Friday, July 30, 2010

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

A loan guaranteed by the Small Business Administration, an agency of the Federal Government

7(a) Loan
504 Loan

SBA 504 Loan is for Real Estate Purchase and Construction
A 504 loan consists of a bank 1st deed of trust and a SBA 504 debenture in second trust deed position

A SBA 7(a) loan is one loan made by a bank and guaranteed by the SBA.

A SBA 7(a) loan can be used for:
Real estate purchase
Real estate debt refinance
Business debt refinance
Equipment purchase
Working capital and inventory
Business acquisition

Are we headed to a double dip recession?

Are we headed to a double dip recession?

It sounds like it according to the Economic Cycle Research Institute.

Check this out-

Thursday, July 29, 2010

Wednesday, July 28, 2010

The SBA and ending the recession one VOTE at a time

The Senate just ended debate for the night. A cloture vote is scheduled for 10:40 AM EST tomorrow.

Watching C-Span was not too encouraging because both parties were complaining about the other, and the bill was not brought to a vote tonight. The issue is that Republicans want to add their own amendments, and when they do, Democrats want to add more of their amendments. Republicans are objecting to the added Democratic amendments, and so on.

The two Senators that voted for cloture on the amendment(Lemieux and Voinovich) which added the $30B Small Business Lending Fund have threatened to withhold their votes for the overall bill unless Republicans were given the ability to offer amendments. It is unclear if this will be allowed. It is clear that these two Republicans were supporting their party, but you would have to guess that if they voted for the most controversial part of the small business bill, they would vote for the bill itself.

The SBA and ending the recession one VOTE at a time

Call your Senators' offices NOW and tell them to pass H.R. 5297!

Just dial 202/224-3121 and ask for your Senator's office.
This is the Small Business Lending Bill that provides for an increased SBA 7(a) and 504 loan program.

It will also by amendment provide for a 90% guaranty on 7(a) loans and continued fee waivers.

The vote is expected possibly today.

If you don’t make this call, you have no one to blame.

Tuesday, July 27, 2010

The SBA and ending the recession one VOTE at a time

This is the latest from NAGGL-
During this afternoon's Senate consideration of HR 5297, Senator Reid said on the floor that he hopes the Senate will complete work on this bill and all amendments by the end of tomorrow. He also indicated that there was now an agreement with Republican members to offer three amendments.

Tomorrow's Senate action on HR 5297 will require several procedural moves needed to adjust the amendment tree from last week, to allow Republicans to offer up to 3 amendments, and to allow for the introduction of a new substitute amendment that would add Sens. Landrieu/LeMieux small business lending fund amendment and Sen. Lincoln's $1.5 billion in agricultural disaster relief to the bill. [A substitute amendment is an amendment that would strike out the entire text of a bill or other measure and insert a different full text.]

After meeting with congressional leaders from both parties today, President Obama was quoted as saying, "I hope that in the coming days, we'll once again find common ground and get this legislation passed. We shouldn't let America's small businesses be held hostage to partisan politics -- and certainly not at this critical time."
If the Senate meets the Majority Leader's goal of completing work and voting on HR 5297 by the close of business tomorrow, the bill will then return to the House, where it would either:

Be voted on as amended by the Senate, or
Go to conference with House and Senate representatives working to iron-out their differing perspectives on the bill.
It remains too early to know how that scenario will play out. Should the path lead to a lengthy conference between the House and Senate, the legislation could languish. The House adjourns this Friday, July 30 until September 13.

The SBA and ending the recession one VOTE at a time

Still pending in the Senate is HR 5297. This is the bill that will increase SBA 7(a) and 504 loan sizes as well as once again increase the guarantee for a 7(a) loan to 90% and waive the SBA guarantee fee. A vote should hopefully occur soon. Right now the Senate is mulling over an unrelated bill S 3628.

If you want to watch the happenings you can if you go here-

The SBA and Best Local Banks

You might want to check this article on Best Local Banks and how more and more lenders are getting into SBA lending.

Go here-

SBA 7(a) Weekly Lending Update

As of July 23rd, $11,026,658,000 in SBA 7(a) loans have been approved by SBA. While this is a significant increase over last year and is also above the levels of 2008, only $109,800,000 in new loans were approved last week. The current pace is well below historical levels as a result of the loss of recovery act provisions such as the increase guarantee of 90% and the SBA guarantee fee waiver.

Monday, July 26, 2010

SBA 7(a) Rate Update

SBA LIBOR Base Rate July 2010 = 3.35%
SBA Fixed Base Rate July 2010 = 5.88%
A 7(a) loan can go 2.75% above these indices.
504 Debenture Rate for July
The debenture rate is 3.80% but note rate is 3.86% and effective yield is only 5.213%.

