SBA 504 Loan Debenture Rate

SBA 504 Loan Debenture Rate for December      

The debenture rate is only 2.70% but note rate is 2.74% and the effective yield is 4.782%.

The SBA and betide

betide

bi-TYD

To happen.

From Old English tidan (happen), from tid (time).

Betide is often shortened to tide or tidings.  Such as when Linus Van Pelt declared in a Charlie Brown Christmas: “Fear not: for, behold, I bring you good tidings of great joy!”

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TIP OF THE WEEK 

Good tidings for the restaurant industry.

Driven by stronger sales and traffic and a more optimistic outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) posted a solid gain in October. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.8 in October, up 1.8 percent from its September level. In addition, the RPI stood above 100 for the 20th consecutive month, which signifies expansion in the index of key industry indicators.

According to the SBA, restaurants obtain more SBA 7(a) loans that any other business type.

If you would like a copy of the National Restaurant Association’s Restaurant Performance Index for October let me know.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate December 2014 = 3.16%

SBA Fixed Base Rate December 2014 = 5.19%

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SBA 504 Loan Debenture Rate for November       

The debenture rate is only 2.80% but note rate is 2.84% and the effective yield is 4.879%.

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Glad tidings are the only possible way to describe the report on employment for the month of November.

According to the Bureau of Labor Statistics, employment increased 321,000.  Jobs added last month were the most since January 2012 and only the second time this year that one-month gains exceeded 300,000.

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

November                          321,000

October                               243,000

September                          271,,000

August                                  180,000

July                                       243,000

June                                      288,000

May                                       224,000

April                                     304,000

March                                   203,000

February                             222,000

January                               144,000

2013     2,074,000

2012     2,193,000

2011      2,103,000

2010     1,022,000

2009     -5,052,000

2008     -3,617,000

2007    1,115,000

2006     2,071,000

2005     2,484,000

2004     2,019,000

What does this mean?

I don’t know.

This was the tenth consecutive month over 200,000, and an all time record 50th consecutive month of job gains.  This is the best year since 1999.  Private employment is up 10.9 million from the recession low. 

Does that mean interest rates will be going up soon?

The Federal Reserve meets next week and officials are expected to debate retaining their “considerable time” commitment. The FOMC statement issued October 29^th  repeated that officials expect to keep rates near zero “for a considerable time.  One of their concerns is that inflation remains below their target of 2%.  The Fed’s preferred gauge of price pressures facing U.S. consumers rose 1.4 percent in October from the same period a year ago and has not been above 2 percent since March 2012.

In the meantime, keep your eyes and ears open for this week’s sale of 30 year Treasury bonds.

Last month the Treasury Department’s $16 billion sale of 30-year notes sold at a yield of 3.092%.  Since then the 30 year yield has drifted around 2.97%.

The long bond yield has dropped more than 90 basis points since the start of the year.  July’s auction sold at a yield of 3.369%.  April’s $13 billion auction of 30 year Treasury bonds sold at a yield of 3.525%.  In March the auction drew a yield of 3.630% compared to February’s yield of 3.69%.  January’s auction sold at a yield of 3.899% compared to December’s 3.90%.  

This distinct flattening of the long end of the yield curve implies investors are rethinking the timing of Federal Reserve interest-rate hikes.

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OFF BASE

We now only use the word 'tide' to denote the regular rising and falling of the sea. We can get a better understanding of what 'tide' and 'betide' mean by substituting 'tide' with 'time', which is just what the mediaeval clerics did - the two words were near enough synonymous. Knowing that 'tide' means 'period of time' or 'season', we can see that a lunar tide can be translated as 'a period of approximately twelve and a half hours' .  The tide/time transliteration also survives in 'good tidings', that is, 'a good time.

Betide is hardly ever used anymore except  as 'woe betide you' as 'you are in for a bad time'.  Woe betide you if you don’t get the meaning of Christmas.

