn't like," he was more than a funny cowboy. During the depths of the Great Depression, angered by Washington's inability to feed the people, Will Rogers embarked on a cross country fund raising tour for the Red Cross.

Tomorrow as you vote, you might want to keep some of his wit and wisdom in mind:

"Everything is changing. People are taking the comedians seriously and the politicians as a joke."

"Our foreign policy is an open book - a checkbook."


"Lettin' the cat out of the bag is a lot easier than puttin' it back in."

"People who fly into a rage always make a bad landing."

“Be thankful we're not getting all the government we're paying for.”

“Diplomacy is the art of saying 'Nice doggie' until you can find a rock.”

"Even if you are on the right track, you'll get run over if you just sit there."

Most of this stuff he said 75 years ago.

Vote.

SBA 7(a) Weekly Lending Update

So far this new fiscal year $1,554,986,000 in SBA 7(a) loans have been approved.

This is an increase of $373,840,000 over the prior week.

For the fiscal year ending September 30th, $12,630,559,000 in SBA 7(a) loans were approved.

For the fiscal year ending September 30th, 2009, $9,286,218,000 in SBA 7(a) loans have been approved.

The SBA 7(a) loan program had been approving just over $14 billion back in 2006 and 2007.

Changes to the SBA 7(a) loan program

For a summary of the changes to the SBA 7(a) loan program, go here

http://www.sba.gov/idc/groups/public/documents/sba_program_office/bank_5000-1182.pdf

SBA 7(a) Weekly Lending Update

Over a billion dollars in SBA 7(a) loans were approved last week. A billion dollars! $1,171,902,000 to be exact.

For the week ending October 15th, 3,236 loans totaling $1,171,902,000 were approved by the SBA.

The increase can be obviously attributed to the Recovery Act enhancements of the 90 percent guarantee and guarantee fee waiver.

The SBA and self storage- Acquisitions

SBA financial assistance is available to acquire existing self storage facilities.

Down payment requirements will vary depending on the financial performance of the facility to be acquired and the financial strength of the buyer. In most cases, buyers should be prepared to put 15 percent down. The down payment should not come from a borrowed source.

The historical cash flow of the facility will be based upon tax returns.

The seller of the facility is required to sell his entire interest. He can not retain any ownership interest.

The SBA and gallimaufry

gallimaufry
(gal-uh-MAW-free)
A hodgepodge; a jumble.
From Middle French galimafree (stew), probably from galer (to make merry) + mafrer (to gorge oneself).
_____________________________________________________
TIP OF THE WEEK

Lost in the gallimaufry of SBA news is the fact that there are only 73 days left until the 90 percent guarantee and SBA guarantee fee waiver once again expire.

SBA 7(a) loans up to $5,000,000 are especially attractive to both lenders and borrowers right now to refinance any owner-user real estate debt that has a balloon.

Not only can borrowers potentially save up to $166,250 in SBA guarantee fees, they will benefit from a loan that is fully amortized and have a rate of interest that will be "extraordinarily" low for an “extended” period of time.
_________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2010 = 3.26%
SBA Fixed Base Rate October 2010 = 5.36%
________________________________________________

504 Debenture Rate for October
The debenture rate is 3.11% but note rate is 3.16% and effective yield is only 4.521%.
________________________________________________
AHEAD OF THE YIELD CURVE

The yield curve is getting steeper.

The slope of the yield curve, the difference between the yields on short- and long-term maturity bonds, has achieved some notoriety as a simple forecaster of economic growth.

The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession while a flat curve indicates weak growth, and conversely, a steep curve indicates strong growth.

The yield on the 30-year bond touched a one-month high as the Treasury sold $13 billion of the bonds to pay for all the wonderful things the government is doing to us. This came a day after the Treasury had sold $21 billion of 10 year bonds. The extra yield that investors demand for 30-year bonds compared with 10-year debt touched a record high 1.46 percentage points Friday. The five-year average is a 0.52 percentage point difference.

The 30 year bond closed Friday at 3.99 percent. The securities drew yields of 3.954 percent in August and 3.82 percent in September.

Does this mean things are getting better and rates will really start to go up?

Not necessarily. The yield on the 30-year bond is rising because traders are betting that the Fed will purchase SHORTER-term U.S. notes in a strategy called quantitative easing. Fed Chairman Ben Bernanke said in a speech last week that additional stimulus may be warranted because inflation is too low and unemployment too high.

The futures market also doesn’t think rates are going to go up.

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years. Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

DEC10- 0.35

DEC11- 0.61

DEC12- 1.15

DEC13- 1.90

DEC14- 2.75

DEC15- 3.48

DEC16- 3.98

DEC17- 4.18

DEC18- 4.26


What does all this mean?


It would appear that the savings from lower variable rates of interest should persist. In their last policy notice, the Federal Reserve said rates would remain "extraordinarily" low for an “extended” period.


_________________________________________________
OFF BASE

There is a gallimaufry of polls about who the best team in college football is.

You have the Associated Press poll, the USA Today college football coaches’ poll, and the Harris Interactive poll.

The AP Top 25 College Poll is compiled from votes by 65 sportswriters and broadcasters from across the country.

The USA Today Coaches' Poll is compiled by the USA Today Board of Coaches which is made up of 59 head football coaches.

The Harris Interactive College Football Poll is a weekly ranking compiled by Harris Interactive, a market research company that specializes in Internet research. The Harris Interactive Poll is composed of former players, coaches, administrators, and current and former media who submit votes.

The University of Oregon Ducks is No. 1 in all the polls, but rated eighth in the computer rankings. EIGHTH!

Computer rankings?

Six different computer programs, run by six different people, also rank the best teams. Every week, the six systems input scores, let the computers spit out the rankings and send them to the BCS. That’s it. Nobody at the BCS double-checks the rankings. Only one of the six, Wes Colley, makes his formula fully public.

For each team, the BCS drops the highest and lowest computer ranking to get rid of potential outliers, adds the four remaining numbers, divides them by a hundred to get a percentage, and averages that percentage with the one from the coaches’ poll and Harris Poll. The BCS no longer uses the AP poll.

As a result, Oregon is number two in the BCS standings which just came out for the first time this season.

