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%.

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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%.

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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 

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate October 2014 = 3.15%
SBA Fixed Base Rate October 2014 = 5.35%

Lenders can charge up to 2.75% over these indices.