Friday, July 23, 2010

The SBA and ending the recession one VOTE at a time

There are several more steps that must be completed before the full bill (including SBA Recovery Act extensions and program enhancements) is voted on in the Senate. From the Senate, HR 5297 will have to go back to the House. Once in the House, it remains unclear the path the bill would take: there could be a conference committee between the House and Senate to wrangle over provisions, or whether the House will accept the Senate version as is.

Thursday, July 22, 2010

The SBA and ending the recession one VOTE at a time

The ball in now in the Senate's court to pass H.R. 5297 this week.

This is the Small Business Jobs Bill that provides for an increased SBA 7(a) and 504 loan program. It will also hopefully by amendment provide for a 90% guaranty on 7(a) loans and continued fee waivers.

The legislation is currently short of the 60 votes needed to end debate.

Wednesday, July 21, 2010

SBA 7(a) Weekly Lending Update

As of July 16th, $10,916,858,000 in SBA 7(a) loans have been approved. This is a significant increase of $194,501,000 over the prior week as borrowers and lenders continue to take advantage of the guaranty fee waiver. Funding for the fee waivers are still available through the SBA's Recovery queue.

Monday, July 19, 2010

The SBA and mortmain


1. The perpetual ownership of property by institutions such as churches.
2. The often stifling influence of the past on the present and the living.

from Latin mortua manus (dead hand).

Imagine a B-movie scene of a dead hand stretching out of a grave and you have the picture of the word mortmain. The idea behind mortmain is of a dead hand reaching beyond to hold a property in perpetuity. By extension, the word describes the past dictating the present in an oppressive manner.

Unlike the passing of an asset to a child on the death of a parent, institutions such as churches hold property forever. Over time, through donations, etc., they can acquire a large amount of real estate which cannot be distributed or revert to the crown. Also, in such cases there is a loss of revenue from inheritance tax. The English King Edward I passed the Statutes of Mortmain in 1279 and again in 1290 to limit such holding of property in perpetuity without royal authorization.

Congress wants the estate tax to pay the mortmain that memory levies on human beings.

In case you haven't heard, Senators Lincoln (D-AR) and Kyl (R-AZ) are at it again. Back in April 2009 they teamed up on Senate Amendment 873, which called for a $5 million federal estate tax exemption and 35% estate tax rate and passed in the Senate by a 51-48 vote. But nothing came of this or any of the other measures that were introduced in 2009 and so on January 1 the federal estate tax was officially repealed. There has been no federal estate tax since then.

Late on Tuesday Lincoln and Kyl teamed up once again to introduce a proposal that calls for an amendment to H.R. 5297, commonly referred to as the Small Business Lending Bill.

This is the bill that will increase the maximum size of SBA 7(a) and 504 loans from $2 million to $5 million. As amended by the Senate, this legislation would also provide a commensurate increase in the statutory maximum guaranteed portion of SBA 7(a) loans along with elimination of borrower fees on 7(a) and 504 loans through December 31, 2010.

Senators Lincoln and Kyl want to add their measure, phasing in a top rate of 35 percent, with a per-person exemption of $5 million, to the small business legislation. The House passed an estate tax bill that would set a top rate of 45 percent, with no tax being owed for an individual with an estate worth less than $3.5 million.

The issue could derail the Small Business Lending Bill because some Democrats say it would add substantially to the massive federal deficit, while benefiting a small number of multimillionaires. Congress goes on summer vacation on August 9 and won’t return until September 13.
SBA LIBOR Base Rate July 2010 = 3.35%
SBA Fixed Base Rate July 2010 = 5.88%

504 Debenture Rate for July
The debenture rate is 3.80% but note rate is 3.86% and effective yield is only 5.213%.

Global warming might actually be a good thing.

Last month was the eighth- warmest June in 116 years, according to the National Climatic Data Center. The corpulent masses needed their air conditioning and industrial production in the U.S. rose in June as higher temperatures across the nation led to increased utility use.

Utility output rose 2.7 percent, while production at manufacturers declined 0.4 percent. Overall output at factories, mines and utilities increased 0.1 percent last month after a 1.3 percent gain in May, figures from the Federal Reserve showed.

The Fed’s report showed U.S. capacity utilization, which measures the amount of a plant that is in use, held at 74.1 percent last month

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


2005- 80.7

2006- 82.4

2007- 81.5

2008- 79.9

2009- 69.9

2010- 73.2

What does all this mean?

Talk of the Federal Reserve raising rates is premature.

One of the Federal Reserve’s favorite gauges of inflationary pressure 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.

Without the boost from utilities, industrial production would have definitely slumped, the first time since August. The August capacity level of 69.9 was the lowest on records dating back to 1967.