Charlie Brown, frustrated, screams out in classic Charlie Brown fashion: “Isn't there anyone who knows what Christmas is all about?”

Linus replies: “Sure, Charlie Brown, I can tell you what Christmas is all about.”

 "And there were in the same country shepherds abiding in the field, keeping watch over their flock by night. And lo, the angel of the Lord came upon them, and the glory of the Lord shone round about them: and they were sore afraid. And the angel said unto them, 'Fear not: for behold, I bring unto you good tidings of great joy, which shall be to all people. For unto you is born this day in the City of David a Savior, which is Christ the Lord. And this shall be a sign unto you; Ye shall find the babe wrapped in swaddling clothes, lying in a manger.' And suddenly there was with the angel a multitude of the heavenly host, praising God, and saying, 'Glory to God in the highest, and on earth peace, good will toward men.'"

Linus picks up his blanket and walks back towards Charlie Brown

“That's what Christmas is all about, Charlie Brown.”

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate December 2014 = 3.16%
SBA Fixed Base Rate December 2014 = 5.19%

Lenders can charge up to 2.75% over these indices.

The SBA and supplicatory

supplicatory

SUH-pli-kuh-tor-ee 

Humbly pleading.

From Latin supplicare (to kneel).

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TIP OF THE WEEK 

Commercial real estate prices continued to surge in the third quarter.

According to CoStar, commercial property sales activity surged 23% over the last year.

Both industrial properties and hotels experienced healthy gains.

This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at September 2014 commercial real estate pricing. Based on 1,214 repeat sales in September 2014 and more than 125,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity. 

If you would like a copy of this release from CoStar, send a supplicatory email.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate November 2014 = 3.16%

SBA Fixed Base Rate November 2014 = 5.28%

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SBA 504 Loan Debenture Rate for November       

The debenture rate is only 2.80% but note rate is 2.84% and the effective yield is 4.879%.

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Minutes of the Federal Reserve’s last meeting on monetary policy on October 28^th and 29^th said that they should be on the lookout for signs of a decline in expectations for inflation.

Over the last 12 months, the Consumer Price Index increased 1.7 percent according to the Bureau of Labor Statistics and has remained below the Fed’s 2 percent target for 29 consecutive months

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.

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

2014- 78.8

Capacity utilization for the industrial sector decreased 0.3 percentage point in October to 78.9 percent, a rate that is 1.2 percentage points below its long-run (1972–2013) average. Capacity utilization at 78.9% is 1.2 percentage points below its average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007.

What does all this mean?

I don’t know.

Also reflected in the Fed minutes was the concern that inflation might persist below the Committee's objective for quite some time.

It would appear that interest rates will not be going up anytime soon.

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OFF BASE

While inflation may not be appearing on the Federal Reserve’s radar, it is hitting home.

Americans will be paying the second-highest costs on record for their Thanksgiving dinners.

Blame the sweet-potato casserole.  Higher prices for sweet potatoes, whipping cream, and pumpkin-pie mix are driving the gains. A feast for 10 will come in at $49.41 this year, a modest 37-cent increase from 2013, while just shy of the all-time high of $49.48 set in 2012, according to a price survey by the American Farm Bureau Federation that was started in 1986.  Prices for a 3-pound (1.4 kilogram) bag of sweet potatoes rose 6 percent to $3.56, and the cost of a half pint of whipping cream climbed 8.1 percent to $2. A 16-pound turkey will cost shoppers $21.65 this year, down from $21.76 in 2013.  Turkey prices fell because retailers offered discounts to lure customers, even though U.S. grocers are paying the highest prices ever at the wholesale level.

Americans eat about 46 million of the birds on Thanksgiving. 

The average weight of a turkey purchased at Thanksgiving is 15 pounds.  How many persons can a 15 pound turkey feed?  Allow 1 pound of uncooked turkey per person. So to answer your question - 15 people without leftovers.   