Oregon plays UCLA Thursday night. The Bruins are 22 point underdogs.

The SBA and self storage- Refinance

The SBA 7(a) loan program can be used to refinance debt on a self storage facility.

The debt must qualify under SBA eligibility criteria.

That means that the original use of the proceeds of the debt to be refinanced must have been for an eligible purpose. Examples of eligible purposes include construction, acquisition and debt refinance. If the debt had been used for a cash distribution to the owners, it may not qualify.

The debt to be refinanced must also be on what the SBA calls "unreasonable" terms. Loans not fully amortized, meaning they have a balloon, are considered unreasonable by SBA.

Applicant's Personal Liquidity

Both SBA 7(a) loan and 504 loan applicants are subject to what is called the "Personal Resources Test."

Does applicant personally have cash that can be used in the lieu of the loan?

If the total financing package:
(1) Is $250,000 or less, the exemption is two times the total financing package or $100,000, whichever is greater;
(2) Is between $250,001 and $500,000, the exemption is one and one-half times the total financing package or $500,000, whichever is greater; or
(3) Exceeds $500,000, the exemption is one times the total financing package or $750,000, whichever is greater.

Total financing package is the total project cost. It typically is the sum of the loan amount and borrower's injection.

7(a) Rate Update

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2010 = 3.26%
SBA Fixed Base Rate October 2010 = 5.36%
Rates can go up to 2.75% over these indices.

504 debenture rate

SBA 504 Debenture Rate for October

The debenture rate is 3.11% but note rate is 3.16% and effective yield is only 4.521%.

Note that debenture fees are increasing. The effective rate chart is based on loans that were actually funded in the October debenture sale. Since there were no loans in the sale that were processed at the higher borrower fee, no rate information is available yet that reflects the new fee. Look for a loan that was processed, closed & funded at the 0.749% fee sometime in November or December.

The SBA and self-storage

If you are trying to figure out where it says SBA loans are now eligible for self-storage or mini-warehouses, you won’t find it.

Sometimes it is not what SBA says, but what they don’t say.

The old SOP (Standard Operating Procedure) used to include this language

“Mini-warehouses, office suites, shopping centers, flea markets, and mobile home parks, are not eligible unless they provide sufficient services. Sufficient services shall be deemed to exist when more than 50% of the business’s revenue for the prior year is derived from the services provided rather than from rental income.”


With the release of the new SOP on October 1st, 2010, that paragraph was deleted.

The deletion was deliberate and represents a change in thinking by the small business administration.

SBA Implements Larger Loan limits Established Under Jobs Bill

SBA has just announced that they have implemented the larger loan limits established under the jobs bill.

Those limits are $5,000,000 for the SBA 7(a) program and $5,000,000 for a 504 debenture.

The press release from SBA will be posted here

http://www.sba.gov/news/

7(a) Rate Update

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2010 = 3.26%
SBA Fixed Base Rate October 2010 = 5.36%

Rates can go up to 2.75% over these indices.

SBA 7(a) Weekly Lending Update

The 90 percent guaranty made a difference.

According to SBA, all of the loan applications placed in the U.S. Small Business Administration’s loan queue by small business borrowers have received final approval. The approvals, which were completed Monday, amount to 1,939 loans for nearly $970 million.

For a copy of the press release from SBA, go here-
http://www.sba.gov/idc/groups/public/documents/sba_homepage/news_release_10-57.pdf

There are only 86 days left until the increased guaranty fee and fee expires.

The SBA and precatory

precatory
(PREK-uh-tor-ee)
1. Expressing a request.
2. Nonbinding: only expressing a wish or giving a suggestion.
From Latin precari (to pray).
_____________________________________________________
TIP OF THE WEEK

New legislation on SBA loans appears to be precatory at this point.

So far the SBA has provided policy guidance allowing

-Waiver of SBA loan fees for SBA 7(a) and 504 loans through December 31, 2010
-a 90 percent guaranty through December 31, 2010
-A new definition of a small business to be a company with net profits less than $5,000,000.

SBA still needs time to implement policies that will

-increase the maximum SBA 7(a) loan amount to $5,000,000
-increase the maximum 504 debenture amount to $5,000,000
-allow 504 loans to be used for the refinance of commercial real loans for the next two years

________________________________________________________________

The first two loan pools under the new SBA First Mortgage Loan Pool Program sold last week.
This is for loans where the debenture funded after February of 2009.
The intent was to stimulate the secondary market for 504 1st trust deeds.
In addition to pool eligible loans, interest appears to be increasing for non-performing and sub-performing 504 1st trust deeds for hospitality.
_________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate September 2010 = 3.26%
SBA Fixed Base Rate September 2010 = 5.36%
________________________________________________

504 Debenture Rate for September
The debenture rate is 3.21% but note rate is 3.26% and effective yield is only 4.622%.
________________________________________________
AHEAD OF THE YIELD CURVE

The two-year U.S. Treasury note yield fell to a record low of 0.403 percent this morning. The 30-year T-bond rose almost a full point in price to yield 3.676 percent, down 4 bps.

The bond market is telling us that the Federal Reserve intends to keep interest rates low as they put it two weeks ago at their last meeting “for an extended period.”



This extended period will last until the economy begins to demonstrate sustainable improvement in job creation.

Keep your eye on Friday’s payroll report from the Department of Labor.

Here is a summary of payroll employment and this week’s interesting little table of data:

August (54,000)
July (54,000)
June (175,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

Overall employment, including government agencies, fell 54,000 for a second month. The decrease reflected a 114,000 drop in temporary workers hired by the government to conduct the 2010 census. Private payrolls climbed 67,000 after a revised 107,000 increase in July that was more than initially estimated.

Things are slowly, too slowly, actually getting better.
In the meantime, interest rates should remain exceptionally low for an extended period.
_________________________________________________
OFF BASE

Pitching always beats batting — and vice-versa.”
-Yogi Berra

The Giants, who have baseball's best pitching staff, are in the playoffs. The Kansas City Royals, the second-best hitting team in the majors, finished last in the American League.

Over the last five seasons, the team that has led the majors in pitching has advanced into the postseason four times. Over that same span, the team that led the majors in home runs was only half as successful.

