Banks and borrowers missing out on SBA loans

Banks and borrowers are missing out on SBA loans.

What's going on here?

Fewer SBA 7(a) loans are being approved this year than they were during the previous two years.


Through December 16th , the SBA approved $2.8 billion in government-guaranteed loans though its flagship 7(a) program this fiscal year, which began October 1st. During the same period a year ago, the SBA had approved $6 billion in 7(a) loans. Two years ago, the SBA had approved $3.1 billion.

The spike in volume was driven by stimulus act incentives such as the higher guarantee and guarantee fee waivers which has expired.

Even without the enhanced guarantee and guarantee fee waiver, SBA 7(a) loans still offer lenders a very profitable lending platform and borrowers long term, fully amortizing loans that can be used for real estate purchase, real estate debt refinance, business debt refinance, business acquisition, equipment purchase and working capital.

An early Christmas for SBA loans

Christmas came early for SBA loans as the $1 trillion omnibus spending bill was passed. 

Not only did this avert a government shutdown it also means both the 7(a) and 504 programs should receive sufficient funding for the balance of the fiscal year.

This omnibus-spending bill appropriates $918.7 million to the SBA for fiscal year 2012


This gives the 7(a) program $17.5 billion in commitments for this fiscal year.

504 debenture rate

504 Debenture Rate for December 


The debenture rate is 2.87% but note rate is 2.92% and effective yield is only 4.95%.

The SBA and divagate

divagate
DY-vuh-gayt
To wander or digress.
From Latin divagatus, past participle of divagari (to wander off), from dis- (away) + vagari (to wander).
_______________________________________________

TIP OF THE WEEK

Let’s divagate. The window is starting to close on opportunities in commercial estate.

According to Moody’s, things are picking up as September saw the third highest post-financial crisis level of repeat-sales.

The Moody’s/REAL Commercial Property Price Indices (CPPI) measure the change in actual transaction prices for commercial real estate assets based on the repeat-sales of the same assets at different points in time.

While pricing remains stagnant, September transaction volume was relatively high at 255 repeat-sales observations. The average monthly transaction count for 2011 is 192 compared with 144 for 2010 and 96 for 2009. Moody’s report for November also projects that within the next few years property prices should be just shy of where they were in August 2006.

Let me know if you would like a copy of the Moody’s/REAL Commercial Property Price Indices report for November.

SBA loans are especially well suited for commercial real estate purchase and refinance.
______________________________________

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate December 2011 = 3.27%
SBA Fixed Base Rate December 2011 = 5.09%
________________________________________
504 Debenture Rate for November
The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 4.94%.
For debt refinance with a 504 loan, the effective yield is 5.234%
________________________________________________

AHEAD OF THE YIELD CURVE

The Federal Open Market Committe meets on Tuesday and it is widely expected that they will continue to state that:

"The Committee ... currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013."

In the Federal Reserve's eyes, resource utilization is gauged by capacity utilization which measures how much plants and factories are being used.

Keep your eyes and ears open for Thursday's Federal Reserve report on Industrial Production and Capacity Utilization.

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- 67.3
2010- 74.8
2011- 76.7

What does all this mean?

I don't know.

Last month capacity utilization for total industry stepped up to 77.8 percent, a rate 2.1 percentage points above its level from a year earlier. This is up 10.5 percentage points from the record low set in June 2009. It is still however 2.6 percentage points below its long term average and the pre-recession levels of 81.3% in December 2007.

The day after the FOMC meeting the government plans to sell $13 billion of 30 year bonds. Last month’s sale of $16 billion of 30 year bonds drew a yield of 3.199 percent. Long term rates remain low thanks to Operation Twist. Last week the Federal Reserve purchased another $2.512 billion of Treasuries due from February 2036 to August 2041. The Fed plans to replace $400 billion of shorter maturities in its holdings with longer-term debt. The idea is that this will support the economy by keeping borrowing costs low.

The Federal Reserve will obviously be keeping both short term and long term rates low for quite awhile

__________________________________________

OFF BASE

It’s the most wonderful time of the year!

The commercial college football bowl season starts this weekend!

Commercial college football bowl season? Every college bowl game has a title sponsor.

It starts Saturday with the Gildan New Mexico Bowl.

Gildan makes Gold Toe Socks. Why the gold on the toe?

During the Great Depression it began manufacturing men's dress socks with a toe made from high quality Irish linen, which made the their product more resistant to holes and fraying than ordinary socks. A department store buyer informed company management that these durable socks were popular, but customers had difficulty distinguishing the product from its competitors. The manufacturer added gold acetate thread to the toes of its socks in order to make it visually distinctive on store shelves.

Speaking of socks, there was nothing more important to coach John Wooden than putting them on right. His first practice always began with a lesson on how to put your socks on right.

Hold up the sock and work it around the little toe area and the heel area so that there are no wrinkles. Smooth it out good. Then hold the sock up while you put the shoe on. You must not permit your socks to have wrinkles around the little toe--where you generally get blisters--or around the heels.

The SBA and corrigible

corrigible

(KOR-i-juh-buhl)
Capable of being corrected.
From Latin corrigere (to correct).
________________________________________________

TIP OF THE WEEK

SBA lending is definitely corrigible.

For 7(a) loans, the 90 percent guarantee and no guarantee fee are once again available. To qualify applicant must be involved in international trade and be located in an area adversely affected by NAFTA based upon job losses and unemployment rate.


A reimbursement of the 504 debenture fee is also available for those applicants located in areas adversely affected by NAFTA.
______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate November 2011 = 3.25%
SBA Fixed Base Rate November 2011 = 4.95%
________________________________________

504 Debenture Rate for November

The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 4.94%.

For debt refinance with a 504 loan, the effective yield is 5.234%
________________________________________________


AHEAD OF THE YIELD CURVE

Corrigible or incorrigible?

47 million people actually lost their jobs in the last twelve months.

That’s not a misprint. Job losses totaled 47 million people in the last twelve months. Fortunately 48.3 million people were also hired in the last twelve months. Doing the math, that means the economy created a net 1.3 million jobs.

Most people don’t understand how vast and complicated our economy is as it’s the net number that makes the headlines.

For example, September reflected “only” 158,000 new jobs. But in reality employers took on 4.25 million workers in September. Through the first ten months of 2011, the economy has added 1.256 million total non-farm jobs or just 125 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.47 million fewer payroll jobs than at the beginning of the 2007 recession.

Keep your eyes opened for Friday’s report on jobs.

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

October 80,000
September 158,000
August 104,000
July 127,000
June 20,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
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.

Don’t be misled by the headlines.

There were only 80,000 jobs added in October. 104,000 private sector jobs were added, and 24,000 government jobs lost. However the change in total employment was revised up for August and September. Gains in the prior two months were revised up by 102,000.

Must ado was made last week that the economy in the U.S. expanded less than previously estimated in the third quarter. Gross domestic product climbed at a 2 percent annual rate from July through September, down from a 2.5 percent prior estimate.


Inventories were a greater drag on the economy last quarter than first estimated. They were cut at an $8.5 billion annual rate, subtracting 1.6 percentage points from growth, compared with a 1.1 percent previous estimate. It was the first time stockpiles were trimmed since the last three months of 2009.

But that is actually good news! Fewer inventories put producers on track to ramp up output heading into the holiday season. Restocking should boost growth by another 0.8 percentage points in the fourth quarter

Be corrigible.
__________________________________________

OFF BASE

As if Black Friday wasn’t bad enough, today is Cyber Monday.

Millions of otherwise productive working Americans, fresh off a Thanksgiving weekend of window shopping, are returning to high-speed Internet connections at work Monday and buying what they liked. The term “Cyber Monday” was coined based on research showing that 78% of online retailers reported a significant increase in sales on the Monday after Thanksgiving in 2004. In 2006, online spending on Cyber Monday jumped 25% to $608 million, 21% to $733 million in 2007, and 15% to $846 million in 2008. In 2009, online spending increased 5 percent on Cyber Monday to $887 million and that more than half of dollars spent online at US Web sites originated from work computers (52.7 percent). Last year Cyber Monday topped the $1 billion mark.

The whole point of the season seems to have been missed.

In case you have not noticed, the days have been getting shorter and shorter. The sun will rise about a minute later tomorrow and set a minute earlier. In just 24 days, it will be the shortest day of the year, the winter solstice.

