Tuesday, April 26, 2011

SBA 7(a) Weekly Lending Update

SBA approved $205,494,000 in SBA 7(a) loans for the week ending April 22.  Year to date total is now up to $12,928,981,000.

This is a slight drop from last week and a big drop from the week prior to that when volume had spiked to $568 million.  That spike was obviously a result of lenders submitting as many deals as they possibly could before the SBA may have shut down.

With the threat of a shutdown now behind us, the challenge will be if the SBA 7(a) program runs out of money before the end of the fiscal year on September 30th.

Thursday, April 21, 2011

SBA loans for self storage facilities- cash flow

For SBA loans, the borrower’s ability to repay the loan from the cash flow of the business is the most important consideration in the loan making process.

SBA allows lenders to determine repayment ability through either an analysis of actual cash flow or by using the “rule of thumb” method. “Rule of thumb” cash flow is defined as earnings before interest and taxes, plus depreciation and amortization, less total debt service.

If a self storage facility can demonstrate repayment ability based upon this rule of thumb approach, it can most likely obtain a SBA loan.

Tuesday, April 19, 2011

Another SBA success story

If you ever shop for sports or camping apparel, you inevitable will run across Columbia Sportswear. 

This company received a SBA loan for $15,000 back in 1970. 

Columbia Sportswear Company located in Portland, Oregon was rescued from near bankruptcy when Gert Boyle took over operations of Columbia, started by her parents, and turned it into a $1 billion company.

Columbia's story, along with others, is available online from SBA at:

Monday, April 18, 2011

SBA 7(a) Weekly Lending Update

Another $217,653,000 in SBA 7(a) loans were approved last week.  This is big drop from the prior week when about $568,000,000 had been approved.   I have no idea why loan volume spiked but it could very well be a reporting issue with SBA.

With about six months still left in the fiscal year, $12,723,487,000 in SBA loans have been approved out of a total of $17,500,000,000 available.  If SBA loan volume sticks around $200,000,000 a week the program won't run out of money.  Anything greater than that means funding could dry up in the summer.

To put this into perspective, only $3,855,352,000 had been approved for the first six months of 2009, while $8,162,168,000 had been approved for the first six months of 2010.  The $12,732,487,000 in approvals for the last six months was driven primary by the Jobs Act enhancements of the increased guarantee percentage and waiver of the guarantee fee, but since expiration of those enhancements, loan demand still is robust. 

Borrowers and lenders alike continue to turn to the SBA 7(a) program.

Friday, April 15, 2011

SBA 504 debenture rate

SBA 504 debenture rate for April
The debenture rate is 4.05%, the note rate is 4.11% and the effective yield is 5.900%.

Wednesday, April 13, 2011

The SBA and the budget

While many federal agencies will take a haircut in the spending bill negotiated last weekend between Senate Democrats and House Republicans -- -- the Small Business Administration has emerged from the negotiations largely intact. The bill trims 0.2 percent from every nonmilitary discretionary account, including those that finance the S.B.A. But it also aims at specific programs with deeper cuts, and here the S.B.A. was effectively spared. . . . go here for the article in the New York Times...

Tuesday, April 12, 2011

SBA 7(a) Weekly Lending Update

According to the SBA, $568,760,000 in SBA 7(a) loans were approved last week.  This is a significant increase over the prior weeks.

Year to date, $12,505,834,000 in SBA 7(a) loans have been approved.     The entire 7(a) program is authorized for $17,500,000,000.  

7(a) loan funding could very well run out before the fiscal year ends in September.

Monday, April 11, 2011

The SBA and meretricious

1. Appealing in a cheap or showy manner: tawdry.
2. Based on pretense or insincerity.
From Latin meretricius, meretrix (prostitute), from merere (to earn money).
The meretricious debate on government spending and the budget extends to SBA loans.

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?

SBA LIBOR Base Rate April 2011 = 3.24%
SBA Fixed Base Rate April 2011 = 6.24%

504 Debenture Rate for March

The debenture rate is 4.09% but note rate is 4.15% and effective yield is only 5.94%.


The economy may be stalling a bit based upon capacity utilization rates.

This obscure gauge, 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 Friday’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

What does all this mean?

I don't know.

Capacity utilization, which measures the amount of a plant that is in use, fell to 76.3 percent in February from a revised 76.4 percent in January. 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 76% 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.

“It ain’t the heat, it’s the humility”
-Yogi Berra

Humility is good for us all. Humidity might even be better for others. Baseball physicists (yes, there really are such people) found that when the relative humidity is increased from 30 percent to 50 percent, the weight of the ball increases causing fewer home runs.

Coors Field in mile-high Denver has been long viewed as a batter’s paradise and a pitcher’s nightmare. Because the air density in Denver is approximately 80 percent of that at sea level, fly balls hit there carry farther. For the first seven seasons at Coors, there were 3.20 home runs hit per game. However, beginning in 2002 the Colorado Rockies began to store their baseballs in a humidor at a constant 50 percent relative humidity as opposed to the more typical 30 percent humidity in Denver. Ever since then, only 2.39 home runs were hit per game.

At Chase Field where the Arizona Diamondbacks play, the typical relative humidity is even lower than in Denver. It’s around only 20 percent. The Diamondbacks recently decided to NOT store balls in a humidor like they do at Coors Field.

Some baseball moisture experts concluded that the humidor idea could have reduced home runs at hitter-friendly Chase Field between 38 percent and 54 percent.

That’s too bad for the imperfect pitcher, Armando Galarraga. Armando made a successful debut for the Diamondbacks in Chicago against the Cubs. He allowed just two walks while striking out five in seven innings of work. He gave up only five hits but two of those were home runs. Home runs have always been a problem for Galarraga, and when he eventually pitches in Arizona, that stadium won’t help.

Armando next pitches Tuesday in Arizona against the Cardinals.

Thursday, April 7, 2011

SBA 7(a) Weekly Lending Update

$270,541,000 in SBA 7(a) loans were approved last week.  That brings the year to date total to $11,937,074,000.

SBA 7(a) loans remain one of the most viable and attractive options to both lenders and borrowers.

Tuesday, April 5, 2011

Killing the goose that lays the golden egg

The Congressional Quarterly daily reports today (4/5) that "prospects of at least a temporary shutdown have surged today. Both the White House and Hill leaders are taking the situations seriously enough that they’re getting ready to sort-of lock up. This morning congressional offices (at least on the House side) were receiving a memo from the leadership telling chiefs of staff the difference between “essential” and “non-essential” employees and which House support offices could be closed. Last night the White House told top agency officials to begin making preparations for implementing a shutdown."

What that means to SBA lenders and borrowers is that no loan approvals will happen if and when the government shuts down.


Friday, April 1, 2011

SBA 7(a) Weekly Lending Update

SBA 7(a) loans are alive and well.

Another $268,569,000 in SBA 7(a) loans were approved last week.  That brings the year to date total to $11,666,533,000.