Five of the last eight World Series teams finished in the top four in their respective leagues in earned-run average. During that same period, none of the majors' top-hitting teams made it that far. And one, the 2008 Texas Rangers, didn't even have a winning record.

This season, no team has been better at keeping things simple than the Giants, who have a 3.38 ERA, the best mark in the majors in seven seasons. They were even better down the stretch, posting a 1.78 ERA in September, the fifth-best mark by any team in any month in the last 90 years. The Giants played 18 games in which no opponent scored more than three runs in a game. No team has done that since the dead-ball era.

Dead ball era by the way was that time in baseball before Babe Ruth started hitting it out.

The Angel’s Brandon Wood finished his season with his own dead-ball era. His batting average ended up at only .146.

Wood joins Ray Oyler as only the second player since 1920 to hit below .150 while getting 200-plus at-bats.

Perhaps the greatest example of the old baseball cliché “good field, no hit,” Ray Oyler was the regular shortstop for the Detroit Tigers in the late 1960’s.

Unable to even hit his weight, Oyler was nicknamed the “woodless wonder." He famously went "0 for August," in the summer of 1968. Tiger’s manager Mayo Smith made one of the boldest and most talked-about managerial moves in baseball history, moving the centerfielder who had never played shortstop to Oyler’s position for the last 9 games of the regular season and for all 7 games of the 1968 World Series.

The next season Oyler played for the new Seattle Pilots. Seattle fans, feeling Oyler was the Pilot most needy of support, organized the "Ray Oyler Fan Club" in spring training.

Oyler almost ruined it by homering to win the Pilots' first home game in the bottom of the ninth inning.

SBA 7(a) 90 percent guaranty is back

The SBA has just announced that for 7(a) loan applications that are in the 7(a) Recovery Loan Queue, SBA will approve these loans with a 90 percent guaranty in addition to fee relief as soon as funds become available (expected on or after October 1, 2010).

This will relieve lenders of the need to withdraw loans from the Queue and resubmit them in order to receive the higher guaranty. SBA believes that most, if not all, lenders will prefer the higher guaranty that is now available under the Small Business Jobs Act.

This of course contradicts previous SBA guidance that you could NOT submit a loan into the queue for the higher guaranty.

This increased guaranty and guaranty fee waiver expires on December 31, 2010.

For a copy of the notice, go here- http://www.sba.gov/idc/groups/public/documents/sba_program_office/bank_5000-1173.pdf

Banks Keep Failing, No End in Sight

From today's Wall Street Journal:

http://online.wsj.com/article/SB10001424052748704760704575516272337762044.html?mod=WSJ_hpp_MIDDLTopStories

As more and more banks fail, more and more of them turn to SBA lending. The SBA hopes to see at least 1,000 new banks become SBA 7(a) lenders.

So far we have helped several small community banks set up and run their SBA departments.

The SBA and ending the recession ONE LOAN AT A TIME

Today the President signed the Small Business Jobs Bill.

For more go here-
http://www.whitehouse.gov/the-press-office/2010/09/27/background-small-business-bill-signing-today

The SBA and ending the recession one VOTE at a time

Today is the first DAY of autumn.

For those of you who thought it was yesterday, it technically was Wednesday September 22, 2010 at 11:09 PM ET.

It is also the start of a whole new season for SBA loans.

HR 5297 passed today by the House of Representatives and will soon be signed by the President

This legislation will

-IMMEDIATELY waive SBA loan fees for SBA 7(a) and 504 loans through December 31, 2010
-IMMEDIATELY provide SBA 7(a) lenders with a 90 percent guaranty through December 31, 2010

-SOON increase the maximum SBA 7(a) loan amount to $5,000,000
-SOON increase the maximum 504 debenture amount to $5,000,000
-SOON allow 504 loans to be used for the refinance of commercial real loans for the next two years
-SOON increase the definition of a small business to be a company with net profits less than $5,000,000.

The difference between IMMEDIATELY and SOON is how long it will take SBA to actually write the rules for the new changes.

There are only 99 days left in the year.

The SBA and the Fed

The Federal Reserve Open Market Committee met today and they said that they will continue to keep interest rates low for an "extended period."

So how long is an extended period? For that answer go here-
http://idosbaloans.blogspot.com/2010/06/when-will-fed-raise-rates.html

For the text of the Fed's release go here-

http://www.federalreserve.gov/newsevents/press/monetary/20100921a.htm

SBA 504 debenture rate

SBA 504 Debenture Rate for September
The debenture rate is 3.21% but note rate is 3.26% and effective yield is only 4.62%.

SBA 7(a) Rate Update

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate September 2010 = 3.26%
SBA Fixed Base Rate September 2010 = 5.36%
Rates can go up to 2.75% over these indices.

SBA 7(a) Weekly Lending Update

There are less than two weeks left in the SBA's fiscal year.

Through September 17th, SBA has approved $12,400,530,000 in SBA 7(a) loans. While this is a substantial increase in lending volumes over the last two fiscal years, it is only a $137,592,000 increase over the prior week.

On annualized basis, that is substantially less than last fiscal year.

The drop in volume can be attributed to many lenders now waiting for passage of HR 5297 which will once again temporarily increase the percent of guaranty to 90 and waive the guaranty fee.

The SBA and ending the recession one VOTE at a time

Senate PASSES Small Business Jobs & Credit Act (HR 5297).

The US Senate just passed HR 5297.

The bill now returns to the House, which is scheduled to recess this evening. Given recent press comments by Speaker Pelosi, it is expected that the House will take up the Senate version of HR 5297 quickly.

That means increased SBA loan sizes. It also means fees will be waived through the year!

Ahead of the yield curve

Good news abounds today.

The yield curve is getting even steeper.

Longer-term Treasuries fell, pushing the 30-year bond yield to a one-month high, as reports on Philadelphia manufacturing and U.S. initial jobless claims eased concern that the economic recovery is stalling.

The yield on the 30-year bond increased 8 basis points, or 0.08 percentage point, to 3.95 percent.

The SBA and ending the recession one VOTE at a time

Senate Set to Approve Tax Cuts, Eased Credit for Small Business

From Bloomberg- http://noir.bloomberg.com/apps/news?pid=20601087&sid=aTGmKA3f69xU&pos=9

Voting on HR 5297 is starting now.