Centuries ago in some cultures, elaborate festivals were held on the winter solstice. 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.

Jesus probably was not even born on December 25th. The reality is that it would have simply been far too cold for shepherds to be out with their sheep at night in Israel. Don’t forget that Mary and Joseph came to Bethlehem to register in a Roman census. Such censuses were not taken in winter, when temperatures often dropped below freezing and roads were in poor condition. Taking a census under such conditions would have been self-defeating.

Only 27 days until Christmas.

SBA 7(a) Rate Update

Indices:


PRIME RATE= 3.25%

SBA LIBOR Base Rate November 2011 = 3.25%

SBA Fixed Base Rate November 2011 = 4.95%


Lenders charge up to 2.75% over these indices.

504 debenture rate

The November Effective Rate* for SBA 504 Loans is 4.94%

For Debt Refinance with a 504 loan it's 5.234%

*Effective rate includes SBA fee, central servicing agent fee, and a 5/8% CDC fee

The SBA and asperity

asperity


ah-SPER-i-tee

Harshness or roughness.

Via French from Latin asper (rough).
________________________________________________

TIP OF THE WEEK

Asperity in commercial real estate is easing, at least according to Moody’s.

The Moody’s/REAL Commercial Property Price Indices (CPPI) measure the change in actual transaction prices for commercial real estate assets based on the repeat sales of the same assets at different points in time. The National — All Property Type Aggregate Index (CPPI) recorded a 2.4% increase in August, bringing it to 15.3% above the post-peak low recorded in April 2011.

The share of distressed transactions included within this month’s CPPI was 21.7%, down 5.9% from last month and the lowest level since January 2010. Prices for distressed transactions were down by 3.5% from the last month and are 6.9% above their post peak low set in August 2010. The reduced share of distressed transactions helped drive this month’s overall price increase.

If you would like a copy of the Moody’s October 2011 report, let me know.

A SBA loan is well suited for commercial real estate purchase or refinance.

The refinance provisions with a 504 loan expire in less than a year.

_____________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2011 = 3.24%
SBA Fixed Base Rate October 2011 = 4.848%
________________________________________

504 Debenture Rate for October

The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 4.609%.

________________________________________________



AHEAD OF THE YIELD CURVE

In case you missed it, the economy has now recovered from the great recession.

According to the Department of Commerce, the value of goods and services produced in the U.S. last quarter surpassed its pre-recession level after 15 quarters, taking three times longer than the average for 10 previous recoveries since World War II.

Gross domestic product expanded at a 2.5 percent annual rate in the period from July through September, the fastest pace in a year and up from 1.3 percent in the prior three-month period. After adjusting for inflation, GDP climbed to $13.35 trillion last quarter, topping the $13.33 trillion peak reached in the last three months of 2007.

Left behind however are the ones who lost their jobs.

The number of Americans with jobs last month, 131.3 million, was lower than the 138 million workers in December 2007, when the 18-month recession began.

Only 80,000 jobs were created in October. Through the first ten months of 2011, the economy has added 1.256 million total non-farm jobs or just 125 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6 ½ million fewer payroll jobs than at the beginning of the 2007 recession. There are a total of 13.9 million Americans unemployed and 5.9 million have been unemployed for more than 6 months.

So what does the bond market think about all of this?

Keep your eyes on Thursday’s $16 billion auction of 30 year Treasury 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- 4.61


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.

Yields on 30 year bonds have fallen from this year’s high of 4.79 percent on February 9 down to about only 3.04 percent.

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 in about a year, and yield curve inversions have foreshadowed each of the last seven recessions. One of the recessions predicted by the yield curve was the most recent one. The yield curve inverted in August 2006, a bit more than a year before the current recession started in December 2007.

According to the Federal Reserve Bank of Cleveland, projecting forward using past values of the yield curve spread and GDP growth suggests that real GDP will grow at about a 0.8 percent rate over the next year

Asperity continues and interest rates will remain low.



__________________________________________



OFF BASE

The sun came up nice and early this morning.

That’s because Daylight Saving Time just ended.

The official spelling is Daylight Saving Time, not Daylight SavingS Time.

Saving is used here as a verbal adjective (a participle). It modifies time and tells us more about its nature; namely, that it is characterized by the activity of saving daylight. It is a saving daylight kind of time. Because of this, it would be more accurate to refer to DST as daylight-saving time. Saving is used in the same way as saving a ball game, rather than as a savings account.

So NO S for Daylight Saving Time and NO apostrophe for Veterans Day which is this Friday.

The holiday is commonly printed as Veteran's Day or Veterans' Day in calendars and advertisements. While these spellings are grammatically acceptable, the United States government has declared that the attributive (no apostrophe) rather than the possessive case is the official spelling.

Because it is a federal holiday, many American people have the day off from school or work for Veterans Day. Non-essential federal government offices are closed. Banks are closed and no mail is delivered. The holiday is often celebrated by having a ravioli meal. This tradition dates back to the ending days of World War I when President Woodrow Wilson, aware that the returning soldiers would be longing for home cooked meals, invited 2,000 soldiers to the White House and helped his staff chefs cook them ravioli, which had just become a mainstay in mainstream American kitchens due to commercial canning. In his Armistice Day address to Congress, Wilson was sensitive to the psychological toll of the lean War years. "Hunger," he remarked, "breeds madness."

The SBA and perspicaciousness

perspicaciousness

puhr-spi-KAY-shuhs-nes

Keenness of perception and discernment.

From Latin perspicere (to see through), from per- (through) + -spicere, combining form of specere (to look).

________________________________________________



TIP OF THE WEEK

Perspicacity is needed when trying to figure out SBA loans.

A thorough understanding of the SBA Standard Operating Procedure, which changed on October 1st, is also important.

Recent changes now allow SBA loans to refinance owner-user real estate debt including lender’s REO properties.

Other changes now make SBA loans the preferred choice of both lenders and borrowers.

______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2011 = 3.24%
SBA Fixed Base Rate October 2011 = 4.848%

_______________________________________

504 Debenture Rate for October

The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 5.067%.

________________________________________________

AHEAD OF THE YIELD CURVE

If you don’t think the economy is recovering, your perspicaciousness is lacking.

Just look at the capacity utilization rate. It has climbed 10.1 percentage points from the record low set in June 2009.

The capacity utilization rate, which measures how much plants and factories are being used, is one of the Federal Reserve’s favorite gauges of the economy.

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.

Last week it was reported that capacity utilization increased to 77.4 percent from 77.3 percent in August. The gauge compares with the average of 79.5 percent over the past 20 years.

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- 67.3
2010- 74.8
2011- 76.7

What does all this mean?

I don't know.

Capacity utilization at 77.4% is still 3.0 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in December 2007.

One implication is that there is very little inflationary pressure in the economy.

Keep your eyes on Thursday’s advance estimate of third quarter Gross Domestic Product. GDP represents the total value of the country's production and consists of the purchases of domestically-produced goods and services by individuals, businesses, foreigners and government entities. Gross domestic product is the country's most comprehensive economic scorecard.

When the report comes out, look at final sales -- GDP less the change in business inventories. When final sales are growing faster than inventories, this points to increases in production in months ahead. Conversely, when final sales are growing more slowly than inventories, they signal a slowdown in production.

Economic growth for the second quarter remained anemic. The Commerce Department's final estimate for second quarter GDP growth was 1.3 percent annualized, compared to first quarter growth of 0.4 percent.

Interest rates will continue to remain low.

__________________________________________

OFF BASE

The Cardinals are in the World Series.

Don’t say so what!

Keep in mind that when the Cardinals win the World Series, the stock market rises 13% the following year.

That`s more than any other team which has won the series at least four times.

In fact the Cardinals win in 1982 preceded the biggest bull market in decades. Since 1926, the Cardinals have won 10 World Series titles. In 9 of those occasions, the Dow posted a gain the following year, with an average return of 13 percent. It is the Dow’s best return for any Major League Baseball team with four or more titles. The best result was a 38.5 percent gain for the Dow in 1935, a year after the Gas House Gang* won the title. Most recently, the Dow hit a record high about a year after the Cardinals' 2006 win, but closed 2007 with a gain of just 6.4 percent.

The New York Yankees are the second-best-performing team for investors. Their 27 World Series titles have been followed by an average stock-market gain of 9.6 percent the following year.

