Sunday, September 23, 2012

The SBA and overslaugh



1. To pass over someone in favor of another, as in a promotion.
2. To bar or to hinder.

From Dutch overslaan (to pass over, omit), from over + slaan (to strike).



The SBA has not been overslaughed.

Congress increased the federal subsidy for Small Business Administration loans in the bill that funds the government for the next six months, a rare case of an agency getting more money than it had this year.

The SBA fared better than most agencies, because Congress increased the subsidy it needs to guarantee loans to small businesses from $210 million this year to $333 million next year.

That means the SBA should be able to back up to $16 billion in loans next year with SBA 7(a) loans.

SBA 7(a) loans can be used for real estate purchase, real estate debt refinance, business debt refinance, business acquisition, working capital, and equipment purchase.



SBA LIBOR Base Rate September 2012 = 3.23%
SBA Fixed Base Rate September 2012 = 4.47%

Debenture Rate for September

The debenture rate is 2.20% but note rate is 2.23936% and effective yield is only 4.279%.



No overslaugh from the Federal Reserve.

At the last Federal Open Market Committee meeting, the Federal Reserve committed to maintaining a highly accommodative monetary policy.

The Federal Reserve also updated its projections of future growth of Gross Domestic Product.

Some people are high-fiving each other now that the Fed is predicting growth of 1.70 to 2.0% this year, and 2.5 to 3.0% next year, which is up from the 1.7% growth recorded in 2011.

This is not something to cheer about.

How bad are we doing? If our economy's projected growth rate doubles to 4% it would still be 30% behind its growth rate from before the recession and half of what it was back in the '80s.

The U.S. economy has never been so sluggish this long into a recovery. The Great Recession officially ended in June 2009.

Keep your eyes and ears open for next week’s final estimate for second quarter GDP.  It was previously estimated at 1.7 percent for the second quarter while the first quarter came in at 2.0 percent.

Here is what GDP has been doing and this week’s interesting little table of data:

2nd quarter 2012:          1.7%
1st quarter 2012:            2.0%
4th quarter 2011:            3.0%
3rd quarter 2011:           1.80%
2nd quarter 2011:           1.30%
1st quarter 2011:             0.4%
4th quarter 2010:           3.1%
3rd quarter 2010:           2.6%
2nd quarter 2010:          1.7%
1st quarter 2010:            3.7%
4th quarter 2009:           5.6%
3rd quarter 2009:          2.2%
2nd quarter 2009:          (0.7)%
1st quarter 2009:            (6.4)%

What does this mean?

I don’t know.

Enhancements to the SBA 7(a) loan program in 2009 caused the volume of SBA 7(a) loans to increase significantly.

With increases in SBA 7(a) loan approvals, the economy soon recovered

The prescience nature of SBA 7(a) loan volume with respect to the gross domestic product leads one to the inevitable conclusion that SBA 7(a) loans contribute positively to gross domestic product.

Just for fun I calculated the correlation coefficient between SBA 7(a) loan volume and GDP for six years using the Microsoft CORREL function.  It came out to a statistically significant 0.86.

It’s our patriotic duty to not overslaugh SBA loans.



The relentless march of the seasons can not be overslaughed.  Summer has ended. 

And now Adam Dunn may be overslaughed by Miguel Cabrera.

As the season comes to end, Dunn has a chance to do what no hitter has done in 85 years.    The last player to lead all of baseball with the most home runs, the most walks and the most strikeouts was Babe Ruth in 1927.

Dunn easily leads with the most strikeouts and walks this season.  He is three home runs off the leader’s pace.

Leading the pack right now for the most home runs in baseball is Miguel Cabrera of the Detroit Tigers.  Cabrera also leads the American League with the highest batting average and most runs batted in.    Should he end up leading the league in home runs, batting average, and runs batted in, he will earn batting’s Triple Crown.

  The last Triple Crown winner was Carl Yastrzemski of the Boston Red Sox in 1967. 

Wednesday, September 19, 2012

SBA 504 Debenture Rate for September

504 Debenture Rate for September

The debenture rate is 2.20% but note rate is 2.23936% and effective yield is only 4.279%. 

Sunday, September 9, 2012

The SBA and enchiridion



A handbook or a manual.

From Latin enchiridion, from Greek encheiridion, from en- (in) + cheir (hand) + -idion (diminutive suffix).

In the beginning an enchiridion was a book concise enough to be carried in one's hand, as its origin from Greek cheir (hand) suggests. Both 'handbook' and 'manual' are literal equivalents of the word from English and Latin (from Latin manus: hand) respectively.



The enchiridion for SBA loans is the SOP 50-10-5 (E).

It was last updated June 1, 2012.

The prior enchiridion, SOP 50-10-5 (D) had just been released last October. 

Another new enchiridion, SOP 50-10-5 (F) original scheduled for October 1st now won’t be out for awhile.

I have been doing SBA loans for over 28 years now.  I was beginning to wonder if it was really one year repeated 28 times.



SBA LIBOR Base Rate September 2012 = 3.23%
SBA Fixed Base Rate September 2012 = 4.47%

504 Debenture Rate for August  

The debenture rate is 2.37% but note rate is 2.41% and effective yield is only 4.45%. 



The Federal Reserve does not have an enchiridion.

Flying by the seat of its pants, the Fed has held the fed funds rate at zero percent since December of 2008.

The Fed has also exploded its balance sheet with two rounds of quantitative easing purchasing over $2 trillion of mortgage back securities and longer term Treasuries.

Despite this, employers added a disappointing 96,000 non-farm jobs in August.

The change in payroll employment for July was revised down from +163,000 to +141,000, and June was revised down from +64,000 to +45,000, for a total revision of minus 41,000 over those two months.

The past three months, monthly job gains have averaged 94,000 compared with 95,000 a month in the second quarter and well below the average monthly gain of 225,000 in the first quarter.

The minutes of the Fed’s July 31-Aug. 1 meeting showed many policy makers said additional stimulus would be needed unless the economy shows signs of a durable pickup.

With NO signs of a durable pickup, what will the Fed do?  

The Fed meets this week and will announce what it is going to do on Thursday the 13th.

The next day, the Federal Reserve will release its report 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- 67.3
2010- 74.8
2011- 76.7
2012- 79.0

What does all this mean?

I don't know.

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.

In July, capacity utilization for total industry moved up 0.4 percentage point to 79.3 percent. 

While capacity utilization is up 2.3 percent from a year ago, it probably will stall also.

Last week’s job report reflected factory payrolls decreasing by 15,000, its biggest drop in two years.

The jump in capacity utilization was driven by a jump in utility production as Americans tried to cool their homes.

July was the hottest month in the lower 48 states in records going back to 1895, according to the National Oceanic and Atmospheric Administration.  The average temperature in the 48 states was 77.6 degrees Fahrenheit (25.3 Celsius), or 3.3 degrees above normal, the agency reported. 

The Fed must also be feeling the heat.



9/11.  It’s been eleven years already.  I guess we are still writing the enchiridion on that one.

Important enchiridions include-

The Holy Bible
Poor Richard’s Almanac by Benjamin Franklin
US Army Survival Manual
Etiquette in Society, in Business, in Politics, and at Home by Emily Post
"Coach Wooden's Pyramid of Success: Building Blocks for a Better Life"
Strunk & White’s The Elements of Style
The Enchiridion of Epictetus
The list on the refrigerator my wife wrote for me

Friday, September 7, 2012

SBA 7(a) Rate Update


SBA LIBOR Base Rate September 2012 = 3.23%
SBA Fixed Base Rate September 2012 = 4.47%

Lenders can charge up to 2.75% over these indices.