The SBA and hoarding

If you make the mistake of watching the wrong channels on TV, you’d think the biggest problem facing the nation is hoarding. Public awareness of the condition has recently experienced an increase with the launch of two competing reality television programs about the subject, Hoarders and Hoarding: Buried Alive, airing on the A&E and TLC networks respectively.

Is it coincidence that the new SOP now allows SBA financial assistance for self-storage facilities?

SBA has dramatically changed its thinking on “passive income”.

For example, under previous guidance, businesses such as self-storage facilities were ineligible for SBA financing unless more than 50% of their revenue was from sources other than rent (the “sufficient services” test). The new guidance in SOP 50 10 5(C) eliminates the “sufficient services” test in order to make SBA loan guarantees available to more of these types of businesses.

That means self-storage facilities are now eligible.

SBA 7(a) Weekly Lending Update

With only two weeks left in its fiscal year, SBA lending looks to close out with SBA 7(a) lending volumes greater than 2008 or 2009.

Through September 10th, $12,262,938,000 in SBA 7(a) loans have been approved by SBA.

That is an increase of only $144,184,000 over the prior week.

The new SBA year that starts October 1st should kick off well as enhancements provided by HR 5297 should be in effect by then.

The SBA and the Fed- capacity utilization

Production in the U.S. cooled in August as automakers scaled back following a surge in output the prior month.

Industrial production increased 0.2 percent last month after rising 0.6 percent in July, figures from the Federal Reserve showed today. Manufacturing expanded 0.5 percent excluding autos, the most since May.

Capacity utilization, which measures the amount of a plant that is in use, increased to 74.7 percent last month. It was 74.6 percent in July. The gauge averaged 80 percent over the past 20 years, showing there’s enough spare plant equipment and space to prevent bottlenecks that would lead to higher prices.

For a copy of the complete release, go here- Industrial production and Capacity Utilization

What does this mean?

This is the highest level for industrial production since Oct 2008, but production is still 7.2% below the pre-recession levels at the end of 2007. Capacity utilization at 74.7% is still far below normal - and well below the the pre-recession levels of 81.2% in November 2007. The all-time low was 69.9% back in August of 2009. This was the lowest ever.

We aren't even half way out of the hole yet.

The SBA and ending the recession one VOTE at a time

Senate Small Business Bill Passes 61-37

Today the Senate voted 61 to 37 to pass a motion to invoke cloture on Substitute Amendment to H.R. 5297, the Small Business Lending Bill.

A vote on final passage will hopefully be done by the end of the week, after which the bill would then move back to the House of Representatives for a vote before going to the President.

The House could delay the process with votes and amendments, but it is expected that they will pass what the Senate sends to them.

The SBA and the Fed

This could be a prelude to tomorrow's release on Industrial Production and Capacity Utilization from the Federal Reserve.

Press Release:
The Ceridian-UCLA Pulse of Commerce Index™ (PCI) by UCLA Anderson School of Management fell 1 percent in August.

This is the UCLA Anderson Forecast and Ceridian Corporation index using real-time diesel fuel consumption data: Pulse of Commerce IndexTM

In July, the capacity utilization rate for total industry moved up to 74.8 percent, a rate 5.7 percentage points above the rate from a year earlier but 5.8 percentage points below its average from 1972 to 2009.

One of the Federal Reserve’s favorite gauges of the economy is the capacity utilization rate. The Federal Reserve watches capacity utilization rates to see if production constraints are threatening to cause inflationary pressures. Bottlenecks or shortages often lead to inflationary pressures that would drive prices even higher. Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.

Should capacity utilization stall or even fall, it may prompt concern from the Federal Reserve when they meet in two weeks.

As a result, the interest rate savings from a low variable rate of interest available from a SBA 7(a) loan should persist for some time.

The SBA and small business optimism

From NFIB: Small Business Confidence Remains Low

The National Federation of Independent Business Index of Small Business Optimism gained 0.7 points in August*, rising to 88.8. Most of the improvement was accounted for by gains in expected real sales and expectations for business conditions six months out, the two components that lowered the index in July. But despite their improvements, both measures are still in recession territory. “Small business owners are expecting sub-par growth in the second half of 2010,” said Bill Dunkelberg, NFIB’s chief economist.

SBA 504 debenture rate

SBA 504 Debenture Rate for September
The debenture rate is 3.21% but note rate is 3.26% and effective yield is only 4.62%.

The SBA and nescient

nescient
NESH-uhnt, NESH-ee-uhnt, NES-ee-uhnt
Lacking knowledge or awareness.
From Latin ne- (not) + scire (to know).
_____________________________________________________
TIP OF THE WEEK
Nescient SBA lenders and borrowers don’t realize that the rules of the game are changing.

SBA has released a new SOP that will be effective October 1, 2010.

There are several changes with this new SOP.

For example, historically, a 7(a) lender could not finance Other Real Estate Owned (OREO) with a 7(a) loan because SBA perceived this as self-dealing. Now these same lenders can finance their OREO with a 7(a) loan. They always could with a 504 loan.

In addition, the definition of a passive business has changed. Under the previous guidance, these businesses were ineligible for SBA financing unless more than 50% of their revenue was from sources other than rent (the “sufficient services” test). The new guidance eliminates the “sufficient services” test in order to make SBA loan guarantees available to more of these types of businesses. Does that mean mini-warehouses are eligible?

For business acquisitions, the lender has to verify the financial information relied upon in the business valuation.

Other changes may soon happen. Legislation to increase the SBA loan limit on a 7(a) loan to $5,000,000, temporarily allow 504 loans to used for debt refinance, and increase the SBA 7(a) guaranty to 90 percent and waive the guaranty fee through the end of the year may be considered this week. If it passes by the Senate, it still needs to be reconciled with the House and then go to the President. The House however does not come back from their summer vacation until next week.