So if 46 million turkeys are served and 15 people can eat a single turkey that is 675 million people that can be fed.  That’s more than twice the population of the United States.

One in seven Americans – 46 million people – rely on food pantries and meal service programs to feed themselves and their families, according to a study by Feeding America, a network of 200 food banks

46 million turkeys will be eaten on Thanksgiving Day.  46 million people in American are going hungry every day.  Have a Happy Thanksgiving.

SBA 504 Loan Debenture Rate

SBA 504 Loan Debenture Rate for November       

The debenture rate is only 2.80% but note rate is 2.84% and the effective yield is 4.879%.

The SBA and veteran

Veteran

vet-er-uh n, ve-truh n

a person who has had long service or experience in an occupation, office, or the like:

-a person who has served in a military force, especially one who has fought in a war:

-a Vietnam veteran.

-experienced through long service or practice; having served for a long period:

of, pertaining to, or characteristic of veterans.

  From Latin veterānus mature, experienced, equivalent to veter- (stem of vetus) old

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TIP OF THE WEEK 

U.S. military veterans can now save up to $69,062.50 on the SBA 7(a) loan guarantee fee.

SBA Policy Notice5000-1319 declares that the SBA guarantee fee on SBA 7(a) loans is now reduced by 50% for small businesses that are 51% or more owned and controlled by a veteran.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate November 2014 = 3.16%

SBA Fixed Base Rate November 2014 = 5.28%

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SBA 504 Loan Debenture Rate for October

The debenture rate is only 2.740% but note rate is 2.787% and the effective yield is 4.15%.

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Veteran interest rate observers have noticed a flattening of the yield curve.

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.  More generally, a flat curve indicates weak growth and conversely, a steep curve indicates strong growth.

Since last month, the yield curve flattened sharply.  

Leading the charge is the 30 year Treasury bond.  At last month’s auction of the 30 year Treasury bond, it yielded 3.074 percent, the least since May of 2013.  The yield has languished around there since then, almost a month ago.

Is the bond market trying to tell us something about how the economy is doing?  Are these lower longer term rates a harbinger of slower economic growth ahead?

Actually, robust economic growth has helped push the U.S. budget deficit down to the lowest level since 2008, marking the sharpest turnaround in the government’s fiscal position in at least 46 years.  The shortfall of $483.4 billion in the 12 months ended Sept. 30 was 2.8 percent of the nation’s gross domestic product of $17.2 trillion over the same period.  The figure peaked at 10.1 percent of GDP in December 2009.  The Congressional Budget Office in August predicted the deficit will shrink further this fiscal year, to 2.6 percent of GDP, before rising to 2.9 percent in the presidential election year of 2016. Before the fourth quarter of 2008, the last time the deficit-to-GDP share reached 2.8 percent was in April 2005.  The reprieve is enabling the government to reduce the amount of debt sold in the short term.  The Treasury recently said its borrowing this quarter will decline to the least for the October-December period since 2007.

As a result, the government can borrow more cheaply than it has in the past. Yields on 30-year Treasuries have averaged 3.4 percent this year, compared with 6.09 percent over the past three decades. 

Futures markets suggested a path of interest-rate increases far below Federal Reserve officials’ own published projections. 

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:

DEC14- 0.25

DEC15- 0.83

DEC16- 1.81

DEC17- 2.50

DEC18- 2.87

DEC19- 3.06

DEC20- 3.35

What does all this mean?

I don’t know.

Eurodollar futures currently imply a federal funds rate of 2.28 percent at the end of 2017, well below the 3.75 percent median projection in Fed policy makers’ most recent forecast, published in September. The probability that the Fed’s benchmark rate will be below 1 percent by the end of 2017, derived from options on eurodollar futures contracts, is 17.3 percent, up from 11.4 percent six months ago.

Traders are betting the Federal Reserve won’t raise interest rates any time soon.

