Tuesday, November 26, 2013

SBA Loans Are Good For the Economy

SBA approved $410,795,000 in SBA 7(a) loans for the week ending November 22.  

The month to date loan approvals total $1,018,045,000.   Year to date loan approvals are at $1,897,258,000 which is slightly higher than the similar period in FY 2012 ($1,843,286,000).  

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, November 19, 2013

SBA Loans Are Good For the Economy

SBA 7(a) loan approvals for the one week period ending November 15th totaled $281,755,000.   

This is a slight drop from the prior week hopefully attributable to the Veterans' Day Holiday.

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.

Monday, November 18, 2013

The SBA and sclertotic

1. Hard, rigid, slow to adapt or respond.
2. Relating to or affected with sclerosis, an abnormal hardening of a tissue or part.
3. Of or relating to the sclera, the white fibrous outer layer of the eyeball.
From Greek skleros (hard).

The Small Business Administration is shedding its sclerotic ways with sweeping changes for its guaranteed loan programs reflected  its new Standard Operating Procedures SOP 50-10-5(F).

The cure for SBA sclerosis can be found here: www.sbapro.com

SBA LIBOR Base Rate November 2013 = 3.17%
SBA Fixed Base Rate November 2013 = 5.31%

SBA 504 Loan Debenture Rate for November 

The debenture rate is only 3.38% but note rate is 3.44% and the effective yield is 5.459%

Is the bond market being sclerotic?

Last week’s auction of 30 year Treasury bonds drew a yield of 3.81 percent.  The yield at the last offering of long bonds, on October 10, was 3.758 percent.  The $16 billion sale of the debt drew lower-than-average demand. The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.16, versus an average of 2.48 at the past 10 auctions. 

One of the Fed’s favorite gauges of the economy is the capacity utilization rate which measures how much plants and factories are being used.  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.  The Federal Reserve typically won’t initiate increases in interest rates until then.

Last week the Fed reported that capacity utilization for total industry declined 0.2 percentage point in October to 78.1 percent.

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- 66.9
2010- 74.8
2011- 76.7
2012- 79.0
2013- 77.8

What does all this mean?

I don’t know.

While capacity utilization up 11.1 percentage points from the record low set in June 2009 and 1.1 percentage points above its level of a year earlier, it is still 2.1 percentage points below its long-run (1972-2012) average.  There is no inflationary pressure whatsoever in the economy.

Don’t be sclerotic in your thinking about where interest rates are going.

To the dismay of sclerotic traditionalists, the holiday season seems to shift earlier every year, with retailers selling Christmas decorations well before Halloween.  But this year, the season will get a legitimate jump-start of sorts.

In a rare convergence of the calendar, Thanksgiving and the first day of Hanukkah, which typically commences close to Christmas, fall on the same date in 2013: November 28.  This is only the second time since Thanksgiving was declared a national holiday by President Abraham Lincoln. The last time was 1888, and the next time will be in the year 79,811.

Hanukkah however is not a Jewish Christmas.   Hanukkah actually commemorates a Jewish military victory over Greek forces in the second century B.C. and the miracle of a day's worth of lamp oil lasting for eight.

Don’t however get too excited about having a kosher Turkey.  Kosher is about killing quickly and humanely as possible but also as cleanly as possible which means eradicating the blood.  To achieve that, before the turkey is plucked it is dipped in cold water but this doesn’t make de-feathering as easy as the scalding dip commercial processors use today.  The cold water closes up the follicles in the skin and makes feather removal very difficult.  You might need a pair of needle-nose pliers at the table.

On the extreme opposite end of the Thanksgiving spectrum is the bacon wrapped Turkey.  Yes, there is such a thing:  

It really doesn't matter what you eat, just be Thankful.

Thursday, November 14, 2013

SBA 504 Loan Debenture Rate for November

SBA 504 Loan Debenture Rate for November  

The debenture rate is only 3.38% but note rate is 3.44% and the effective yield is 5.459%

Wednesday, November 13, 2013

SBA 7(a) Loan Rate Update


SBA LIBOR Base Rate November 2013 = 3.17%
SBA Fixed Base Rate November 2013 = 5.31%

Lenders can charge up to 2.75% over these indices.

Monday, November 4, 2013

The SBA and nyctophobia

An abnormal fear of night or darkness.
From Latin nycto (night) + -phobia (fear).

Don’t be in the dark over how much time you have before the year ends.

The way Thanksgiving, Christmas and New Year’s holidays fall this year, we are likely to lose an entire week and a half.

That gives everyone just over a month to close a loan prior to year end.  

That also means the benefits from section 179 won't be available for much longer. 

Under Section 179 of the Internal Revenue Code, taxpayers that purchase new or used qualifying business property and place it in service in 2013 can immediately deduct up to $500,000 of its cost.  Additionally, taxpayers can take advantage of the temporary additional "50% bonus depreciation" deduction on qualified capital expenditures (new equipment only). 50% bonus depreciation applies in addition to the Section 179 deduction.  The bonus depreciation is currently scheduled to sunset in 2014 and the annual Section 179 deduction amount is scheduled to drop to $25,000.

SBA loans can be used to purchase equipment.  They can also be used to purchase businesses, refinance debt, buy real estate or for general working capital purposes.  

Check out our website: www.sbapro.com


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%.


The Federal Reserve’s FOMC met last week and they made it real clear that interest rates won’t be going up anytime soon.

The financial markets seem to agree.

Just look at the Dow Jones utility average.

What does the utility average tell us? Mainly, it represents Wall Street's view on interest rates.

Utilities typically pay higher dividends than the industrials or the transports, and they're popular with income investors. As interest rates on longer term Treasury notes fall investors look to utilities for higher yields.  Conversely, when Wall Street expects rates to rise, the utility average falls, because Treasuries and other bonds become tougher competition for utility stocks.

Conventional wisdom has held that interest rates would rise — but that's not what the utilities index has been telling us.   Year to date the Dow Jones Utilities Average is up 13.93%.  Over the last month it is up just over 4%.  If you're looking for a quick read on what Wall Street thinks about interest rates, the Dow Jones utility average is a pretty good indicator.

So where then are interest rates going?

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:

DEC13- 0.25
DEC14- 0.44
DEC15- 1.01
DEC16- 2.02
DEC17- 2.96
DEC18- 3.66
DEC19- 4.13
DEC20- 4.43

What does all this mean?

I don’t know.

Traders are betting the Federal Reserve will wait well into 2015 to raise interest rates after the jobs report for September showed the labor market lost steam even before the government shutdown.

Keep your eyes and ears open for Friday’s jobs report for the month of October.  The monthly job gains reported by the Labor Department have steadily slowed this year, averaging 207,000 in the first quarter, 182,000 in the second quarter and 143,000 in the third quarter.   The advance estimate of third quarter Gross Domestic Product from the Department of Commerce’s Bureau of Economic Analysis will be released on Thursday.

All that might be something to be scared about.

But don’t be afraid of interest rates going up anytime soon.
The sun will be going down earlier than usual now that daylight savings time has ended.   On the plus side, it will seem to be coming up earlier than usual.

Nyctophobes will have an extra day to hide as we head into a three day weekend.

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

Veterans Day November 11
Thanksgiving Day November 28

Christmas Day December 25