SBA Loans Are Good For the Economy

It's a Merry Christmas for SBA lenders and borrowers!

SBA 7(a) loan approvals totaled $454,408,000 for the week ending December 13th.

This strong SBA 7(a) loan volume is great for everybody.

The correlation coefficient between SBA 7(a) loan approvals and the economy's gross domestic product is a statistically significant 0.86.

The SBA and tintinnabulate

Tintinnabulate

tin-ti-NAB-yuh-layt

To ring; to tinkle.

From Latin tintinnabulum (bell), from tintinnare (to jingle)

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TIP OF THE WEEK 

It’s time to tintinnabulate.

Christmas is upon us and the New Year begins soon.

A whole new game with new rules starts at the beginning of the year with the Small Business Administration’s new Standard Operating Procedures 50-10-5(F).

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate December 2013 = 3.17%
SBA Fixed Base Rate December 2013 = 5.39%

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SBA 504 Loan Debenture Rate for December  

The debenture rate is only 3.36% but note rate is 3.44% and the effective yield is 5.458%

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AHEAD OF THE YIELD CURVE 

The bond market tintinnabulates as the yield curve gets steeper.

Last week the U.S. government sold $13 billion of 30-year Treasury bonds at a yield of 3.90%.   In November the 30 year Treasury bonds drew a yield of 3.81%  while in October it was 3.758%.   It was as low as 2.73% earlier this year. 

The slope of the yield curve—the difference between the yields on short- and long-term maturity bonds—has achieved some notoriety as a simple forecaster of economic growth.   The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession in about a year while a flat curve indicates weak growth and a steep curve indicates strong growth.

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

Wait a minute, why no numbers for 2003, 2004, and 2005?

One month after the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury mothballed the 30-year bond in 2001, experts speculated it was trying to drive down long-term interest rates, which had remained stubbornly high while the Federal Reserve was slashing short-term interest rates to revive the economy. When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis points in one day. Why? A shrinking supply of the 30-year Treasury bond caused increased demand to drive rates down.

The December auction bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was at 2.35, versus a bid-to-cover ratio of 2.16 at the November sale.   This is still off from an average of 2.48 at the past 10 auctions.

What does this mean?

I don’t know.

Treasury prices have declined on expectations the Federal Reserve might move this week or early next year to begin scaling back its monthly bond purchases, pushing longer term yields higher. 

What about short term yields for variable rates?

Keep your eyes and ears open for this week’s Federal Reserve meeting on monetary policy.  

Last time the Fed met they anticipated that an “exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”

An EXCEPTIONALLY low range for the federal funds rate will be appropriate.

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OFF BASE

The tintinnabulation of Salvation Army bell ringers with their red kettles is one of the sounds of Christmas just like Jingle Bells.

The Salvation Army has been in the United States since 1879, and in 1891, Captain Joseph McFee (yes, Captain, this is an army after all) of San Francisco came up with the Christmas kettle concept.  The bell ringing season starts in November and runs through Christmas Eve. 

After five grueling days of non-stop bell ringing, the three contenders for the Salvation Army World Bell Ringing record agreed to jointly lay their bells down after 105 hours on December 7th.   Five days of non-stop bell ringing!  It only takes one shift to raise enough money to provide two nights of shelter and four warm meals for the men, women and children who enter their doors every day. 

That’s something to keep in mind when you hear a bell ringing by a Salvation Army red kettle.

I know this is corny but like Zuzu in It’s A Wonderful Life said: “Every time a bell rings an angel gets his wings.”

Merry Christmas!

No Fees For SBA 7(a) Loans!

As set forth in SBA Information Notice 5000-1288, all 7(a) loans approved for $150,000 or less in FY2014 will have a zero fee for both the yearly fee (also known as the ongoing servicing fee) and the upfront guaranty fee.

SBA just released 5000-1294 clarifying SBA 7(a) loan fees.

SBA Loans Are Good For the Economy

Merry Christmas!

SBA 7(a) loan approvals totaled $394,464,000 for the week ending December 6th.

The week prior to the Thanksgiving break had $410,795,000 in SBA 7(a) loan approvals.

This is a very strong, robust pace and bodes well for the economy.

Don't forget that the correlation coefficient between SBA 7(a) loan approvals and our Gross Domestic Product is a statistically significant 0.86!

