Sunday, January 22, 2012

The SBA and nugacity



Triviality; futility

From Latin nugax (trifling), from nugari (to trifle).



Our oasis of nugacity looks at SBA loans for debt refinance.

A SBA 504 loan can be used to refinance debt as long as 85% of the loan proceeds from the debt being refinanced were originally used to purchase or build real estate.

A SBA 7(a) loan can also refinance real estate debt as well as business debt used for other purposes. It can be amortized for 25 years if at least 51% of the loan proceeds for the debt being refinanced were originally used for a real estate purpose. Debt refinance with a SBA 7(a) loan requires that the debt being refinanced has a balloon or there is a 10% improvement in cash flow.

Keep in mind that refinancing with a SBA 504 loan is for a limited time only.



SBA LIBOR Base Rate January 2011 = 3.30%
SBA Fixed Base Rate January 2011 = 5.00%


504 Debenture Rate for January

The debenture rate is 2.76% but note rate is 2.81% and effective yield is only 4.839%.



The Federal Reserve Open Committee meets this week.

Federal Reserve officials will for the first time make public their own forecasts for the federal funds rate at their January 24 and 25 meeting, according to minutes from last month’s Federal Open Market Committee.

By releasing their forecasts, central bankers are likely to alter expectations for the timing of the first increase in their benchmark rate, which has been kept near zero since December 2008.

Last month, Fed Officials repeated their view that economic conditions would warrant "exceptionally low levels for the federal funds rate at least through mid-2013.”

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:

DEC12- 0.58
DEC13- 0.73
DEC14- 1.28
DEC15- 2.00
DEC16- 2.60
DEC17- 3.05
DEC18- 3.34

What does all this mean?

I don’t know.



Happy New Year!

Or as our Chinese friends would say “Kung Hei Fat Choi.” Loosely translated, it means “Congratulations and be prosperous.”

Today is the first day of the Chinese New Year. Why today? Chinese New Year falls on the second new moon after the winter solstice.

The Chinese New Year tradition is to reconcile, forget all grudges and sincerely wish peace and happiness for everyone.

Reconcile, forget all grudges and sincerely wish peace and happiness for everyone. Not a bad way to start the year. Or restart your year.

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