Monday, October 28, 2013

SBA Loans Are Good For the Economy

The SBA is working through the backlog created by the government shutdown.

For the one week period ending October 25th, $308,113,000 in SBA 7(a) loans were approved.

The average SBA 7(a) loan amount appears to be declining.  The average SBA loan amount approved last week was $308,730.

There are no longer any guaranty fees on SBA 7(a) loans of $150,000 or less.

Tuesday, October 22, 2013

SBA Loans Are Good For the Economy

The SBA is doing a good job of playing catch-up.

Small Business Administration officials returned to work on Thursday October 17th to find a backlog of several hundred loan-guarantee applications that were filed during the 16-day government shutdown.

In just two days, 929 SBA 7(a) loans were approved totaling $294,770,000.  

This just might be an example of Parkinson’s Law in reverse.

Parkinson's law is the adage first articulated by Cyril Northcote Parkinson as part of the first sentence of a humorous essay published in The Economist in 1955:

Work expands so as to fill the time available for its completion.

Monday, October 21, 2013

The SBA and petard

1. A small bomb used to blast down a gate or wall.
2. A loud firecracker.
From French p├ęter (to break wind), from Latin peditum (a breaking wind), from pedere (to break wind). Ultimately from the Indo-European root pezd- (to break wind) which also gave us feisty, fart, and French pet (fart).

Ignore some of the petards about wasteful government spending.

The continuing resolution that will fund the federal government for another 86 days should include broad based support for the Small Business Administration.

 For the SBA 7(a) program, the return to a zero subsidy rate removes the need to seek appropriations.  It also reduces lender fees.  For its 7(a) guaranty loan program, the SBA budget authority will support a program level of $17.5 billion!

SBA loans are good for the economy.    Remember, SBA 7(a) loan volume is a leading economic indicator as the correlation coefficient between SBA 7(a) loan volume and the economy’s Gross Domestic Product is a statistically significant 0.86.


SBA LIBOR Base Rate October 2013 = 3.18%
SBA Fixed Base Rate October 2013 = 5.37%

SBA 504 Loan Debenture Rate for October 

The debenture rate is only 3.37% but note rate is 3.425% and the effective yield is 5.451%.


Lost amongst the petards in Washington was the fact that employment growth is languishing.

The government shutdown has severely affected employment, or at least the reporting of it.

The jobs report from the Bureau of Labor Statistics for the month of September will finally be released tomorrow.  It would have normally come out three weeks ago. 

Only 169,000 jobs were added in August.   The government had also revised down its estimated job growth for June and July by a combined 74,000 jobs, meaning the net gain from the job’s report is under 100,000 jobs.  That does not even keep up with population growth.

Here is a summary of net monthly payroll employment and this week’s interesting little table of data:

August 169,000
July 104,000
June 172,000
May 176,000
April 165,000
March 88,000
February 332,000
January 148,000
December 155,000
November 161,000
October 137,000
September 114,000
August 142,000
July 181,000
June 45,000
May 77,000
April 68,000
March 143,000
February 240,000
January 243,000
December 203,000
November 157,000
October 112,000
September 158,000
August 104,000
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.

At the current pace of job growth, it would take more than six years to get back to pre-recession employment levels.  The Federal Reserve’s Federal Open Market Committee meets next week on monetary policy and they have made it clear that they won’t even consider raising interest rate until unemployment improves.

It would appear that interest rates won’t be going up anytime soon.

Our politicians might be hoisted by their own petards yet.
Hoisted by one’s own petard?

Believe it or not, Vin Scully once used that phrase in a baseball game.

On Cinco de Mayo back in 2008, Dodger pitcher Chad Billingsley struck out ineffectually, prompting Vinny to state that "he was hoisted on his own petard"...  The Dodgers would go on to win that game 5-1. 

So what does it mean to be hoisted by one’s own petard?

A petard was a bell-shaped bomb used to breach a door or a wall.  Now that we have advanced to nuclear missiles, this low-tech word survives in the phrase "to hoist by one's own petard" meaning "to have one's scheme backfire".

The idiom was popularized by Shakespeare in his play Hamlet.  Hamlet, having turned the tables on those tasked with killing him, says:
    For 'tis the sport to have the engineer

    Hoist with his own petard 

Friday, October 18, 2013

SBA Loans Are Good For the Economy

SBA 7(a) loan volume exploded at the end of the government’s fiscal year as borrowers and lenders rushed in to obtain loan guarantees prior to the government shutdown.