SBA 504 Loan Debenture Rate for December

SBA 504 Loan Debenture Rate for December   

The debenture rate is only 3.36% but note rate is 3.44% and the effective yield is 5.458%

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate December 2013 = 3.17%
SBA Fixed Base Rate December 2013 = 5.39%

Lenders can charge up to 2.75% over these indices.

SBA Loans Are Good For the Economy

Thankful SBA 7(a) lenders and borrowers took a break for Thanksgiving as $285,510,000 in SBA 7(a) loans were approved for the week ending November 29th.

While down from the prior week, the month of November had $1,303,555,000 in SBA 7(a) loan approvals.

SBA 7(a) loans contribute positively to the economy as the correlation coefficient between SBA 7(a) loan approvals and the gross domestic product is a statistically significant 0.86.

The SBA and wassail

wassail

(WOS-uhl, wo-SAYL) 

To toast.

To go from house to house singing carols at Christmas.

noun:

  1. A toast to someone's health.

  2. A festivity with much drinking.

  3. A drink for toasting, especially spiced ale.

  4. The singing of Christmas carols going from house to house.

From Old Norse ves heill (be well).

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TIP OF THE WEEK 

The time to wassail is upon us.  

The 328 revisions to SBA’s Standard Operating Procedures will be in effect in just a few hebdomads (Bonus word!  A hebdomad (HEB-duh-mad) is a group of seven, or a period of seven days; a week.   It’s from the Latin hebdomas, from Greek hepta (seven)).   If you are too busy wassailing and don’t have a handle on all these pending changes to SBA lending, we’ve got it covered: www.sbapro.com

The FDIC just released its Quarterly Banking Profile for the third quarter.

For the first time in 17 quarters — since the second quarter of 2009 — earnings registered a year-over-year decline.

Lenders however doing SBA loans are enjoying substantial premiums from the sale of guaranteed portions that can be recognized as immediate fee income.

Let me know if you would like a copy of the latest FDIC Quarterly Banking Profile.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate November 2013 = 3.17%
SBA Fixed Base Rate November 2013 = 5.31%

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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%

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AHEAD OF THE YIELD CURVE 

The Federal Reserve keeps telling us that the economy “has been expanding at a MODERATE pace.” 

That’s an improvement from the MODEST pace they mentioned last July.  I’m still not sure what the difference is between moderate and modest.  Minutes however from their last meeting on monetary policy gave us a hint on what modest is.    They said that “Consumer price inflation continued to be MODEST.”  So what is MODEST consumer price inflation?

Last month, the BLS reported that the seasonally adjusted CPI for all urban consumers fell 0.1% (-0.7% annualized rate) in October. The CPI less food and energy increased 0.1% (1.5% annualized rate) on a seasonally adjusted basis.   These measures indicate inflation remains well below the Fed's target (2%).

That means the focus of the Federal Reserve will continue to be jobs.

Keep your eyes and ears open on this week’s jobs report.  

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

October 204,000

September 163,000

August 238,000

July 104,000

June 172,000

May 176,000

April 165,000

March 88,000

February 332,000

January 148,000

2012

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

2011

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

2010

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)

2009

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)

2008

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 in two weeks on monetary policy and they have made it clear that they won’t even consider raising interest rates until unemployment improves.   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 168,000 in the third quarter.  

It would appear that interest rates won’t be going up anytime soon.  Now that’s something to wassail about.

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OFF BASE

The drink of wassail, a hot mulled cider, was traditionally drunk as an integral part of wassailing; an ancient southern English drinking ritual intended to ensure a good cider apple harvest the following year.  The tradition of wassailing now falls into two distinct categories: The House-Visiting wassail and the Orchard-Visiting wassail.   The Orchard-Visiting wassail refers to the ancient custom of visiting orchards in cider-producing regions of England and singing to the trees to promote a good harvest for the coming year.  The House-Visiting wassail is the practice of people going door-to-door singing Christmas carols.

Wassailing even shows up in Hamlet Act 1, Scene 4:

"The king doth wake to-night, and takes his rouse,  

Keeps wassel."  

Hamlet is observing that his uncle is giving himself up to jollity.   We should all give ourselves up to jollity this time of year.  

Keep on wassailing.