SBA should also soon make official the “alternative size” standard for 7(a) loans. What is the alternative size standard? Under SBA's 504 program, a business concern can not have tangible net worth not in excess of $8.5 million and average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years not in excess of $3.0 million

It sounds like another whole new SOP will have come out again.
_________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate September 2010 = 3.26%
SBA Fixed Base Rate September 2010 = 5.36%
________________________________________________

504 Debenture Rate for August
The debenture rate is 3.52% but note rate is 3.57% and effective yield is only 4.93%.
________________________________________________
AHEAD OF THE YIELD CURVE

The yield curve is getting a little steeper.

Last Thursday, the 30-year bond yield gained 11 basis points to 3.84 percent as the government sold $13 billion of the long term bonds. It fell on August 25th to 3.46 percent, the lowest level since March 2009.

Is the bond market telegraphing hope about the economy?

Keep your eye on Wednesday’s release by the Federal Reserve on Industrial Production and Capacity Utilization for the month of August.

In July, the capacity utilization rate for total industry moved up to 74.8 percent, a rate 5.7 percentage points above the rate from a year earlier but 5.8 percentage points below its average from 1972 to 2009.

Here is what capacity utilization rates have done:

1997- 83.6
1998- 83.0
1999- 82.4
2000- 82.6
2001- 77.4
2002- 75.6
2003- 74.6
2004- 79.2
2005- 80.7
2006- 82.4
2007- 81.5
2008- 79.9
2009- 69.9
2010- 74.8


What does all this mean?


I don’t know.


One of the Federal Reserve’s favorite gauges of the economy is the capacity utilization rate. The Federal Reserve watches capacity utilization rates to see if production constraints are threatening to cause inflationary pressures. Bottlenecks or shortages often lead to inflationary pressures that would drive prices even higher. Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.

Capacity utilization at 74.8% is still far below normal - and well below the the pre-recession levels of 81.2% in November 2007.

That means we still have a long way to go before interest rates really start to go up.
_________________________________________________
OFF BASE
The rules are always changing.

As a matter of fact, today is the anniversary of the the Knickerbocker Rules formalized by Alexander Cartwright in 1845 on September 13th. They are considered to be the basis for the rules of the modern game of baseball.

The rules consisted of twenty general guidelines to the rules of baseball. Several of the rules are still around in some form today, while others are in direct contrast to current rules.

For example, the 10th rule stated- A ball knocked out of the field, or outside the range of the first and third base, is foul.

A ball knocked between the baselines and beyond the field was not initially a home run but a foul, to be ignored (after finding the ball). The early ball fields had very deep fences (if any) and an over-the-fence knock was an unlikely event.

It wasn’t until 26 years later that the home run became part of the game.

The first home run hit in MLB history was by Ezra Sutton of the Cleveland Forest Citys on May 8, 1871 against the Chicago White Stockings in the National Association. Sutton hit a second home run in the game to be the player to hit the first and second home runs in MLB history. What a great trivia question! Uncle Ezra, as admiring Boston fans called him, was considered one of the greatest third basemen of all time. While with the Athletics he made the first error in the first National League game ever played. If you are wondering what kind of name Ezra is, it is a book in the Old Testament. Ezra was a Jewish priestly scribe who led about 5,000 Judean exiles living in Babylon to their home city of Jerusalem in 457 BC.

Home runs keep the game interesting these days.

A Diamondbacks error in the top of the ninth allows Jason Giambi to come to the plate with two out and a man on first in a 2-2 game. He reaches down for a pitch low on the outside corner and drives it over the fence in centerfield. The Rockies walk off to their tenth win in a row, 4-2. Giambi has four hits this month, three of them homers.

The Rockies pulled within 1 1/2 games of first place in the NL West. San Diego comes into Coors Field for a three-game series starting Monday night. With a few more wins and some help from the Dodgers, who play the Giants beginning on Tuesday, the Rockies could soon move into first place.

Only 10 days until summer officially ends. And there are only 109 days left in the year.

SBA 7(a) Rate Update

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate September 2010 = 3.26%
SBA Fixed Base Rate September 2010 = 5.36%
Rates can go up to 2.75% over these indices.

The SBA and the new SOP

In August of 2008, the SBA released the SOP 50-10(5). On March 1, 2009, they released the SOP 50- 10 5(A). On October 1, 2009, they released the SOP 50- 10 5(B).

The SBA has released yet another version, SOP 50- 10 5(C) which will be effective October 1, 2010.

This latest version of the SOP has some noteworthy changes.

For example, businesses such as hair salons nail salons, dance studios and others often rent space to the tradesperson and then handle advertising, hiring cleaning services and the sales of merchandise. Under the previous guidance, these businesses were ineligible for SBA financing unless more than 50% of their revenue was from sources other than rent (the “sufficient services” test). The new guidance eliminates the “sufficient services” test in order to make SBA loan guarantees available to more of these types of businesses.

Another change is the financing of Other Real Estate Owned (OREO) with a 7(a) loan.

The new SOP right there on page 141 now states:

B. Loan Proceeds May be Used to Finance a Lender’s Other Real Estate Owned (OREO):
Where loan proceeds will be used to finance the purchase of real estate owned by the 7(a) lender making the loan, the application must:
1. Be submitted to the LGPC (delegated authority may not be used to process these applications);
2. Include an independent real estate appraisal that meets the requirements found in Chapter 4 of this Subpart (the appraisal requirement cannot be delayed until loan closing), and that provides the liquidation value of the real estate;
3. Identify the lender’s cost in the real estate, including any expenses directly associated with acquiring and maintaining the property. The use of proceeds attributable to the purchase of the real estate may not exceed the liquidation value or the lender’s cost, whichever is less; and
4. Include an explanation of the circumstances surrounding the lender’s acquisition of the real estate. If the acquisition of the property was triggered by a business failure at that particular location, the lender must submit a detailed explanation of why the new small business borrower will succeed at that same location.

SBA Loan Basics for Borrowers- What is the Guaranty Fee?

What is the SBA guaranty fee?

A lender must pay a fee to SBA for each loan guaranteed under the 7(a) program. This fee is known as the ―SBA Guaranty Fee.

Think of it as like an insurance premium. SBA uses these fees to pay for when they have to honor the guaranty for a lender.

The total loan amount determines the percentage that is used to calculate this fee. The guaranty fee is based on the guaranteed portion of the loan and not the total loan amount.

