Monday, January 31, 2011

The SBA and hecatomb

hecatomb

(HEK-uh-toom, -tom)

A large-scale slaughter.

Originally a hecatomb was a public sacrifice and feast of 100 oxen or cattle to the gods in ancient Greece and Rome. The word is derived from Latin hekatombe, from Greek hekatombe, from hekaton (hundred) + bous (ox).
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TIP OF THE WEEK
The hecatomb in commercial real estate is over.

The Moody’s/REAL All Property Type Aggregate Index recorded a 0.6% increase in November, the third consecutive month of national price gains.

This index measures overall commercial property values on a monthly basis. The changes are based on repeat sales transactions.

The National – All Property Type Aggregate Index has increased 6.4% during the past three months. These three months of rising prices contrast with the prior three months in which prices measured significant declines. Prices are up 2.8% from a year ago, down 31.6% from two years ago and are 41.6% below the peak, which occurred in October 2007.

If you would like a copy of Moody’s January 2011 report on commercial real estate, let me know.

Either a SBA 504 loan or a SBA 7(a) loan can finance commercial real estate.
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Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate January 2011 = 3.26%
SBA Fixed Base Rate January 2011 = 6.06%
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504 Debenture Rate for January
The debenture rate is 3.89% but note rate is 3.951% and effective yield is only 5.951%.
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AHEAD OF THE YIELD CURVE

Will there be a hecatomb for borrowers with variable rate loans?

The economy is improving. It accelerated in the fourth quarter of 2010 as consumer spending climbed by the most in more than four years.

Gross domestic product grew at a 3.2 percent annual rate. For all of 2010, the world’s largest economy expanded 2.9 percent, the most in five years, after shrinking 2.6 percent in 2009. The volume of all goods and services produced rose to $13.38 trillion, for the first time surpassing the pre-recession peak reached in the fourth quarter of 2007.
Household purchases, about 70 percent of the economy, rose at a 4.4 percent pace last quarter, the most since the first three months of 2006. The increase added 3 percentage points to growth.

Rates have to start going up, right?

Fed policy makers indicated last week that growth isn’t strong enough to reduce the jobless rate as fast as they would like.

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:
December 103,000
November 71,000
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.

For all of 2010, about 1.1 million jobs were created, the most since 2006.


That’s a start, but we’ve got a long ways to go.

There are still over 7 million fewer jobs in the U.S. compared to the peak of employment in 2007.

If the U.S. economy adds 200,000 jobs per month, it will take 3 years to get back to the previous peak. And that doesn't include jobs needed to offset population growth (about 125,000 jobs per month).

The Federal Open Market Committee last week said that “economic conditions…..are likely to warrant exceptionally low levels for the federal funds rate for an extended period.”

Until employment really picks up, rates will remain low.
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OFF BASE

No one is predicting a hecatomb in the Super Bowl.

The Green Bay Packers are only 2 ½ point favorites over the Pittsburgh Steelers.

This is the narrowest point spread in 27 years.

The last Super Bowl to have a point spread of less than three points was played after the 1983 season, when the Washington Redskins were 2 1/2-point favorites over the Raiders.

Of course the Raiders went on to win that game 38 – 9.

Thursday, January 27, 2011

Rates to remain low for an extended period

The Federal Reserve Open Market Committee once again said that economic conditions "likely to warrant exceptionally low levels for the federal funds rate for an extended period."

That means the savings from a variable rate SBA 7(a) loan should persist for some time.

Go here for the complete statement from the Federal Reserve.

Thursday, January 20, 2011

Everybody loves small business and the SBA

It looks like everybody loves the Small Business Administration. At least Republican members of the House of Representatives do. House GOP members today released their plan to cut $2 1/2 trillion in spending over the next ten years.

Noticeably absent from their chopping block was the SBA, and rightly so. This is one of the only government programs that actually pays for itself. If you calculate the cost of the program and then consider the increased tax revenues generated by SBA borrowers, it generates net revenue back to the goverment.

Call it supply side spending.

For more details on the proposed budget cuts, go here- http://news.yahoo.com/s/usnews/20110120/ts_usnews/housegoplists25trillioninspendingcuts

Tuesday, January 18, 2011

The SBA and assiduous

assiduous
(uh-SIJ-oo-uhs)
adjective: Constant; persistent; industrious.
From Latin assiduus, from assidere (to attend to, to sit down to), from ad- (toward) + sedere (to sit).
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TIP OF THE WEEK
Despite the assiduous efforts of many, the use of a 504 loan to refinance debt is still not yet available.

Currently a SBA 7(a) loan can be used to refinance real estate debt that has a balloon and it could also provide additional working capital if necessary.

Lenders and borrowers must be assiduous in their calculation of the SBA guarantee fee however. It’s back.

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Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate January 2011 = 3.26%
SBA Fixed Base Rate January 2011 = 6.06%
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504 Debenture Rate for January
The debenture rate is 3.89% but note rate is 3.951% and effective yield is only 5.951%.
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AHEAD OF THE YIELD CURVE

Be assiduous in reading the tea leaves of the yield curve.

The yield curve is now very steep.

The difference between yields on U.S. 2- and 30-year securities has reached almost 4 percentage points. This is the steepest slope to the yield curve since at least 1977

Does this mean interest rates will soon rise?

