Monday, February 28, 2011

The SBA and meticulous

Extremely careful, precise, or thorough.
From Latin meticulosus (fearful), from metus (fear). Originally the term meant one who was fearful and eventually it acquired a positive sense.
Be meticulous about 504 debt refinance.

Starting TODAY, SBA is accepting applications to refinance mortgage debt with a 504 loan.
The debt to be refinanced must be coming due before December 31, 2012.
Borrowers can refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower.
Loan proceeds may NOT be used for any other business expenses such as working capital.
There will also be an ongoing guarantee fee of 1.043% on the total unpaid balance of the debenture that increases the effective yield to the borrower.

If a borrower is unable to refinance their mortgage debt with a SBA 504 loan, a SBA 7(a) loan may be a viable option.
SBA LIBOR Base Rate February 2011 = 3.26%
SBA Fixed Base Rate February 2011 = 6.16%
504 Debenture Rate for February
The debenture rate is 4.22% but note rate is 4.285% and effective yield is only 6.071%.
How meticulous are bond investors?

The yield curve has dipped down a little bit.
The 30 year Treasury bond is down to 4.50% which is the lowest it has been in a month.
Many attribute the drop in longer term rates to the unrest in Libya driving investors to the safety of our government debt and concerns that surging oil prices may stall the economy.
Lost in the headlines was the news that the capacity utilization rate dipped last month. Job growth also stalled in January.

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:
January 36,000
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)
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)
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 meets again March 15th. How meticulous will they be?
Did you enjoy last Monday’s holiday?
Our next three day weekend is not until Memorial Day. That’s 92 days away.
If you check out the calendar it turns out that this is the longest streak of the year we have to go without a break from the five day grind.

Was it this long lull that inspired Ferris Bueller to take his famous day off?
Meticulous observation of “Ferris Bueller’s Day Off” reveals that his day off was actually June 5th, 1985.
How does one figure that out?

On Ferris's agenda that afternoon was, naturally, a trip to Wrigley Field.
On the screen we see Chicago first-baseman #10 holding on an Atlanta Braves player wearing #18. The announcer pipes in: "Runner on first base, nobody out. That's the first hit they've had since the fifth inning, and only the fourth hit in the game."
Chicago pitcher #46 throws the pitch to a left-handed Atlanta hitter with a two-digit number ending in "5" and what appears to be a long last name. The batter swings at the pitch and hits a long fly ball to left. "That's a drive! Left field... twisting... and into foul territory."
The Chicago leftfielder races for the ball but it screams foul, into Ferris' hand.
The movie "Ferris Bueller's Day Off" was released on June 11, 1986. The ballgame then must have been filmed either real early in the 1986 season or sometime during 1985. Looking at all the box scores from those seasons, we see that there was no game in 1986 in which Lee Smith (#46) faced the Braves at Wrigley Field. There were four such games in '85, though Smith left the Braves hitless in one of those. Of the remaining three games, it isn't hard to find the game we're looking for.
The foul ball that Ferris caught was hit by Atlanta rightfielder Claudell Washington (#15) in the top of the 11th inning. The game was tied at two and backup second-baseman Paul Zuvella (#18) was being held on first by Leon Durham (#10) after a leadoff single (the fourth hit of the game, and Atlanta's first hit since the fifth). Washington would end his at-bat with a flyball to leftfielder Davey Lopes. The next batter, Rafael Ramirez, would wind up hitting a two-run home run and the Braves would go on to win 4-2.

Only 30 days until Opening Day. Maybe that should be a holiday.

Wednesday, February 23, 2011

SBA 7(a) loans with variable rates

SBA 7(a) loans have variable rates tied to prime. Typically the rate can be up to prime plus 2.75%. It will usually adjust on a monthly or quarterly basis depending on the lender.

The idea of a variable rate may sound terrifying to some, but the prospects of increases in interest rates are far off. To get an idea of how long you can take advantage of the variable rate of a SBA 7(a) loan, you might want to go here:

When will the Fed raise rates?
by CalculatedRisk on 2/21/2011 05:08:00 PM
Short answer: it is very unlikely that the Fed will increase the Fed funds rate this year.