In the meantime, keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.

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OFF BASE

Veterans Day is November 11^th and it is a Federal holiday.

According to the Federal Reserve, here is our remaining holidays for 2014:

Veterans Day November 11
Thanksgiving Day November 27
Christmas Day December 25 

So why is it on the 11^th instead of a Monday?  Major hostilities of World War I were formally ended at the 11th hour of the 11th day of the 11th month of 1918, when the Armistice with Germany went into effect. It coincides with other holidays such as Armistice Day and Remembrance Day, which are celebrated in other parts of the world  

By the way, it is Veterans Day - a simple plural without a possessive apostrophe (Veteran's or Veterans').  The United States government has declared that the attributive (no apostrophe) rather than the possessive case is the official spelling.

To all our Veterans, THANK YOU.

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate November 2014 = 3.16%
SBA Fixed Base Rate November 2014 = 5.28%

Lenders can charge up to 2.75% over these indices.

The SBA and Bailiwick

bailiwick

BAY-luh-wik 

A person's area of expertise or interest.

From Middle English bailliwik, from bailie (bailiff), from bail (custody), from Latin baiulare (to serve as porter) + Middle English wick (dairy farm or village), from Old English wic (house or village), from Latin vicus (neighborhood).

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TIP OF THE WEEK 

SBA loans are of course our bailiwick.

The SBA ended its fiscal year on an exceptionally strong note with SBA 7(a) loan approvals increasing by over 11% from last year’s totals.

Fortunately a continuing resolution provided a $1 billion increase in the SBA's lending authority for both fiscal 2014 which just ended and fiscal year 2015 which has just begun.

The government’s fiscal year began October 1^st.

SBA loan fees remain at ZERO for loans of $150,000 and less.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate October 2014 = 3.15%

SBA Fixed Base Rate October 2014 = 5.35%

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SBA 504 Loan Debenture Rate for October

The debenture rate is only 2.740% but note rate is 2.787% and the effective yield is 4.15%.

 ________________________________________________
AHEAD OF THE YIELD CURVE 

The Federal Reserve’s bailiwick is supposedly monetary policy with a dual mandate to control inflation while making sure everyone can get a job.

Now they are getting concerned about inflation.  More precisely, they are concerned about NO inflation.

The Federal Open Market Committee is shifting its focus toward prices after putting its main emphasis on jobs for months. Several officials worried that “inflation might persist below” the committee’s target for “quite some time,” minutes from the Sept. 16-17 meeting said.

Longer-run inflation expectations have clearly eroded in the financial markets.

At the most recent auction of 30 year Treasury bonds, 30 year yields reached the lowest since May 2013.  The 30-year bonds yielded 3.074 percent at auction.

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

2014- 3.074

The 30 year Treasury bond is currently at 2.97 percent.

What does all this mean?

I don’t know.

Traders are betting the Federal Reserve won’t raise interest rates any time soon.

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OFF BASE

Did you ever wonder why the US government’s fiscal year begins on October 1^st.   Jose Lima’s birthday is September 30^th, but that has nothing to do with it.

The Federal fiscal year gives elected Congressmen, who begin office in January, time to participate in the budget process for the next fiscal year. The President kicks off the process when he submits the budget for the next year by the first Monday in February. Congress, including the newly elected officials, has until September 30 submit their own budgets and negotiate final budget to submit back to the President. If Congress doesn't meet the deadline, then some non-essential government agencies may start to shut down as we found out last year.

It wasn’t always that way.  

The first fiscal year for the U.S. Government started Jan. 1, 1789. Congress changed the beginning of the fiscal year from Jan. 1 to Jul. 1 in 1842, and finally from Jul. 1 to Oct. 1 in 1977 where it remains today.

The word "fiscal" was originally a Latin word meaning "a small rush basket," used as a purse. This became the "public purse," which became the French word fiscal, meaning "to tax."