While the capacity utilization rate is 5.9 percentage points above the rate from a year earlier it is still 6.5 percentage points below its average from 1972 to 2009.

We still have a long ways to go.


The debate over an estate tax is doing more than killing legislation on SBA loans.

It made the Yankees kill George Steinbrenner.

Think about it.

When the Senate allowed the estate tax to lapse at the end of last year, it encouraged wealthy people near death's door to stay alive until January 1 so they could spare their heirs a 45% tax hit. Now the estate tax will come roaring back in 2011. Not only will the top rate jump to 55%, but the exemption will shrink from $3.5 million per individual in 2009 to just $1 million in 2011, potentially affecting eight times as many taxpayers.

The math is ugly: On a $5 million estate, the tax consequence of dying a minute after midnight on Jan. 1, 2011 rather than two minutes earlier could be more than $2 million; on a $15 million estate, the difference could be about $8 million.

By dying last week, the billionaire and long-time New York Yankees owner's wealth avoids the federal estate tax, likely saving his heirs enough money to field an entire team of Alex Rodriguez.

Forbes magazine has estimated Steinbrenner's estate at $1.1 billion. The federal estate tax in 2009 was 45 percent, with the $3.5 million per-person exemption. If he had died last year, his estate could thus have faced federal taxes of almost $500 million, depending on how the estate was structured.

The Steinbrenners therefore are expected to avoid what happened to the family of Chicago Cubs owner P.K. Wrigley after he died in 1977. The family was forced to sell the Cubs to the Tribune Co. four years later to pay the taxes on Wrigley's estate.

This is not crazy people talk but actually Nobel Prize winning thinking.

In 2001 two economists won the prize in economics for their conclusions that people find a way to postpone their deaths if that would qualify them for a lower rate on the inheritance tax. I actually have a copy of that work "Dying to Save Taxes: Evidence from Estate Tax Returns on the Death Elasticity," National Bureau of Economic Research Working Paper No. W8158, March 2001.
Death elasticity.

Wednesday, July 14, 2010

SBA 7(a) Rate Update

SBA LIBOR Base Rate July 2010 = 3.35%
SBA Fixed Base Rate July 2010 = 5.88%________________________________________________
504 Debenture Rate for July
The debenture rate is 3.80% but note rate is 3.86% and effective yield is only 5.213%

Tuesday, July 13, 2010

SBA 7(a) Weekly Lending Update

As of July 9th, the SBA approved $10,722,357,000 in SBA 7(a) loans. That is an increase of only $87,619,000 over the prior week. While it was only a four day work week due to the Fourth of July holiday, approvals still only averaged $21,904,750 a day, the lowest since SBA started tracking this stuff.

Friday, July 9, 2010

The SBA and ending the recession one employee at a time

It will be small business that leads us out of the recession, but not anytime soon.

Intuit Inc., which provides payroll services for small employers, says the nation's tiniest companies had fewer new hires last month than any time since October.

To calculate its estimate of national hiring, Intuit uses payroll information from its 56,000 small-business customers. The company defines small businesses as those with fewer than 20 employees. Intuit's data show that small businesses hired just 18,000 additional workers last month. That's still positive territory, but it's less than a third of the 60,000 that were added in February, when it seemed that an employment recovery was imminent. Additional hiring dropped steadily during the spring, to 40,000 in April and 32,000 in May. Another payroll company, Automatic Data Processing Inc., painted an even gloomier picture, saying that small businesses lost 1,000 jobs nationwide in June.

While correlation is not causation, the drop in small business hiring coincidences with the expiration of the SBA loan Recovery ACT stimulus measures. SBA loan volume has declined to a snail's pace.

Thursday, July 8, 2010

SBA 7(a) Weekly Lending Update

As of July 2nd, $10,634,738,000 in SBA 7(a) loans were approved. That's $132,849,000 for the week. If annualized, that works out to just under $7 billion, well below historical borrowing volume.

Wednesday, July 7, 2010

SBA 7(a) Rate Update

SBA LIBOR Base Rate June 2010 = 3.35%
SBA Fixed Base Rate June 2010 = 6.24%________________________________________________
504 Debenture Rate for June
The debenture rate is 3.88% but note rate is 3.94% and effective yield is only 5.29%

Tuesday, July 6, 2010

The SBA and ending the recession ONE LOAN AT A TIME

We have closed another loan.

This time it was a $605,800 SBA 7(a) loan to an accountant that refinanced his real estate purchase money note and reimbursed him for tenant improvements and provided additional working capital.

In the last ten years we have closed $754,794,299 in SBA 7(a) and 504 1st trust deeds.