For Loans of $150,000 or less the guaranty fee is 2% of guaranteed portion

For Loans between $150,001 to $700,000 the guaranty fee is 3% of guaranteed portion

For Loans between $700,001 to $2,000,000 the guaranty fee is 3.5% of guaranteed portion up to $1,000,000 PLUS 3.75% of the guaranteed portion over $1,000,000

For example, the guaranty fee on a $100,000 loan with an 85% guaranty would be 2% of $85,000 or $1,700.

The guaranty fee on a $2,000,000 loan with a 75% guaranty ($1.5 million guaranteed portion) would be 3.5% of $1,000,000 ($35,000) PLUS 3.75% of $500,000 ($18,750), which totals $53,750.

The Recovery Act temporarily waived these guaranty fees, but that expired on May 31, 2010. There is pending legislation to possible extend the waiver of these guaranty fees through the end of the year.

SBA 7(a) Weekly Lending Update

$12,118,754,000 in SBA 7(a) loans have funded through the week ending September 3rd. That is an increase of $191,507,000 from the prior week.

Another $181,876,400 in SBA 7(a) loans are in the Recovery Act loan queue awaiting possible guaranty fee relief. With 445 loans in the queue, that is an average loan size of $408,000. The guaranty fee would be $9,180.

Funding for guaranty fee waivers is the subject of legislation scheduled for a Senate vote on Spetember 14th.

The SBA and banks

The FDIC released the Q2 Quarterly Banking Profile last week.

The number of FDIC-insured institutions reporting financial results fell by 104 in the second quarter, from 7,934 to 7,830. This is the first time in almost ten years that the number of reporting institutions has fallen by more than 100 in a single quarter (the number declined by 113 in third quarter 2000).

While there may be fewer and fewer lenders out there, more and more of the remaining ones are SBA 7(a) lenders.

Since the passage of the Recovery Act, more than 1,200 lenders who had not made loans since October 2008 returned to SBA lending. In fact, of those lenders more than half had not made SBA loans since 2007.

The SBA hopes to increase the number of active SBA lending partners for the 7(a) loan program to 3,000 by September 30, 2011.

SBA Urges Public to Plan for Disasters During National Preparedness Month

It is National Preparedness Month and the Boy Scouts motto is "Be Prepared."

In conjunction with the five-year anniversary of the devastating Gulf Coast storms of 2005, the U.S. Small Businesses Administration is encouraging business owners, homeowners and others to create their own disaster preparedness plan during National Preparedness Month in September.

To prepare for disasters, SBA offers the following tips:
•Develop a solid emergency response plan.
• Make sure you have adequate insurance coverage.
• Copy important records.
• Create a "Disaster Survival Kit."


When disaster strikes, the SBA makes low-interest loans to homeowners, renters and non-farm businesses of all sizes.


To learn more about the SBA’s disaster assistance program, visit the website at www.sba.gov/disasterassistance.

For small businesses, the best way to be prepared is to ensure your company has adequate permanent working capital. A SBA 7(a) loan can be used for working capital purposes.

SBA 7(a) Weekly Lending Update

$11,927,247,000 in SBA 7(a) loans have been funded through the week ending August 27th. That is a $218,581,000 increase over the prior week.

Another $207,374,500 in SBA 7(a) loans sit in the Recovery Act loan queue.

The SBA and obambulate

obambulate
(o-BAM-byuh-layt)
To walk about.
From Latin ob- (towards, against) + ambulare (to walk).
_____________________________________________________
TIP OF THE WEEK
No obambulating in circles.
Small Business is getting bigger.

The SBA has indicated that they intend to make the alternative size standard PERMANENT for 7(a) loans. This alternative size standard had been set to expire on September 30th. This does not require a vote from the Senate or anything like that.

What is the alternative size standard? Under SBA's 504 program, a business concern must meet either the size eligibility criteria of the 7(a) program, or have tangible net worth not in excess of $8.5 million and average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years not in excess of $3.0 million

As a result, businesses such as multi-unit franchisees usually too big for SBA financial assistance and manufacturers with more than 500 employees can utilize SBA 7(a) loans for real estate purchase, real estate debt refinance, business debt refinance, equipment, purchase, working capital and business acquisition.
_________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2010 = 3.30%
SBA Fixed Base Rate August 2010 = 5.67%
________________________________________________

504 Debenture Rate for August
The debenture rate is 3.52% but note rate is 3.57% and effective yield is only 4.93%.
________________________________________________
AHEAD OF THE YIELD CURVE

Do you remember the difference between a depression and a recession?

A recession is when your neighbor loses his job. A depression is when you lose your job.

With the housing market still obviously slumping, any job creation will have to come from small business.

This morning, the Intuit Small Business Employment Index reported that small business employment grew slightly in August, but at a declining rate compared to healthy gains made in January through April. The Index is based on figures from the country’s smallest businesses that use Intuit Online Payroll. The August employment growth translates to approximately 26,000 new jobs nationwide, the same number of jobs added in July based on revised estimates.

Keep your eye on Friday’s payroll report from the Department of Labor.

Here is a summary of payroll employment and this week’s interesting little table of data:

July (131,000)
June (221,000)
May 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

Overall employment fell 131,000 in July. The Census Bureau said it let go about 144,000 of the people conducting the decennial population count from mid-June to mid-July. It still had about 200,000 temporary workers on staff as of July 17, indicating additional cuts to come that will keep distorting the payroll figures for months. For that reason, economists say private payrolls will be a better gauge of the state of the labor market for much of 2010. Private payrolls that exclude government agencies rose by 71,000 last month, less than forecast, after a June gain of 31,000. Total employment fell a revised 221,000 in June.

The pace of hiring signals it will take years for the world’s largest economy to recover the more than 8 million jobs lost during the recession that began in December 2007.

As a result, interest rates will remain low for an extended period.
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OFF BASE
Happy Birthday Ted Williams.

Today is the birthday of Ted Williams. He would have been 92 years old.