The earliest the Fed will raise rates? It could be later in 2012 or even later ...

Wednesday, February 16, 2011

The SBA and the budget

Total credit subsidy appropriations are proposed to go from $83 million in FY 2010 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. Don't you just love government speak?

Tuesday, February 15, 2011

504 debenture rate

SBA 504 Debenture Rate for February
The debenture rate is 4.22% but note rate is 4.285% and effective yield is only 6.071%.

Monday, February 14, 2011

The SBA and philogyny

Love of women.
From Greek philogynia, from philo- (loving) + -gyn (woman)
Do you know the difference between a philanderer and philandrist? A philanderer is one who engages in frivolous love of women while a philandrist loves men. Philandrist comes from Greek philandros (loving of man), to refer to a woman who loves her husband. The term Philander was later used in literature to name a male character, apparently from the mistaken belief that it refers to a man who loves, rather than one who loves a man. The differences are not subtle.
Make sure you also know the differences between a SBA 7(a) loan and a SBA 504 loan. One has a variable rate while the other has a 10 year prepayment penalty. One can be used for commercial real estate debt refinance. The other might soon.
SBA LIBOR Base Rate February 2011 = 3.26%
SBA Fixed Base Rate February 2011 = 6.16%
504 Debenture Rate for January
The debenture rate is 3.89% but note rate is 3.951% and effective yield is only 5.951%.
You’ve heard of quantitative easing?

That’s where the Federal Reserve said that it would buy $600 billion of U.S. government debt to spur job growth and avoid deflation.

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

Since the Fed’s November 3rd announcement about these debt purchases, the 30-year yield has jumped about ½ of a percent. The interest rate on the 30 year bond has risen about 125 percentage points from a 17-month low of 3.46 percent August 25th.

Last week the government sold $16 billion of 30 year bonds with a yield around 3.75%.

Last month’s sale of 30-year bonds drew a yield of 4.515 percent, compared with 4.410 percent at the December auction.

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

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.

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.

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 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. 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.

It would appear that the savings from low variable rates of interest should continue for an "extended" period.
I think everybody knows what day today is. It goes without saying. It is a day filled with romance and hope.

Yes, today is the day some pitchers and catchers start showing up for spring training.

With only 44 days left until Opening Day even fans of the worst teams think right now they have a chance.

The two teams with the worst odds for winning the 2011 World Series are the Pittsburgh Pirates and Kansas City Royals.

Here are the odds for the rest of the teams to win the World Series.
Keep in mind, last year the San Francisco Giants were 25/1 odds at the beginning of last season.

Arizona Diamondbacks 100/1
Atlanta Braves 22/1
Baltimore Orioles 80/1
Boston Red Sox 5/1
Chicago Cubs 35/1
Chicago White Sox 20/1
Cincinnati Reds 25/1
Cleveland Indians 100/1
Colorado Rockies 22/1
Detroit Tigers 28/1
Florida Marlins 40/1
Houston Astros 75/1
Kansas City Royals 150/1
Los Angeles Angels 25/1
Los Angeles Dodgers 30/1
Milwaukee Brewers 25/1
Minnesota Twins 20/1
New York Mets 40/1
New York Yankees 13/2
Oakland Athletics 30/1
Philadelphia Phillies 13/4
Pittsburgh Pirates 200/1
San Diego Padres 50/1
San Francisco Giants 14/1
Seattle Mariners 80/1
St. Louis Cardinals 20/1
Tampa Bay Rays 20/1
Texas Rangers 18/1
Toronto Blue Jays 50/1
Washington Nationals 80/1

Tuesday, February 8, 2011

SBA 7(a) Rate Update


SBA LIBOR Base Rate February 2011 = 3.26%
SBA Fixed Base Rate February 2011 = 6.16%

Lenders can charge up to 2.75% over these indices.