The Texas Rangers have never won a World Series, but baseball has had eight first-time winners in the past 45 years. Following those Series, the most recent of which was the Angels' "rally monkey" title in 2002, the Dow has risen an average of 8.97 percent.

*The Cardinals nickname is the Gashouse Gang given to them by Leo Durocher. The phrase "gas house" referred to plants that produced town gas for lighting and cooking from coal, which were common fixtures in US cities prior to the widespread use of natural gas. The plants were noted for their foul smell and were typically located near railroad yards in the poorest neighborhood in the city.

Enough of this perspicaciousness.

504 debenture rate

504 Debenture Rate for October 


The debenture rate is 2.76% but note rate is 2.807% and effective yield is only 5.067%.
 
While debenture rate and note rates declined, effective yield is up due to an increase in fees.

The SBA and columbarium

columbarium

kol-uhm-BAR-ee-uhm
1. A vault with niches for storing urns.
2. A dovecote or pigeon house.
From Latin columbarium, from columba (pigeon, dove).

________________________________________________

TIP OF THE WEEK

A commercial columbarium or dovecote is used for pigeons in the production of squab. Squab has been commercially raised in North America since the early 1900s. Usually considered a delicacy, squab is tender, moist and richer in taste than many commonly-consumed poultry meats and is very lean, easily digestible, and rich in proteins, minerals, and vitamins. Squab grace the menus of American haute cuisine restaurants such as The French Laundry and has enjoyed endorsements from some celebrity chefs.

Unique properties such as a columbarium are eligible for SBA financial assistance for purchase, construction or debt refinance.
______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2011 = 3.24%
SBA Fixed Base Rate October 2011 = 4.848%
________________________________________

504 Debenture Rate for September

The debenture rate is 2.85% but note rate is 2.89% and effective yield is only 4.709%.
________________________________________________

AHEAD OF THE YIELD CURVE

It turns out the dog days of summer really didn’t go to the dogs.

Last month the Labor Department had reported that ZERO jobs were created in the month of August. Making matters worse, the government had also revised down job growth figures for July, to 85,000 from 117,000 and said employers added just 20,000 jobs in June, not 46,000.

September’s payroll numbers just came out and it now reports that the month of August payroll numbers have been revised up to 57,000. From ZERO to 57,000. July has been revised one more time to 127,000. These revisions to previous reports added a total of 99,000 jobs to payrolls in July and August.

September’s payrolls rose by 103,000.

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

September 103,000
August 57,000
July 127,000
June 20,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
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.

Thirty-year bond yields dropped 20 basis points on September 2nd, when the government reported zero job growth in August. Yields had increased 18 basis points on August 5th, when the payrolls report showed the job market had gained traction.

Keep your eyes on Thursday’s $13 billion auction of 30 year Treasury bonds.

Yields on 30-year bonds decreased 146 basis points in the third quarter, the most since falling 164 basis points in the last three months of December 2008. The biggest bond rally in three years has repudiated Standard & Poor’s downgrade of our government’s AAA credit rating. These rates should continue to remain low as the Federal Reserve just purchased $2.5 billion of longer-term debt through its Operation Twist.

Even as the yield curve flattens, it has not inverted. Projecting forward using past values of the yield curve spread and GDP growth, the Reserve Bank of Cleveland suggests that real GDP will grow at about a 0.8 percent rate over the next year. It is quite optimistic about the recovery continuing.
__________________________________________


OFF BASE

If you didn’t notice, yesterday banks were closed in observance of Columbus Day, which is tomorrow.

On October 12, 1492 Columbus landed in the New World. Celebrations of the event, most notably starting in 1869 by Italians in San Francisco, become official in 1937 when President Franklin Roosevelt proclaimed every October 12 as Columbus Day. That's where it remained until 1971 when Congress declared it a federal public holiday on the second Monday in October.

The amazing thing about Columbus and his voyage was how it was financed. Many people think the King and Queen of Spain, Ferdinand and Isabella, bankrolled it. Not quite. Ferdinand and Isabella made the city of Palos pay back a debt to the crown by providing Columbus with two of the ships. The balance came from some Italian investors Columbus had lined up. The crown had to put up very little money from the treasury.

SBA lending works pretty much the same way. Our treasury department puts up very little money as fees collected by the Small Business Administration ends up subsidizing the program. Factor in taxes paid by successful borrowers and this ends up being a net revenue generator for us all.

SBA 7(a) Rate Update

Indices:


PRIME RATE= 3.25%

SBA LIBOR Base Rate October 2011 = 3.24%

SBA Fixed Base Rate October 2011 = 4.84%

Lenders charge up to 2.75% over these indices.

SBA Announces Record Loan Approval Volume in FY 2011

From the SBA:
During the fiscal year, which ended Sept. 30, SBA loan approvals supported $30.5 billion (61,689 loans) in lending to small businesses and start-ups through its two largest loan programs, compared to $22.6 billion (60,771 loans) in FY 2010 and $17.9 billion (50,830 loans) in FY2009.


The FY2011 total is the highest volume fiscal year in the agency’s history, surpassing the $28.5 billion mark established in FY2007. The first quarter of the year, at over $12 billion supported, was the most active single quarter ever for SBA-backed loans, with more than four times the dollar volume of the same quarter in 2009 – the first three months of the recession – and more than double the volume of any quarter over the past four years.

The totals for FY2011 include 53,706 loans $19.63 billion under the agency’s largest loan program, the 7(a) General Business Loan program, and 7,983 loans for a total approval of $4.84 billion, supporting $10.34 billion in small business lending under the 504 Certified Development Company loan program. The “supported” amount for 504 loans includes the SBA share and third party loans that are made by commercial lenders as part of the funding package.


Those numbers compare with 7(a) totals for FY 2010 of 52,938 loans for $12.46 billion, and 504 program totals of 7,833 loans for a total supported dollar amount of $9.97 billion.

The SBA and vade mecum

vade mecum


VAY/VAH-dee MEE/MAY-kuhm

A book for ready reference, such as a manual or guidebook.

From Latin vade mecum (go with me), from vadere (to go) + me (me) + cum (with).
________________________________________________

TIP OF THE WEEK

The vade mecum for SBA loans is the SOP- Standard Operating Procedures.

SBA has once again re-written its SOP. These changes in the rules will be effective on October 1st.

One of the changes is that SBA lenders selling OREO are no longer limited to the liquidation value or their cost in the property.

Both SBA 504 and 7(a) loans offer high loan to value financing for owner-user real estate.
______________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate September 2011 = 3.22%
SBA Fixed Base Rate September 2011 = 4.99%
________________________________________

504 Debenture Rate for September

The debenture rate is 2.85% but note rate is 2.89% and effective yield is only 4.709%.
________________________________________________

AHEAD OF THE YIELD CURVE

The Federal Reserve doesn’t really have a vade mecum. Or does it?

With short term interest rates as low as they can go, the Federal Open Market Committee announced last week that it wanted to push down longer term rates by buying more longer term Treasuries.

The Fed would mimic a policy in 1961 known as “Operation Twist” for its goal of bending the yield curve.

While Fed staff called it Operation Nudge, it became known as Operation Twist, after Chubby Checker’s hit, The Twist.

The bond market began dancing almost immediately after the Fed announcement as the 30 year Treasury bond dropped 45 basis points last week, the most since the midst of the global financial crisis in December 2008.

The Fed also left unchanged its pledge to keep the benchmark interest rate near zero through at least mid-2013. The central bank has kept the target federal funds rate for overnight interbank loans in a range of zero to 0.25 percent since December 2008.

So what happens after 2013?

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:

DEC11- 0.55
DEC12- 0.53
DEC13- 0.79
DEC14- 1.50
DEC15- 2.17
DEC16- 2.64
DEC17- 2.94
DEC18- 3.10

What does all this mean?

I don’t know.

It would appear that interest rates will remain low for an extended period.
__________________________________________

OFF BASE

The vade mecum for anyone who likes baseball is www.baseball-reference.com

If you check it out, you will discover that only two players--Jose Bautista and Curtis Granderson--will hit 40 home runs this season. Three other players--Albert Pujols, Matt Kemp and Mark Teixeira--are close with a handful of games to play.

Way back when, it used to be impressive get 40 homers in a season. But then things got crazy and 40-home run hitters became commonplace.

Now, it's back to the future time. For the third time in the last four years, we're going to have only two guys break the 40-homer barrier.

Many people might think it’s because steroids are out of baseball.