In 1941, Williams was hitting .39955, which would round up to .400, on the last day of the season. Williams was offered a seat on the bench to protect the first .400 season since 1930 but in his typical Teddy Ballgame way, Williams declined. He then torched A's pitchers for six hits in eight at bats finishing the season at .406. No hitter has had a .400 batting average since. Despite that hitting, he was not the Most Valuable Player that season. He also led the league in runs, home runs, walks, on base percentage, and slugging yet lost the MVP to DiMaggio. DiMaggio that year had a 56 game hitting streak.
Both a .400 batting average and a 56 game hitting streak are records that will not be broken, at least not this season.

The real excitement left in the season is what happens with the Chicago White Sox.

For some reason, they seem to think that Manny Ramirez might help them out. The White Sox have lost nine of 14 and 13 of 20 to fall 4½ games back of AL Central-leading Minnesota with three games left in the season series between the teams. Interestingly enough, the first two stops on their 10-game trip are Cleveland and Boston, two of Ramirez's former clubs. Ramirez already has played at Boston this season. As a member of the Dodgers, he was 5-for-12 a home run over the Green Monster in a three-game series in June. As a member of the White Sox, Manny will now be playing in the best home run park in the game.

In addition to Manny, the White Sox also have the best new pitcher in the major leagues. That would be Chris Sale. A college baseball player just a few months ago, left hander Chris Sale became the first player from the 2010 draft to make it to the majors. In the eight innings he has now pitched over his first eight games, Sale has allowed only one run while striking out eleven. He is an incredible strike out pitcher. During his brief stay in the minors he struck out 15 in only 6 1/3 innings. He also led all of college baseball with 146 strikeouts.

It is also a brand new season for college football starting this weekend.

It will also be a brand new game.

There are three new college football rules in effect. Wedge blocking on kickoffs is banned. A wedge block is when two or more players form a wall of blockers to create a running lane for a return on kickoffs. The new rule defines a wedge as two or more players aligned shoulder to shoulder within 2 yards of each other. In addition, taunting in the field of play will start costing teams points in 2011. Currently, players who are penalized for taunting on their way to the end zone draw a 15-yard penalty on the extra point attempt, 2-point conversion attempt or the ensuing kickoff. Beginning in 2011, live-ball penalties will be assessed from the spot of the foul and eliminate the score. Examples include players finishing touchdown runs by high-stepping into the end zone or pointing the ball toward an opponent.

A third change bans the use of eye black containing symbols or messages, a trend that grew in popularity because of the use by Heisman Trophy winner Tim Tebow.

In what some are already calling the "Tim Tebow rule," college football players are now prohibited from writing anything on their eye black -- the very types of messages the former Florida Gator quarterback made popular with various Bible verses.

Tebow -- the 2007 Heisman Trophy winner popularized the trend, and the nation noticed. On the same day that Florida played Alabama in the SEC Championship Game December 5th, the No. 1 Google "hot" search in the U.S. was John 16:33, the verse Tebow wore on his eye black.

In fact, Tebow's Scripture choices were among the Top 10 Google searches in the U.S. during nearly every major Florida game in 2009. For the Sept. 19 game against Tennessee, his choice of Romans 8:28 was the No. 5 search; for the Oct. 10 game against LSU, 1 Thessalonians 5:18 was the No. 7 search; and for the game against Florida State -- his final home game -- Hebrews 12:1-2 was the No. 3 search. His choice of Ephesians 2:8-10 was the No. 4 search for the Jan. 1 Sugar Bowl. The Google trend dates back to the 2008 BCS Championship Game, when John 3:16 -- Tebow's verse for that game -- landed at the No. 1 spot.
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SBA 7(a) Weekly Lending Update

For the week ending August 20th, only $168,622,000 in SBA 7(a) loans were approved.

The drastic drop in volume can be attributed to the expiration of the 90 percent guarantee which expired at the end of May.

Legislation to end the increased guarantee through the end of the year will be voted on September 14th.

The SBA and ending the recession ONE LOAN AT A TIME

We have closed another loan.

This time it was a $2,000,000 SBA 7(a) loan to a car wash in the Inland Empire that refinanced a construction loan and some other debt.

In the last ten years we have closed $756,794,299 in SBA 7(a) and 504 1st trust deeds.

SBA 7(a) Rate Update

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2010 = 3.30%
SBA Fixed Base Rate August 2010 = 5.67%
Rates can go up to 2.75% over these indices.

SBA 7(a) Weekly Lending Update- A picture is worth a thousand words

Since a picture is worth a thousand words, here is the weekly 7(a) lending volume. The cliff diving began when the SBA 7(a) loan 90 percent guarantee and SBA 7(a) loan guarantee fee waiver expired at the end of May.

SBA Loan Basics for Borrowers- Does an SBA loan need collateral?

SBA requires lenders to seek ALL available collateral. While a SBA loan should not be turned down due to a lack of collateral, lenders need to take as much collateral as they can.

Lenders first look to the business assets such as equipment. Inventory and accounts receivable are excluded.

If the business assets are not enough to secure the loan, the borrower may have to offer personal assets such as a second or third trust deed on the home. If the borrower has equity in excess of 25 percent of the market value of the home, SBA considers that to be worthwhile and will want the lender to use that if the business assets don't fully secure the loan.

A personal guarantee is required on all SBA borrowers.

SBA 7(a) Weekly Lending Update

Signs of life in 7(a) lending?

SBA 7(a) loans jumped by over $251,825,000 in the last week, bringing the total to $11,540,044,000 for the year.

This is the biggest one week increase since the expiration of the increased guarantee and guarantee fee waiver which occurred at the end of May.

Another 427 loans totaling $181,082,300 sit in the loan queue at SBA awaiting the possibility of funding with the guarantee fee waiver.

The SBA and quiescence

quiescence

(kwee-ES-uhns, kwi-)

A state of rest, inactivity, or quietness.

From Latin quiescere (to become quiet), from quies (quiet).


_____________________________________________________
TIP OF THE WEEK



The quiescence from the dog days of summer will soon fade into the crisp focus of autumn. The same thing will happen with SBA lending. On September 14th the Small Business Jobs bill will finally come up for a vote. Included in the bill will be provisions for a larger 7(a) loan program and 504 loan program. The 504 loan program will also have the ability to refinance debt for a few years. The increased guarantee and guarantee fee waiver for the 7(a) program will also be extended until the end of the year.

