Wednesday, April 30, 2014

SBA Loans Are Good For the Economy

Gross domestic product, the broadest measure of goods and services produced across the economy, increased at just a 0.1% annual pace for the first quarter of 2014.

That’s down from 2.6% in the fourth quarter and is the weakest pace since late 2012.

What happened?

This slowdown in GDP should not have come as a surprise to anyone who remembers that SBA 7(a) loans provide a substantial, tangible economic benefit that trickles throughout the economy.

Here is what GDP has been doing and this week’s interesting little table of data:

1st quarter 2014                0.1
4th quarter 2013              2.6%
3rd quarter 2013              4.1%
2nd quarter 2013             2.5%
1st quarter 2013              1.1
4th quarter 2012:             0.1%
3rd quarter 2012:             2.8%
2nd quarter 2012:          1.2%
1st quarter 2012:            3.7%

Contrast that with quarterly SBA 7(a) loan volume:
1st quarter 2014                $4,106,960,000
4th quarter 2013:             $3,989,696,000
3rd quarter 2013:             $5,371,662,000
2nd quarter 2013              $4,273,683,000
1st quarter 2013               $4,049,146,000

Notice the slump in 7(a) loan volume in the last quarter of 2013?  Thanks to the government shutdown back in October, SBA 7(a) loan approvals grinded to a halt and then it took some time to get back up and running.

The impact was manifested with the drop off in economic activity in the following quarter.

The correlation of SBA 7(a) loan approvals with our nation's economic performance appears to be quite strong.  Just for fun I calculated the correlation coefficient between SBA 7(a) loan volume and GDP for over six years using the Microsoft CORREL function. 

It came out to a statistically significant 0.86.

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