Monday, June 16, 2014

The SBA and brouhaha

BROO-ha-ha, broo-ha-HA, broo-HA-ha
Noise, confusion, and excitement, especially over something insignificant.
An alteration of the Hebrew term barukh habba (welcome, literally, "blessed be the one who comes").



A brouhaha erupted recently as the Small Business Administration becomes un-pervicacious with the lender explicitly calculating a borrower’s ability to repay proposed loans of $350,000 and less.  Effective July 1st, SBA Information Notice 5000-1314 declares that the Small 7(a) loan credit scoring model satisfies the requirement that the lender demonstrate the applicant’s ability to repay the loan with earnings from the business.   The credit score alone is enough.  Verifications of IRS income tax returns are still required however and if anything in the lender’s financial analysis demonstrates that the Small Business Applicant lacks reasonable assurance of repayment in a timely manner from the cash flow of the business, the loan request must still be declined, regardless of the collateral available or outside sources of cash.

Another brouhaha is also coming on franchise eligibility determinations!


SBA LIBOR Base Rate June 2014 = 3.15%
SBA Fixed Base Rate June 2014 = 5.31%

SBA 504 Loan Debenture Rate for June
The debenture rate is only 2.99% but note rate is 3.04% and the effective yield is 5.069%.

No brouhaha is expected once the Federal Reserve meets this week on interest rates.

The last time the Federal Open Market Committee met on monetary policy they said that they might have to keep “the target federal funds rate below levels the Committee views as normal in the longer run.”

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:

DEC14- 0.29
DEC15- 1.01
DEC16- 2.10
DEC17- 2.90
DEC18- 3.41
DEC19- 3.78
DEC20- 4.04

What does all this mean?

I don’t know.

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

Where’s the brouhaha over hurricane season?
The eastern Pacific has never witnessed storms so strong so early.  First, hurricane Amanda became the strongest May hurricane in the eastern Pacific on record, when its peak winds soared to 155 mph (high-end category 4 level) on May 25. Now, just over two weeks later, the eastern Pacific has given birth to the powerhouse hurricane Cristina whose maximum sustained winds also reached 155 mph!
Forecasters have called for an active eastern Pacific hurricane season due to the expectation of El NiƱo conditions which elevate ocean temperatures (in the tropical Pacific).
The lack of a brouhaha might all be in their names.  People don’t take hurricanes as seriously if they have a feminine name and the consequences are deadly, finds a new groundbreaking study.

Female-named storms have historically killed more because people neither consider them as risky nor take the same precautions, the study published in the Proceedings of the National Academy of Sciences concludes.  Researchers at the University of Illinois and Arizona State University examined six decades of hurricane death rates according to gender, spanning  1950 and 2012.  Of the 47 most damaging hurricanes, the female-named hurricanes produced an average of 45 deaths compared to 23 deaths in male-named storms, or almost double the number of fatalities.  The difference in death rates between genders was even more pronounced when comparing strongly masculine names versus strongly feminine ones.

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