It’s actually because Jose Lima died. In 2000, Lima gave up a National League record 48 home runs.

Now Cincinnati Reds pitcher Bronson Arroyo is challenging Lima Time.

Arroyo has served up 44 dingers this season.

Bronson’s 2.18 homers per nine innings is the second-highest mark ever among pitchers who qualified for the ERA title, according to Baseball Reference. Only the late Jose Lima (2.20 per nine in 2000) got taken deep more often.

Jose’s birthday by the way is this Friday, September 30th. He would have been 38 years old.

SBA 504 debenture rate

504 Debenture Rate for September

The debenture rate is 2.85% but note rate is 2.89% and effective yield is only 4.709%.

SBA 7(a) Rate Update

Indices:


PRIME RATE= 3.25%

SBA LIBOR Base Rate September 2011 = 3.22%

SBA Fixed Base Rate September 2011 = 4.99%

Lenders charge up to 2.75% over these indices.

The SBA and estival

estival


ES-ti-vuhl

Relating to or occurring in summer.

Via French from Latin aestivus (of or relating to summer).
________________________________________________
TIP OF THE WEEK

Summer is coming to an end and so is the government’s fiscal year.

The New Year looks good for SBA lending.

Total credit subsidy appropriations are proposed to go from $83 million in FY 2011 to $215 million in FY 2012. Of course, using the governments’ calculator the $215 million proposed for FY 2012 will be a DECREASE from the actual FY 2011 appropriation when considering the $505 million in Jobs Act money. As a result, funding is increasing while at the same time decreasing.

Our new SBA 7(a) loan servicing center is expanding.

We are now able to provide all SBA lender services (packaging, submission, documentation, closing, servicing, guaranty purchases and liquidation) at NO fixed cost to lenders.
______________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2011 = 3.19%
SBA Fixed Base Rate August 2011 = 5.41%
________________________________________
504 Debenture Rate for August
The debenture rate is 3.29% but note rate is 3.34% and effective yield is only 5.142%.
Note that the effective yield for debt refinance under the 504 program is slightly higher.
It is now 5.501%.
________________________________________________

AHEAD OF THE YIELD CURVE

So where is the economy going?

Keep your eye what happens when the government has to borrow more money this week. The U.S. will offer $32 billion of three-year notes, $21 billion of 10-year debt and $13 billion of 30-year bonds in three daily auctions beginning September 12th.

The economy has never contracted with the difference between 10- and 30-year Treasury yields as wide as the current 1.34 percentage points, or 134 basis points, since the so-called long bond was first issued in 1977. The gap, which is more than double the 49 basis-point average of the past 20 years, has ranged from negative 56 to positive 41.9 at the start of the last five recessions, beginning in January 1980.

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 in about a year, and yield curve inversions have foreshadowed each of the last seven recessions. One of the recessions predicted by the yield curve was the most recent one. The yield curve inverted in August 2006, a bit more than a year before the current recession started in December 2007.

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.

Yields on 30 year bonds have fallen from this year’s high of 4.79 percent on February 9 down to about 3.27 percent, which is a historical low.

As might be expected, the flatter slope has increase the probability of recession. Using the yield curve to predict whether or not the economy will be in recession in the future, the Federal Reserve Bank of Cleveland estimates that the expected chance of the economy being in a recession next August at 4.8 percent, up noticeably from June and July’s 1.7 percent, albeit still a fairly low number. While their approach is somewhat pessimistic as regards the level of growth over the next year, it is quite optimistic about the recovery continuing.

The Federal Reserve’s Federal Open Market Committee meets on September 20 and 21. The next day is the last day of summer.

___________________________________________

OFF BASE

Estival joy ends in just ten days on September 22nd.

The next day, the first day of autumn, has equal hours of sunlight and daylight. The sun rises exactly due east and sets exactly due west that day. The days will continue to get shorter and shorter every day until the first day of winter which is the shortest day of the year.

This year ends in 110 days.

As the events of September 11th remind us and as echoed in the Book of James 4:14 “Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes.”

The SBA and esurient

esurient

i-SOOR-ee-uhnt
Hungry; greedy.
From Latin esurire (to be hungry), from edere (to eat).
________________________________________________

TIP OF THE WEEK

Esurient buyers of commercial real estate will be disappointed if they think recessionary bargains still abound.

According to the Moody’s/Real Commercial Property Price Index, commercial real estate prices rose another 0.9 percent in June. This is the second month in a row that prices have gained. This index measures the change in actual transaction prices for commercial real estate based on the repeat-sales of the same assets at different points in time.

Most notably, prices of industrial buildings in the Western United States are only 5.5% below the peak which occurred in the fourth quarter of 2007. Industrial prices in the West have rebounded 29.5% since their post peak low in third quarter of 2009.

If you would like a copy of the Moody’s August 2011 special report on the Moody’s/Real Commercial Property Price Index, let me know.
_______________________________________
Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2011 = 3.19%
SBA Fixed Base Rate August 2011 = 5.41%
________________________________________

504 Debenture Rate for August
The debenture rate is 3.29% but note rate is 3.34% and effective yield is only 5.142%.
Note that the effective yield for debt refinance under the 504 program is slightly higher.
It is now 5.501%.
________________________________________________

AHEAD OF THE YIELD CURVE

Esurience in the jobs market?

The number of people continuing to receive jobless benefits dropped by 80,000 in the week ended August 13th to 3.64 million. This is the fewest since September 2008. This continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Extended benefits and emergency payments recipients total another 3.64 million. The number recently decreased by about 20,400.

Add those two numbers together and you get just OVER 7 million people receiving some form of jobless benefit. The economy still has just UNDER 7 million fewer payroll jobs than at the beginning of the 2007 recession.

On the Friday before the long weekend celebrating LABOR will be the payroll report from the Department of Labor.

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

July 117,000
June 46,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
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.

Payroll increases of around 125,000 a month are needed to keep the unemployment rate steady, while about 200,000 a month would bring it down a percentage point over a year. Through the first six months of 2011, the economy has added 757,000 total non-farm jobs or just 126,000 per month.

Interest rates will continue to remain low for an extended period.

___________________________________________

OFF BASE

Monday is Labor Day.

For many people, this marks the end of summer.

In high society, Labor Day is considered the last day of the year when it is fashionable to wear white. The post–Labor Day moratorium on white clothing and accessories has long ranked among etiquette hard-liners' most sacred rules.

So then if white is out, what color works?

Success has a color, and the color is red. In fact, a recent study confirms previous reports that athletes wearing red uniforms win competitions more often than opponents dressed in other colors.

When opponents of a game are equally matched, the team dressed in red is more likely to win.

British anthropologists Russell Hill and Robert Barton of the University of Durham reached that conclusion by studying the outcomes of one-on-one boxing, tae kwon do, Greco-Roman-wresting, and freestyle-wrestling matches at the 2004 Summer Olympics in Athens, Greece. In each event Olympic staff randomly assigned red or blue clothing or body protection to competitors. When otherwise equally matched with their opponent in fitness and skill, athletes wearing red were more likely to win the bout. In equally matched bouts, the preponderance of red wins was great enough that it could not be attributed to chance, the anthropologists say.

The advantage of red may be intuitively known, judging from the prevalence of red uniforms in sports.

In 2002 the Angels changed from their dark blue and periwinkle to their current red. They ended up winning the World Series that year.

In 2006, the Diamondbacks ditched the purple, teal and copper for Sedona red. The Diamondbacks are now four games up in the NL West with 28 games left.

So it is the change to red that is helping the Diamondbacks? Arizona has rallied behind its starting pitching- mainly Ian Kennedy. Kennedy has been on a roll, allowing no more than three runs in his previous nine starts while moving toward the top of the NL Cy Young favorites list. And now the Diamondback’s pitching is about to get better once Trevor Bauer is called up from the minor leagues. Trevor was the best pitcher in all of college baseball this year for UCLA. In just 15 innings of pitching for the minor league AA Baybears he has struck out 23 batters. At UCLA he had 460 career strikeouts. His career strikeout total ranks second on the Pac-10 list behind Tim Lincecum, who had 491 strikeouts for Washington from 2004-06.

Trevor’s UCLA Bruins team color is a baby blue. It does not strike fear into opponents like red does. It may just lull them to sleep. But if opponents are caught flatfooted this year, the UCLA Bruin football pistol offense just might work. Their first game is this Saturday against Houston.