For the one month period ending September 30th, 7(a) loan volume was $2,419,791,000.  That accounted for almost HALF of the total volume of SBA 7(a) loan approvals for the entire quarter.

Here is a breakdown of SBA 7(a) quarterly loan volume for the last year:

3rd quarter 2013:             $5,371,662,000
2nd quarter 2013              $4,273,683,000
1st quarter 2013               $4,049,146,000
4TH quarter 2012             $4,173,790,000
3rd quarter 2012              $4,359,166,000
2nd quarter 2012              $4,039,042,000
1st quarter 2012                 $3,443,723,000

 Assuming all these loans actually fund, this up-tick in loan volume bodes well for the economy.

Remember, SBA 7(a) loan volume is a leading economic indicator as the correlation coefficient between SBA 7(a) loan volume and GDP is a statistically significant 0.86.

Tuesday, October 15, 2013

SBA 504 Loan Debenture Rate for October

SBA 504 Loan Debenture Rate for October  

The debenture rate is only 3.37% but note rate is 3.425% and the effective yield is 5.451%

Monday, October 7, 2013

The SBA and contumely

KON-too-muh-lee, kuhn-TOO-muh-lee, KON-tuhm-lee, -tyoo-, -tyoom-) 
Contemptuous or insulting treatment arising from arrogance.
Via French from Latin contumelia (insult), probably from con- (with) + tumere (to swell).

Contumely has caused the government to shut down.

The day before the shutdown lenders rushed to have SBA approve over $½ billion in SBA 7(a) loans.  

That is the most loans ever approved in a single day by the SBA.

You can still get in line and apply for a SBA loan.

Don’t miss out once the SBA re-0pens for business- small business.



SBA LIBOR Base Rate October 2013 = 3.18%
SBA Fixed Base Rate October 2013 = 5.37%

SBA 504 loan Debenture Rate for September 

The debenture rate is only 3.62% but note rate is 3.678% and the effective yield is a whopping 5.698%.


How contumely can one get?

Even though the government has shut down, it still has to borrow money.

The government will run out of borrowing authority October 17th according to the Treasury Department, when it hits it’s the $16.7 trillion debt ceiling.

What exactly is the “debt ceiling”?

The United States debt ceiling or debt limit is a legislative restriction on the amount of national debt that can be issued by the Treasury.  Because expenditures are authorized by separate legislation, the debt ceiling does not actually restrict deficits. In effect, it can only restrain the Treasury from paying for expenditures that have already been incurred.   It is a limit on the ability to make good on its commitments.

If the debt ceiling is not raised by the time the government really runs out of money, the executive branch has the authority to determine which obligations are paid and which are not.  The executive branch’s hands are tied.  It MUST choose to prioritize interest payments on bonds, which would avoid an immediate, direct default on sovereign debt. 

The Fourteenth Amendment (Amendment XIV) to the United States Constitution Section 4 is pretty clear on that: The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.   SHALL NOT BE QUESTIONED.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds. 

We will see if anybody is questioning the “public debt of the United States.”

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:

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
2011- 2.89
2012- 2.77
2013- 3.25

What does all this mean?

I don’t know.

Last month’s $13 billion auction of the securities drew a yield of 3.82 percent.  Since then yields have dropped down to about 3.71 percent.  It climbed to 3.94 percent on August 22, the highest since August 2011.

The Constitution makes it clear that we won’t be defaulting on any debt.   

Article III, Section 3, of the Constitution also clearly defines treason.  Unfortunately the Treason Clause applies only to disloyal acts committed during times of war. Acts of disloyalty during peacetime are not considered treasonous under the Constitution.  So we can’t line them all up in front of a firing squad.

Nobody should be contumely.
When told to use contumely in a sentence, Shakespeare came up with Hamlet’s “to be or not be” soliloquy in King Lear:  "For who would bear the whips and scorns of time, Th’ oppressor's wrong, the proud man's contumely?"    He’s whining about the insults of arrogant men.

Another dose of contumely hits with the news that Monday is a Federal holiday.

According to the Federal Reserve, here are the remaining holidays for 2013:

Columbus Day October 14
Veterans Day November 11
Thanksgiving Day November 28

Christmas Day December 25

Thursday, October 3, 2013

SBA 7(a) Loan Rate Update


SBA LIBOR Base Rate October 2013 = 3.18%
SBA Fixed Base Rate October 2013 = 5.37%

Lenders can charge up to 2.75% over these indices.

Tuesday, October 1, 2013

SBA Loans Are Good for the Economy

After processing a record $600 million in loans yesterday, SBA ran out of FY 2013 authorization last night a couple hours before the shutdown.