Not necessarily.

Lost on the Friday of a three day weekend was the Federal Reserve’s release on 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

What does all this mean?
I don't know.

Capacity utilization, which measures the amount of a plant that is in use, increased to 76 percent last month, the highest since August 2008, the Fed’s production report showed. The gauge averaged 80 percent over the past 20 years, signaling there’s enough spare plant equipment and space to prevent bottlenecks that would push prices higher.

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 76% is still far below normal - and well below the the pre-recession levels of 81.2% in November 2007.

That means we still have a long way to go before interest rates really start to go up.
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OFF BASE

Ok, let’s not be so assiduous that we forget to stop and smell the roses, catch the waves or watch the sunsets.

Thank goodness for yesterday’s holiday.

It was an official holiday because the Federal Reserve Board said it was.

Here are the holidays this year that will be observed by the Federal Reserve Board:

Birthday of Martin Luther King, Jr.- January 17

Washington's Birthday- February 21

Memorial Day- May 30

Independence Day- July 4 Monday

Labor Day- September 3

Columbus Day- October 8 Saturday (bummer)

Veterans Day- November 12 Friday

Thanksgiving Day- November 22

Christmas Day- December 25


Notice the long stretch of no holidays from Washington’s Birthday to Memorial Day?

It looks like we need another holiday wedged in there and Opening Day for Major League Baseball in the perfect candidate.


Only 71 days until the season starts.

Thursday, January 13, 2011

SBA 7(a) Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate January 2011 = 3.26%
SBA Fixed Base Rate Januaary 2011 = 6.06%

Lenders can charge up to 2.75% over these indices.

Wednesday, January 12, 2011

504 debenture rate

SBA 504 Debenture Rate for January

The debenture rate is 3.89% but note rate is 3.951% and effective yield is only 5.951%.

Monday, January 3, 2011

The SBA and asseverate

asseverate
(uh-SEV-uh-rayt)
verb tr.: To affirm solemnly.
From Latin asseverare (to declare in earnest), from severus (serious).
You should asseverate to do more SBA loans.
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TIP OF THE WEEK
One New Year’s asseveration should be to check out commercial real estate.

Moody's reported just before Christmas that their REAL All Property Type Aggregate Index increased 1.3% in October. This index measures overall commercial property values on a monthly basis and breaks the numbers down by property type once each quarter. The changes are based on repeat sales transactions.

This is the second consecutive month to record an increase. Prices are now up 3.2% from a year ago. This presents a unique opportunity as values are down 34.4% in the past two years and have declined 41.9% since the peak, which occurred in October 2007.

People are beginning to notice as U.S. commercial property sales more than doubled to $16 billion in the third quarter compared with a year earlier, according to Real Capital Analytics Inc.

If you would like a copy of the Moody’s report on commercial real estate, let me know.
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Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate December 2010 = 3.27%
SBA Fixed Base Rate December 2010 = 5.77%
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504 Debenture Rate for December
The debenture rate is 3.72% but note rate is 3.77% and effective yield is only 5.571%.
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AHEAD OF THE YIELD CURVE

Is now the time to buy real estate?

How long will interest rates remain low?

Both answers depend on unemployment. Job growth will fuel fundamental commercial real estate demand. Job growth will also affect what the Federal Reserve does with interest rates.

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:

November 39,000
October 171,000
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.

There are 15.1 million unemployed people in this country. There are now 7.4 million fewer jobs in the U.S. compared to the peak of employment in 2007.

If the U.S. economy adds 200,000 jobs per month, it will take 3 years to get back to the previous peak. And that doesn't include jobs needed to offset population growth (about 125,000 jobs per month).

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

What’s your New Year’s asseveration?

“A New Year’s Resolution is something that goes in one year and out the other.”
-Oscar Wilde

To be more precise, what Wilde was saying is that resolutions made the last week of December are usually over the first week of January.

There is a right way and a wrong way to make a New Year's resolution.

There is also a difference between men and women and their resolutions.

For men, they should set S.M.A.R.T goals- goals that are Specific, Measurable, Achievable, Realistic and Time based (SMART). For example, focus on creating bite-sized, measurable goals for each week. Map out the step-by-step mini-goals that will slowly but surely take you to where you want to be, make a note of them, and stick to the plan.

For women, the secret is to go public. For example, write down your resolution on a large sheet of paper, sign it, and place it somewhere prominent in your house. Tell your friends, family and colleagues about your resolution, and ask them to provide you with helpful nudges to assist you in achieving your goal. Do not keep your resolution to yourself.


Many people often make the mistake of trying to achieve too much. The chances of success are greater when people channel their energy into one thing.

For example, do you want your weight to be average? There are now more overweight people in America than average-weight people. So overweight people are now average… which means, you have met your New Year's resolution.

SBA loans Jobs Act Money exhausted

SBA quietly reactivated the Loan Queue on December 28 for the loans that could not be funded. Borrowers and lenders now will have to decide whether to have their loans processed immediately -- with the standard upfront guarantee fee and lower guarantee percentages; or, to wait in the queue for possible funding with the Jobs Act benefits as previously approved Jobs Act loans are cancelled.