Color probably doesn’t really matter. Usually the esurient team wins.

SBA 504 debenture rate

SBA 504 debenture rate for August

The debenture rate is 3.29%, the note rate is 3.34% and the effective yield is 5.142%.

Note that the effective yield for debt refinance under the 504 program is slightly higher. It is now 5.501%.

The SBA and vatic

vatic


VAT-ik

Of or related to a prophet or a prophecy: prophetic.

From Latin vates (prophet)
________________________________________________

TIP OF THE WEEK

A vatic Federal Reserve pledged for the first time to keep its benchmark interest rate at a record low at least through mid-2013.

That means the rates on SBA loans provide borrowers with opportunities that can’t be ignored.
_______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate August 2011 = 3.19%
SBA Fixed Base Rate August 2011 = 5.41%
________________________________________

504 Debenture Rate for July

The debenture rate is 3.74% but note rate is 3.79% and effective yield is only 5.59%.

Note that the effective yield for debt refinance under the 504 program is slightly higher.

It is now 5.947%.
________________________________________________



AHEAD OF THE YIELD CURVE

2/3’s of a billion dollars was cut from the deficit last week.

Our government sold $72 billion of notes and bonds last week at extraordinarily low yields. It will save taxpayers $647 million in interest payments during the life of the securities.

The auction produced a yield of 3.750 percent on the 30 year Treasury bond. Yields on 30 year bonds have fallen from this year’s high of 4.79 percent on February 9. The record low yield for a 30-year bond auction is 3.54 percent, reached in February 2009.

Last week’s auction results show investors are thumbing their noses at Standard & Poor’s decision to lower its assessment of the U.S.’s creditworthiness to AA+, and are instead scooping up the debt on signs the economy and inflation are slowing and the near-zero chance the government will default.

The Federal Reserve boosted debt markets last week when it pledged to keep its target rate for overnight loans between banks at a record low of zero to 0.25 percent at least through mid-2013.

Isn’t the Federal Reserve worried that it might have to raise rates sooner if inflation starts to rear its ugly head?

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.

Keep your eye on Tuesday's release from the Federal Reserve on Industrial Production and Capacity Utilization.

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
2011- 76.7

What does all this mean?

I don't know.

Last month, the rate of capacity utilization for total industry stagnated at 76.7 percent.

Capacity utilization at 76.7% is still far below normal - and well below 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

Sixty years ago today, August 15th, 1951 Giants rookie center fielder Willie Mays makes a running catch of a drive to deep right centerfield and whirls counterclockwise to throw out the astonished runner from third base at home. The Giants then come up to bat and Dodgers pitcher Ralph Branca gives up a two run homer. The Giants go on to win 3-1.

The game proved to be vatic.

Less than two months later, Ralph Branca would give up another home run to lose a game. In one relief outing on October 3, 1951, he gave up a home run to Bobby Thomson of the New York Giants to cost his team the pennant and allow the Giants to go on to the World Series. The "Shot Heard 'Round the World" completed a monumental collapse by the Dodgers who were leading the league by 13 1/2 games on August 11th.

Three years later, in the 1954 World Series, Willie Mays would make the “Catch”, a sensational running catch snaring a long drive near the outfield wall with his back to the infield.

The ball traveled about 420 feet, which in most stadiums would've been either over the wall or off the wall for extra bases. However the cavernous Polo Grounds, with its rectangular shape, allowed Mays to make a flat-out on-the-run facing-the-bleachers catch to make the out. After catching the ball, he immediately spun and threw the ball with a mighty heave to the infield. The runners on second and first couldn’t score. The play prevented the Indians from taking the lead.

In the stands, sat Yogi Berra. He was asked if he thought the Giants would win. He replied, "It's tough to make predictions, especially about the future."

Deja Vu All Over Again

Senate Republicans have introduced a bill that could eliminate all federal programs to assist small businesses, as well as women-owned, veteran-owned and minority-owned firms. Senator Richard Burr (R-NC) introduced S. 1116, titled the "Department of Commerce and the Workforce Consolidation Act," which would combine the Small Business Administration (SBA) with the Department of Labor and the Department of Commerce, a move that could devastate U.S. job creation.

Republicans have attempted to abolish the SBA for nearly three decades. President Ronald Reagan tried to shut the agency down back when I first got started doing SBA loans.

Once people realize that the SBA 7(a) program not only drives job creation but is also a net revenue generator for the government, support for the program should keep it alive.  If you factor in the cost of the program, both its administration as well the actual guarantees, against the guarantee fees collected and net tax revenues generated, this program pays for itself.  Call it supply side spending.

SBA 7(a) Weekly Lending Update

According to SBA, another $332,045,000 in SBA 7(a) loans funded last week.  That brings the gross loan totals to $16,774,472,000.   The SBA has only authorized $17,500,000,000 in SBA 7(a) loans for its fiscal year which does not end until September 30th.

Once you factor in however loan cancellations and loans that are approved but never fund, we are only at about $15 billion through July.   SBA is currently funding about $300 million in loans per week.  Calculated another way, SBA has funded 86% of its authority, with 83% of the fiscal year remaining. 

With nine weeks left in the fiscal year and assuming no surge in loan applications, SBA 7(a) lending should not be interrupted except for many just a few days.

SBA 7(a) Rate Update

Indices:


PRIME RATE= 3.25%

SBA LIBOR Base Rate August 2011 = 3.19%

SBA Fixed Base Rate August 2011 = 5.41%

Lenders can charge up to 2.75% over these indices

The SBA and Gordian

Gordian

(GOR-dee-uhn)

Highly intricate; extremely difficult to solve.

In Greek mythology, King Gordius of Phrygia tied a knot that defied all who tried to untie it. An oracle prophesied that one who would undo this Gordian knot would rule Asia. Alexander the Great simply cut the knot with one stroke of his sword. Hence the saying, "to cut the Gordian knot", meaning to solve a difficult problem by a simple, bold, and effective action.

________________________________________________



TIP OF THE WEEK

Many people think that there is no Gordian complexity to commercial real estate. The recovery in commercial estate will happen once jobs start coming back.

It’s not so simple. The July 20, 2011 The Moody’s/REAL Commercial Property Price Index (CPPI) measured a 6.3% increase in May, the first positive move in six months and the largest one-month increase since the inception of the index. This index measures the change in actual transaction prices for commercial real estate assets based on the repeat-sales of the same assets at different points in time.


Distressed transactions registered a price increase of 4.8%. Accounting for 27.0% of repeat sales, they switched this month from being a drag to a contributor to a price recovery.


Let me know if you would like a copy of the July Moody’s/Real Commercial Property Price Index report.

SBA 7(a) and 504 loans are available for buyers not wanting to miss out on opportunities in commercial real estate.

_______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate July 2011 = 3.19%
SBA Fixed Base Rate July 2011 = 5.66%

________________________________________


504 Debenture Rate for July

The debenture rate is 3.74% but note rate is 3.79% and effective yield is only 5.59%.

Note that the effective yield for debt refinance under the 504 program is slightly higher.
It is now 5.947%.

________________________________________________



AHEAD OF THE YIELD CURVE



The Federal Reserve meets next week on monetary policy. The decision on what the Federal Open Market Committee does with interest rates comes on the heels of another report on jobs for the month of July.

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

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


June 18,000
May 25,000
April 232,000
March 194,000
February 235,000
January 68,000
2010
December 121,000
November 93,000
October 210,000
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.

Job growth has obviously stalled in the second quarter.

Through the first six months of 2011, the economy has added 757,000 total non-farm jobs or just 126,000 per month. There have been 945,000 private sector jobs added, or about 158,000 per month. This barely keeps up with population growth. While this is a better pace of payroll job creation than last year, the economy still has 6.98 million fewer payroll jobs than at the beginning of the 2007 recession.


The Federal Reserve will have no choice but to keep hacking at the Gordian knot by keeping interest rates low for an extended period.

___________________________________________



OFF BASE


I am not a Constitutional scholar but here’s something interesting.



Section 4 of the 14th Amendment reads: "The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."



The Supreme Court has on only one occasion -- in the depths of the Depression -- had the opportunity to rule on this section. In that case, Perry v. United States, the Court said, "The Constitution gives to the Congress the power to borrow money on the credit of the United States ... Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations."



Now that Congress has borrowed money and incurred debt, we cannot -- as a nation and under our Constitution -- walk away.

