Monday, October 24, 2011

The SBA and perspicaciousness



Keenness of perception and discernment.

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



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.



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%.



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.



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.

Wednesday, October 19, 2011

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.

Tuesday, October 11, 2011

The SBA and columbarium


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



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.


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%.


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
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.

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.


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.

Thursday, October 6, 2011

SBA 7(a) Rate Update



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.

Wednesday, October 5, 2011

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.