_________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2010 = 3.30%
SBA Fixed Base Rate August 2010 = 5.67%
________________________________________________

504 Debenture Rate for August
The debenture rate is 3.52% but note rate is 3.57% and effective yield is only 4.93%.
________________________________________________
AHEAD OF THE YIELD CURVE



The Federal Reserve Open Market Committee met last week and once again said that interest rates will remain low for an extended period.

The Fed also said after its policy meeting this week that it will reinvest principal payments on mortgage assets it holds into long-term Treasuries after judging that “the pace of economic recovery is likely to be more modest in the near term than had been anticipated.”

The central bank plans to buy about $18 billion of Treasuries and inflation-protected securities by the middle of September. The first purchases will be on August 17 for U.S. debt maturing from August 2014 to July 2016, according to the New York Fed’s website.

A few days later the Treasury Department sold $16 billion in 30-year bonds at a yield of 3.954%. Money managers and international investors were drawn to the government's sale of 30-year bonds despite yields coming at the lowest since March 2009. Investors offered to buy 2.77 times the amount of debt sold, compared to an average of 2.44 times at the last four new sales of 30-year bonds.

Here is what the 30 year bond has been doing:

2001- 5.49


2002- 5.43


2003- ND


2004- ND


2005- ND


2006- 4.91


2007- 4.84


2008- 4.18


2009- 3.89


2010- 4.77


What a minute, why no numbers for 2003, 2004, and 2005?

One month after the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury mothballed the 30-year bond in 2001, experts speculated it was trying to drive down long-term interest rates, which had remained stubbornly high while the Federal Reserve was slashing short-term interest rates to revive the economy. When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis points in one day. Why? A shrinking supply of the 30-year Treasury bond caused increased demand to drive rates down.

What does all this mean?

About 72 percent of the U.S. government’s $862 billion economic stimulus program has been spent or obligated, according to President Barack Obama’s administration. Obama has increased the nation’s publicly traded debt to a record $8.18 trillion to fund his programs, leading some members of Congress to say the government should curb its spending.

The government appears to be borrowing prudently.

Last week’s sale of the 30 year bond was the same as the last three quarterly sales of new long bonds. While the government has steadily shrunk its auctions in most shorter term maturities, it has kept longer-dated debt sales larger to extend the overall maturity of its debt and thus reduce refinancing risk in coming years.

The 30 year yield has dropped from 4.77 percent at the last sale of the securities on April 8. The bond’s average yield was 4.49 percent from Dec. 31, 2007, through Sept. 12, 2008, just before the collapse of Lehman Brothers.

The bond market appears to be telegraphing no imminent rise in rates.
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OFF BASE
"“t ain't the heat; it's the humility."
-Yogi Berra
It’s the dog days of summer. Dog days? What is a dog day? Is it so hot that dogs just lay around panting? The term "dog days" has nothing to do with dogs. It dates back to Roman times, when it was believed that Sirius, the Dog Star, added its heat to that of the sun creating exceptionally high temperatures. The Romans called the period dies caniculares, or "days of the dog." The name Sirius seems to come from an ancient Greek word for "scorching" or "sparkling." Sirius is the brightest star visible from either of Earth's hemispheres. It's prominent in the evening during the northern hemisphere winter. But its appearance in the summer has also been noticed for many thousands of years. Each northern hemisphere summer, after being behind the sun for awhile, the Dog Star reappears before dawn. Early Greeks and Romans blamed Sirius for the heat in July and August. This is the time of year when Sirius comes up either with the sun or shortly before the sun each day. It travels across the sky with the sun during the daylight hours. The ancients believed that the double whammy of the sun and Sirius actually caused the hot weather.

I learned a new golf rule yesterday.

You can’t “ground” a club if you are in a bunker. What’s grounding? When setting up for a swing, many golfers will allow the club head to gently rest upon the ground with arms extended to enable the feet to be situated the proper distance from the ball. Also, you might take a divot during your practice swing. That also constitutes grounding. This is perfectly acceptable on the fairway, in the rough and off the tee. However, when playing a ball within the boundaries of a hazard, such as a sand trap the golfer is not permitted to allow the club head to touch the surface during address or any practice swings (Rule 13-4: 2 stroke penalty in medal play, loss of hole in match play). He or she may only strike the ground during the actual swing itself.

What is the motivation for this rule? Some claim that it permits the golfer to determine how thick or heavy the sand is, thus allowing a better feel for how hard the swing must be. But that doesn't really make sense because it is perfectly permissible for a golfer to slightly shuffle his/her feet at address to get a solid stance, and in the process, determine how heavy the sand is. More likely is the interpretation that to ground the club within a sand trap is to improve the lie of the ball. It is impossible to allow the club to touch the sand without depressing the sand, no matter how slightly. A sand trap affords an opportunity for a ball to become plugged. Were a golfer permitted to ground the club within a bunker, the ball would become more exposed, defeating the spirit of playing as it lies.

I figured that out yesterday. Professional Dustin Johnson had a one-stroke lead on the 18th hole of the PGA Championship at Whistling Straights. His tee shot landed in a flat area that had served as a path for spectators. It was sandy. But it did not strike him as being a formal hazard. In addressing the ball, Johnson grounded his club. Bad move. It cost him two strokes plus chance to tie and join the playoff.

SBA Loan Basics for Borrowers- What can a SBA loan be used for?

A SBA 7(a) loan can be used for many purposes such as real estate purchase, real estate debt refinance, business debt refinance, business acquisition, franchise financing, working capital and inventory purchase.

Perhaps the better question would be what can a SBA loan NOT be used for? You can NOT use SBA to pay off shareholder debt or buy into a partial ownership interest in a company.

SBA Loan Basics for Borrowers- What is a small business?

To be eligible for SBA financial assistance, which is a fancy way of saying to get a SBA loan, your company has to be considered a small business. Remember, SBA means SMALL BUSINESS Administration.

SBA uses what they call a size standard for both the SBA 504 and 7(a) loan program.

Currently the 504 loan program defines a small business as one which has net profit after taxes less than $3 million averaged over the last three years and a BUSINESS net worth less than $8.5 million.

The SBA 7(a) loan program currently uses the same standard as a 504 loan.