It sounds like the whole debt ceiling debate, like most political debates, was a bunch of hot air and idle banter. The President could have pulled his sword out and cut that Gordian knot awhile ago.



More importantly, the Detroit Tigers went out and got some more pitching by trading for Doug Fister. Fister was the Mariners number three starter. Up to his last start before being dealt to the Detroit Tigers, Fister pitched to a 3–12 record with only a 3.33 ERA. Don’t be deceived by his win-loss record. He has the lowest run support in major-league baseball. And it’s not even close. Fister’s run support is 1.97 per nine innings. Next closest is San Diego’s Dustin Moseley at 2.55. He also has great control. Fister is tied for seventh among all American League pitchers with 2.0 walks per nine innings.

SBA 7(a) Weekly Lending Update

As the dog days of summer approach, SBA 7(a) loan approvals slowed to $288,595,000 for the week ending July 22nd.  Year to date total is now $16,442,427,000.

SBA 7(a) Weekly Lending Update

SBA 7(a) loan volume remains fairly robust as $306,612,000 in SBA 7(a) loans were approved for the week ending July 15th.  That brings the year to date total to $16,153,832,000. 

Two years ago only $6,431,361,000 in SBA 7(a) loans had been approved through the same period.  

Loan demand jumped since then thanks to legislative enhancements that have since expired.   Current loan demand is driven by both borrowers and lenders realizing that the 7(a) program is one of the most viable options out there.

The SBA and laodicean

laodicean

(lay-ah-duh-SEE-uhn)

Lukewarm or indifferent

After Laodicea, a city in Asia Minor, whose Christians were rebuked for their indifference to religion in Revelation 3:16 in the New Testament.
_____________________________________________________


TIP OF THE WEEK

Borrowers and lenders are not being laodicean about the SBA 7(a) loan program. Loan volume has more than doubled, almost tripled from three years ago. Over $15,847,220,000 in SBA 7(a) loans have already been approved out of an authorized total of $17,500,000,000 for SBA’s fiscal year which doesn’t end until September 30th.

SBA 7(a) loan proceeds can be used for real estate purchase, real estate debt refinance, working capital, business debt refinance, equipment purchase, and business acquisitions.

_______________________________________

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate July 2011 = 3.19%
SBA Fixed Base Rate July 2011 = 5.66%
________________________________________________

504 Debenture Rate for July

The debenture rate is 3.74% but note rate is 3.79% and effective yield is only 5.59%.

Note that the effective yield for debt refinance under the 504 program is slightly higher.

It is now 5.947%.
________________________________________________

AHEAD OF THE YIELD CURVE

Is the bond market being laodicean about the debt ceiling?

Last week, the government’s $13 billion sale of 30 year bonds attracted higher-than average-demand. Investors downplayed concerns that the country faces the unprecedented situation in 15 days of the government not having enough money to pay all its bills. The government has said it has until August 2nd before its ability to make payment on $14.3 trillion of debt expires.

Demand for bonds is measured by two things: the bid to cover ratio and its yield.

The bid-to-cover ratio on the $13 billion in bonds, which gauges demand by comparing total bids with the amount offered, was 2.80, versus a 2.64 average at the past 10 sales.

The 30 year bond yielded 4.198 percent at the auction. Last month the yield at auction was 4.238 percent. It was up to 4.79 percent back in February. This morning it’s up to 4.25 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 does all this mean?

I don’t know.

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 in about a year, and yield curve inversions have foreshadowed each of the last seven recessions. One of the recessions predicted by the yield curve was the most recent one. The yield curve inverted in August 2006, a bit more than a year before the current recession started in December 2007.

Over the past month, the yield curve became flatter, as longer term rates have dropped. .

So while the yield curve has become flatter, it has not inverted.

The bond market is obviously discounting concerns about the debt ceiling debate.

The bond market is saying based upon past values of the yield curve spread and GDP growth that the economy will continue to grow albeit at a lackluster, laodicean pace.

The Federal Reserve Open Market Committee does not meet again until August 9th.

Interest rates will continue to remain low for an extended period.
_____________________________________________

OFF BASE

Perhaps most laodicean of all was Nero.

On this day in history in AD 64, Nero supposedly played the fiddle (violin) while Rome burned.

There is a major flaw with this story. There was no such instrument as the fiddle (violin) in first century Rome. There's no definitive date for the invention of the violin, or of its synonym as fiddle, but it certainly wasn't until at least the 16th century.

The point is however we should NOT To occupy ourselves with unimportant matters and neglect priorities during a crisis.

So sign that on-line petition to try and get Fox Sports to bring back Vin Scully for one last World Series.

Vin has not announced a World Series game on television since 1988 when the Dodgers last went to the fall classic.

Go here if you’d like to have Vin Scully announce the World Series one last time:

http://www.petitiononline.com/ScullyWS/petition.html

504 debenture rate

SBA 504 debenture rate for July

The debenture rate is 3.74%, the note rate is 3.79% and the effective yield is 5.59%.

Note that the effective yield for debt refinance under the 504 program is slightly higher.  It is now 5.947%.

SBA 7(a) Weekly Lending Update

SBA 7(a) loan approvals enjoyed the Fourth of July holiday along with everyone else as loan approvals for the short week totaled only $200,373,000.  That's down from $353,642,000 from the week before.

So far $15,847,220,000 in SBA 7(a) loans have been approved.  This is a dramatic increase over the last two years and is a testament as to the SBA 7(a) loan program being a viable source of financing for small businesses.

SBA 7(a) Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate July 2011 = 3.19%
SBA Fixed Base Rate July 2011 = 5.66%

Lenders can charge up to 2.75% over these indices

SBA 7(a) Weekly Lending Update

SBA loan approvals jumped up last week to $329,597,000.

That brings the year to date total to $15,293,205,000. 

There are 14 weeks left in the government's fiscal year and the authorized limit for the 7(a) program is $17,500,000,000.

The SBA and contumacious

contumacious

(KON-tuh-may-shuhs)

Stubborn, insubordinate.

From Latin contumacia, from contumax, contumac- (insolent).
_____________________________________________________

TIP OF THE WEEK

The contumacious recovery in the economy prompted the Federal Reserve last week to reiterate that interest rates will remain low for an “extended period.”

SBA 7(a) loans for real estate purchase, real estate debt refinance, business debt refinance, business acquisition, equipment purchase and working capital provide attractive rates that will persist for some time.

The 504 debenture rate is also attractive for real estate purchase and real estate debt refinance.

For every $1,000,000 dollars borrowed to purchase or refinance real estate, the monthly payment is around $6,000.
_______________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2011 = 3.19%
SBA Fixed Base Rate June 2011 = 5.73%
________________________________________________
504 Debenture Rate for June
The debenture rate is 3.675% but note rate is 3.729% and effective yield is only 5.521%.
________________________________________________

AHEAD OF THE YIELD CURVE

The Federal Reserve Open Market Committee met last week for two days.

When they were done meeting they said that “economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate for an extended period.”

So how long is an extended period? The Fed has kept its target rate locked at zero to 0.25 percent since December 2008.

The futures market gives us a hint that an extended period looks to be a few more years.

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:

DEC11- 0.52
DEC12- 0.91
DEC13- 1.73
DEC14- 2.71
DEC15- 3.59
DEC16- 4.23
DEC17- 4.61
DEC18- 4.77

What does all this mean?

I don’t know.

It would appear that the savings from lower variable rates of interest should persist.
_____________________________________________

OFF BASE

The contumacious owner of the Los Angeles Dodgers forced the team into bankruptcy this morning.

Their only real asset is announcer Vin Scully, who has been painting pictures with his words since 1950 when he joined the Dodgers.

Unfortunately Vin has not announced a World Series game on television since 1988 when the Dodgers last went to the fall classic.

There is now an on-line petition to try and get Fox Sports to bring back Vin Scully for one last World Series.

Go here if you’d like to have Vin Scully announce the World Series one last time:
http://www.petitiononline.com/ScullyWS/petition.html

SBA 7(a) Weekly Lending Update

$265,643,000 in SBA 7(a) loans were approved last week.

That brings the year to date total to $14,963,608,000. 

SBA 7(a) loans can be used for real estate purchase or refinance, business debt refinance, equipment purchase, business acquisitions and working capital.