The SBA and shrift

Shrift

Confession to a priest. Also, penance and absolution that follow confession.

From Old English scrift (confession, penance), from scrifan (to shrive: to impose penance). Ultimately from the Indo-European root skribh- (to cut, separate, or sift).

The term nowadays is mostly seen in the form "to get short shrift" meaning to receive little consideration or a curt treatment. Originally, short shrift was what condemned criminals received: brief time granted to them for confession and absolution before execution.

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TIP OF THE WEEK 

If you gave all the rules regarding SBA loans short shrift, don’t worry.

SBA has just released another new set of Standard Operating Procedures.

SOP 50-10-5(G) is effective as of October 1st, 2014.  It will remain in effect until the release of SOP 50-10-5(H) followed by SOP 50-10-5(I), SOP 50-10-5(J), SOP 50-10-5(K), SOP 50-10-5(L), SOP 50-10-5(M), SOP 50-10-5(N), SOP 50-10-5(O), SOP 50-10-5(P), SOP 50-10-5(Q), SOP 50-10-5(R), SOP 50-10-5(S), SOP 50-10-5(T), SOP 50-10-5(U), SOP 50-10-5(V), SOP 50-10-5(W), SOP 50-10-5(X), and SOP 50-10-5(Y).  No word on if and when SOP 50-10-5(Z) will ever be released.

Among the changes are Elimination of the Personal Resource Test and clarification of the language concerning the eligibility of businesses such as barber shops, hair salons, nail salons, and similar types of businesses.

SBA loan fees also remain at ZERO for loans of $150,000 and less.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate October 2014 = 3.15%

SBA Fixed Base Rate October 2014 = 5.35%

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SBA 504 Loan Debenture Rate for September  

The debenture rate is only 2.969% but note rate is 2.69% and the effective yield is 5.002%.

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Is the bond market giving the economic recovery short shrift?

U.S. Treasury prices surged on Wednesday, as investors thought that the world was coming to an end and sought out safe assets, pushing benchmark yields to their biggest one-day drop in nearly nine months.

The 30-year bond yield plunged 11 basis points to 3.098%.

On Friday, the Commerce Department reported that employment increased by 248,000 in September.

The 30 year bond yield ended up at 3.131%.  

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

September          248,000

August                 180,000

July                       243,000

June                      288,000

May                       224,000

April                     304,000

March                   203,000

February             222,000

January               144,000

2013     2,074,000

2012     2,193,000

2011      2,103,000

2010     1,022,000

2009     -5,052,000

2008     -3,617,000

2007    1,115,000

2006     2,071,000

2005     2,484,000

2004     2,019,000

What does this mean?

I don’t know.

At the current pace (through September), the economy will add 2.72 million jobs this year (2.64 million private sector jobs). Right now 2014 is on pace to be the best year for both total and private sector job growth since 1999.

Keep your eyes and ears open for Thursday’s auction of the 30 year Treasury bond.

Last month, The Treasury Department sold $13 billion in 30 year bonds at a yield of 3.240%, the highest yield since July.

The long bond yield has dropped more than 50 basis points since the start of the year.  July’s auction sold at a yield of 3.369%.  April’s $13 billion auction of 30 year Treasury bonds sold at a yield of 3.525%.  In March the auction drew a yield of 3.630% compared to February’s yield of 3.69%.  January’s auction sold at a yield of 3.899% compared to December’s 3.90%.  

The gap between shorter- and longer-term Treasury yields narrowed to its smallest since 2009 on Friday, a sign that investors are rethinking the timing of Federal Reserve interest-rate hikes

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OFF BASE

Don’t give short shrift to Columbus Day.

It’s a federally recognized holiday and an excuse for an upcoming three day weekend.

According to the Federal Reserve, here is our remaining holidays for 2014:

Columbus Day October 13
Veterans Day November 11
Thanksgiving Day November 27
Christmas Day December 25