Monday, October 20, 2014

The SBA and Bailiwick



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).


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 1st.

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

SBA LIBOR Base Rate October 2014 = 3.15%
SBA Fixed Base Rate October 2014 = 5.35%

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%.

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.
Did you ever wonder why the US government’s fiscal year begins on October 1st.   Jose Lima’s birthday is September 30th, 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."

Monday, October 6, 2014

The SBA and 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.

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.

SBA LIBOR Base Rate October 2014 = 3.15%
SBA Fixed Base Rate October 2014 = 5.35%

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%.

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

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 

Friday, October 3, 2014

SBA 7(a) Loan Rate Update


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.