504 debt refinance

SBA just released a further set of enhancements to the regulations governing the Temporary 504 Refinance Program. 
In short, the further enhancements allow:
- Submission of an application subject to an appraisal
- A clarification on the handling of multiple note refinancings

Anyone who owns their own building and has a balloon coming due should seriously consider a refinance with a 504 loan.

504 debenture rate

SBA 504 debenture rate for June


The debenture rate is 3.675%, the note rate is 3.729% and the effective yield is 5.521%.

SBA 7(a) Weekly Lending Update

SBA 7(a) loan approvals jumped up last week to $290,785,000.

That brings the year to date total to $14,697,965,000.

More and more borrowers and lenders are turning to the SBA 7(a) loan program to refinance debt, fund working capital, buy equipment, acquire businesses and buy real estate.

The SBA and epiphenomenon

epiphenomenon

(ep-i-fuh-NOM-uh-non, nuhn)

A secondary phenomenon, one resulting from another. 2. An additional symptom appearing during the course of an illness, but not necessarily related to it.

From Greek epi- (upon, after, over) + phainomenon (that which appears), from phainesthai (to appear).
_____________________________________________________

TIP OF THE WEEK

Tantalizingly low interest rates are one epiphenomenon of this economy. And it looks like rates will remain low for quite a while.

For every $1,000,000 dollars borrowed to purchase or refinance real estate, the monthly payment is around $6,000.
_______________________________________

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2011 = 3.19%
SBA Fixed Base Rate June 2011 = 5.73%
________________________________________________
504 Debenture Rate for May

The debenture rate is 3.79% but note rate is 3.85% and effective yield is only 5.639%.
________________________________________________

AHEAD OF THE YIELD CURVE
So are we headed for a double dip recession?

The economy has visibly slowed as only 54,000 jobs were created last month compared to 232,000 in April.

The yield curve is telling us no. We are not headed for a double dip recession.

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 in about a year, and yield curve inversions have foreshadowed each of the last seven recessions. One of the recessions predicted by the yield curve was the most recent one. The yield curve inverted in August 2006, a bit more than a year before the current recession started in December 2007.

Over the past month, the yield curve became flatter, as longer term rates have dropped.

Last week’s $13 billion auction of 30 year Treasury bonds drew a yield of 4.238 percent. It was up to 4.79 percent at the February auction.

So while the yield curve has become flatter, it has not inverted.
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 are due to meet in Washington on June 21-22. Futures contracts showed the likelihood of an increase in the Fed funds target by the March 2012 meeting fell to 21 percent. The Fed’s target rate for overnight lending between banks has stayed at zero to 0.25 percent since December 2008.

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.

Last month capacity utilization, which measures the amount of a factories and plants in use, fell to 76.9 percent last month from 77 percent in March. The capacity utilization rate had been steadily climbing since reaching a historic low in August of 2009 of only 68.2%. 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.

The Ceridian-UCLA Pulse of Commerce Index tends to lead industrial production which in turn dictates capacity utilization rates. This index is based on real-time diesel fuel consumption data for over the road trucking and serves as an indicator of the state and possible future direction of the U.S. economy. By tracking the volume and location of fuel being purchased, the index closely monitors the over the road movement of raw materials, goods-in-process and finished goods to U.S. factories, retailers and consumers. The Ceridian-UCLA Pulse of Commerce Index™ (PCI), issued last week by the UCLA Anderson School of Management and Ceridian Corporation fell 0.9 percent on a seasonally and workday adjusted basis in May, after falling 0.5 percent in April.

It looks like interest rates should remain low for, as the Federal Reserve likes to say, an “extended period.”

_____________________________________________

OFF BASE

Today marks the last day Babe Ruth ever wore a Yankees uniform. In 1948 an ailing Babe Ruth made his final appearance at Yankee Stadium. With the crowd of 49,641 singing Auld Lang Syne, and members of the 1923 Yankees team (the first to play in the stadium) looking on, the New York Yankees retired Ruth's uniform number 3 during ceremonies that also commemorate the 25th anniversary of the Stadium. Fewer than two months later, the 53-year-old Ruth would die from throat cancer.

Tonight Reno Aces pitcher Armando Galarraga faces the Tucson Padres. The last time Armando pitched for the Aces he gave up 10 runs in only four innings. 5 of those runs came on two homers. It certainly has been an interesting year for the former Detroit Tigers pitcher. It was almost exactly a year ago that he pitched the near perfect game while on the Tigers. A wrong call made by the umpire in the top of the ninth with two outs gave him the imperfect game instead.

The Sky Isn't Falling After All

Here is some good news to counter all recent gloomy economic news.

When reporting SBA 7(a) loan volume, the SBA gives us GROSS loan approvals, before cancellations. Taking into account cancellations, net approvals are only about $13.3 billion, and at the current pace SBA should not run out of loan authority for the 7(a) program.

SBA 7(a) Weekly Lending Update

Will the SBA 7(a) program run out of money before its fiscal year ends on September 30th?

So far SBA has approved $14,407,180,000 in SBA 7(a) loans.  That leaves only $3,092,820,000 left for the next 16 weeks. 

In the last two weeks, SBA has approved $462,855,000 in SBA 7(a) loans.   

7(a) Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2011 = 3.19%
SBA Fixed Base Rate May 2011 = 5.73%

Lenders can charge up to 2.75% over these indices

The SBA and obdurate

obdurate
(OB-doo-rit)
1. Stubborn: not easily moved.
2. Hard-hearted: resistant to emotions.
From Latin obdurare (to harden), from durus (hard).
_______________________________________

TIP OF THE WEEK

Don't go thinking the recovery in commercial real estate is being obdurate.

Last week the Moody’s/REAL Commercial Property Price Index dropped 4.2 percent from February and is now 47 percent below the peak of October 2007. The national index has fallen for four straight months as sales of distressed properties hurt real estate values.

The national index however hides what’s happening in some markets. According to Moody’s the property type with the largest increase in prices in the West was industrial, where prices rose 4.7% in the past quarter. Western industrial prices are only 7.3% below the peak which occurred in the fourth quarter of 2007.

Many industrial properties are owner-user making them perfect candidates for SBA financing.

_______________________________________

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate May 2011 = 3.21%
SBA Fixed Base Rate May 2011 = 5.96%
________________________________________________
504 Debenture Rate for May
The debenture rate is 3.79% but note rate is 3.85% and effective yield is only 5.639%.
________________________________________________

AHEAD OF THE YIELD CURVE

Job creation is the obdurate obstacle to economic recovery.

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

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

April 244,000
March 221,000
February 235,000
January 68,000

2010
December 121,000
November 93,000
October 210,000
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.

So far the economy has added 854,000 private sector jobs this year, or 213,500 per month.

This is a much better pace of payroll job creation than last year, but the economy still has 6.955 million fewer payroll jobs than at the beginning of the 2007 recession. At this pace, it will take 3 years just to get back to the pre-recession level, or sometime in 2014!

That means interest rates, especially variable rates, will remain low for awhile.

______________________________________________



OFF BASE



Many people think today marks the beginning of summer but we’ve actually got 22 more days until the first day of summer.

For many baseball teams however, their summer is already over.

The average correlation between a team's win percentage on June 1 and its final winning percentage is 0.76. How high is a 0.76 correlation? Statisticians consider 0.7 a "significant" correlation and 0.8 a "strong" one. These are on a scale where 1.0 represents a direct statistical relationship and 0 represents no relation at all.

Right now, Armando Galarraga’s Diamondbacks are in first place. When Armando last pitched for the Diamondbacks, they were in last place. Against the Padres he only lasted five innings while allowing eight runs. The Diamondbacks then sent him down to the minor leagues and they have since won 14 out of their last 16 games. Sunday Armando made his pitching debut for the Reno Aces and allowed six hits and five walks in five innings. The only run he allowed was of course a home run.

SBA 7(a) Weekly Lending Update

SBA 7(a) loans approvals bumped up to $270,991,000 for the week ending May 20th.  That brings the year to date total to $13,944,325,000.

There are 18 weeks left in the SBA's fiscal year and only $3,555,675,000 remaining for the SBA 7(a) program.  That less than $200 million per week.

SBA Turn Around Time

For those of you who think you should only work with a PLP lender, you are mistaken.  We recently assisted a lender in submitting a deal to SBA through the Guaranty Loan Processing Center and obtained our approval in less than a week. 

For start to finish it was actually four days.

