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:


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

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