The SBA and self-storage

SBA loans are well suited for self-storage facilities.

According to the Self Storage Association, there are 2.21 billion square feet of self-storage in this country. That means there are more than 7 square feet of storage per U.S. resident.


You might want to check out this article from Inc. magazine:

http://www.inc.com/best-industries-2010/self-storage-and-mini-storage-leasing-industry.html

SBA 7(a) Weekly Lending Update

Another $250,053,000 in SBA 7(a) loans were approved for the week ending May 13th.  That brings the year to date total to $13,673,334,000.  $17,500,000,000 has been appropriated for the fiscal year which ends September 30th.  That 19 weeks away which means the 7(a) program could run out of money before the year ends.

The SBA and macerate

macerate
(MAS-uh-rayt)
1. To soften by soaking or steeping in a liquid.
2. To separate into parts by soaking.
3. To weaken or to become thin; to emaciate.
From Latin macerare (to make soft, weaken).
_____________________________________________________

TIP OF THE WEEK

Community banking has been macerated. Economic and market shifts have also macerated commercial real estate. The boom of the last decade is gone.

Un-macerated are SBA loans.

The May issue of the CB Journal takes a look at community banking, real estate, and how SBA loans have changed in a big way.

For a copy of this month’s issue, go here: http://cb-resource.com/CBJournal/04CBJournal_May11.pdf
_______________________________________

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate May 2011 = 3.21%
SBA Fixed Base Rate May 2011 = 5.96%
________________________________________________

504 Debenture Rate for May

The debenture rate is 3.79% but note rate is 3.85% and effective yield is only 5.639%.
________________________________________________

AHEAD OF THE YIELD CURVE

The government had to borrow another $72 billion last week to keep paying for all the wonderful things they are doing to us.

Included in all that borrowing was $16 billion in 30 year bonds that sold at a yield of 4.35 percent. The yield touched 4.25 percent on May 5, the lowest level since December 7, after rising to 4.79 percent on Feb. 9. Last month’s auction drew a yield of 4.531 percent.

This dip in the yield curve coincides with a dip in the Ceridian-UCLA Pulse of Commerce Index. This index is based on real-time diesel fuel consumption data for over the road trucking and serves as an indicator of the state and possible future direction of the U.S. economy. By tracking the volume and location of fuel being purchased, the index closely monitors the over the road movement of raw materials, goods-in-process and finished goods to U.S. factories, retailers and consumers. It fell 0.5 percent in April.

The Ceridian-UCLA Pulse of Commerce Index tends to lead industrial production which in turn dictates capacity utilization rates.

The capacity utilization rate, which measures how much plants and factories are being used, has been steadily climbing since reaching a historic low in August of 2009 of only 68.2%.

Keep your eye on Tuesday's release from the Federal Reserve on Industrial Production and Capacity Utilization.

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
2011- 77.4

What does all this mean?

I don't know.

Last month, the rate of capacity utilization for total industry rose 0.5 percentage point to 77.4 percent, a rate 3.0 percentage points below its average from 1972 to 2010. In December it was at 76.3 percent.

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 77.4% is still far below normal - and well below 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

In case you haven’t heard, the world is supposed to end this Saturday.

May 21st is being heralded as Judgment Day--the time when the earth will be destroyed due to mankind's sins. The guy making this prediction had previously said that the world would end on September 6, 1994. The world did not end on that day evidently due to a mathematical error.

May 21st is also the birthday of Monty Stratton. He would have been 99 years old. Stratton pitched for the Chicago White Sox in late 1930’s and was recognized as one of the top pitchers in the American League. However, a freak hunting accident caused Monty’s right leg to be amputated. Throughout the early- and mid-1940s, Stratton attempted to come back from his injury, pitching in the minors while hopping around on a crude wooden leg. His return to baseball encountered difficulties because other teams persistently bunted balls out of his reach, but Stratton finally was able to make a successful comeback, winning 18 games with the Class-C Sherman Twins of the East Texas League. His comeback attempt was the subject of the 1949 film The Stratton Story which starred Jimmy Stewart.

Pitching on two perfectly good legs still is Arizona Diamondback Armando Galarraga. Armando gave up another home run last Wednesday against the Giants and now has allowed 12 home runs over only 37 2/3 innings. At this rate Armando has an excellent shot of setting a new record for home runs allowed by a pitcher in a single season. He pitches again tonight against the Padres.

SBA 7(a) Weekly Lending Update

SBA loan activity jumped up a little bit.  Another $260,154,000 in SBA 7(a) loans were approved for the week ending May 6th.  

That leaves only $4,076,719,000 left in the program until the fiscal year ends on September 30th.  That's 20 weeks away meaning loan approvals would have to average $203,836,000 per week to last. 

SBA 7(a) Rate Update

Indices:


PRIME RATE= 3.25%

SBA LIBOR Base Rate May 2011 = 3.21%

SBA Fixed Base Rate May 2011 = 5.96%

Lenders can charge up to 2.75% over these indices

SBA 7(a) Weekly Lending Update

Is the SBA 7(a) loan program going to run out of money?

Another $234,146,000 in SBA 7(a) loans were approved during the week ending April 29th.  That brings the year to date total to $13,163,127,000.   A total of $17,500,000,000 in SBA 7(a) loans are authorized for the fiscal year which ends September 30th.  

That leaves us with $4,336,873,000 remaining.  With 21 weeks left in the fiscal year loan approvals need to average $206,517,760 per week or the SBA runs out of money.

The SBA and sisyphean

Sisyphean

(sis-ee-FEE-uhn)

Endlessly laborious and fruitless.

Sisyphus, a king in Greek mythology was cursed to push a huge boulder to the top of a hill, only to watch it roll back down and to repeat this forever.
____________________________________________

TIP OF THE WEEK

The sisyphean struggle with commercial real estate presents opportunities for both buyers and lenders.

Moody's reported last week that the Moody’s/REAL All Property Type Aggregate Index declined 3.3% in February and 4.9 percent from a year earlier. According to Moody's, CRE prices are down 4.9% from a year ago and down about 44.7% from the peak in 2007. Prices are just above the post-bubble low last August - and about at the levels of 2002.
If you would like a copy of Moody’s April 2011 report, let me know.

Either a SBA 504 loan or 7(a) loan can be used for the purchase or refinance of owner-user commercial real estate.
_________________________________

Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate April 2011 = 3.24%
SBA Fixed Base Rate April 2011 = 6.24%
___________________________________

504 Debenture Rate for April

The debenture rate is 4.05% but note rate is 4.11% and effective yield is only 5.90%.
______________________________________

AHEAD OF THE YIELD CURVE
Economic recovery plods along with a Sisyphean pace.



Our economy grew slower in the first quarter as government spending declined by the most since 1983. Gross domestic product rose at a 1.8 percent annual rate from January through March after a 3.1 percent pace in the last three months of 2010, the Commerce Department reported last week.


Has the rock rolled back down the hill with employment?

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

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

March 216,000
February 194,000
January 68,000


2010
December 121,000
November 93,000
October 210,000
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.

After meeting for two days, the Federal Reserve last week left its benchmark interest rate in a range of zero to 0.25 percent, where it’s been since December 2008, and retained a pledge in place since March 2009 to keep it “exceptionally low” for an “extended period.”

That’s because as they said “the unemployment rate remains elevated”

The likelihood policy makers will raise the target rate for the federal funds rate at their March 2012 meeting decreased to 44 percent, from 61 percent a month ago, Fed funds futures showed.
______________________________________

OFF BASE

Sisyphus probably needed a hug every time the rock rolled back down the hill.

According to the Hugs for Health Foundation, everybody needs a hug. They believe hugging nurtures the human spirit and is healthy for both the hugger and hugged.

This week is the Hugs for Health Foundation’s National Hug Holiday Week.

Better than a hug is a prayer.

Thursday is the National Day of Prayer.

Needing both a hug and a prayer is probably pitcher Armando Galarraga of the Diamondbacks. Friday he pitched seven innings and gave up only six hits. Three of those hits were home runs however and the Diamondbacks lost 4 -2. Galarraga has now allowed 11 homers in 28 innings. At this rate, Armando has an excellent shot of breaking Jose Lima’s record for allowing 48 home runs in the National League in a season. This is also Jose’s first year of eligibility for entering into the Baseball Hall of Fame. He doesn’t have a prayer.

Life is short, pray hard.