Monday, March 9, 2020

The SBA and PROgnosticate


prognosticate
prahg-NAHSS-tuh-kayt

-to foretell from signs and symptoms : predict

-to give an indication of in advance : foreshadow


from Greek pro- ‘before’ + gignĊskein ‘know’.

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TIP OF THE WEEK

The prognostication from SBA is that the SOP 50-10-6 will include the new Interim Final Rule guidance effective March 11, 2020.

That means SBA loan applicants will be subject to a personal resources test as follows:


-If the total financing project is $350,000 or less, each 20 percent owner must inject any liquid assets that are in excess of 2 times the total financing package, or $500,000, whichever is greater

-If the total financing project is between $350,001 and $1,000,000, each 20 percent owner must inject any liquid assets that are in excess of 1.5 times the total financing package, or $1,000,000, whichever is greater

-If the total financing project exceeds $1,000,000, each 20 percent owner of the Applicant must inject any liquid assets that are in excess of 1 times the total financing package, or $2,500,000, whichever is greater



SBA has also expanded its definition of an affiliate to include a loan applicant which derived more than 85 percent of its receipts over the previous three fiscal years from a contractual relationship with another concern.  SBA has also provided guidance for exceptions on affiliation.  If you would like a copy of their guidance of the exception, let me know.



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Indices:
PRIME RATE= 4.25%
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SBA 504 Loan Debenture Rate for March

For 20 year debentures, the debenture rate is only 1.49% but note rate is 1.518% and the effective yield is 2.808%.

For 25 year debentures, the debenture rate is only 1.62% but note rate is 1.643% and the effective yield is 2.881%.
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AHEAD OF THE YIELD CURVE

The fed funds futures market had prognosticated last week’s Federal Reserve cutting of the target range for the fed funds rate by 50 basis points to 1.00% to 1.25%.

The Federal Reserve did not suggest further rate cuts were forthcoming, but investors are adding to bets that the central bank will ease policy again at its March meeting on the 18th and 19th.

Even better-than-expected gains in U.S. job growth in February in Friday’s Labor Department data failed to blunt the bond-market rally that caused longer term interest rates to go procumbent.

The 30-year bond yield tumbled 35.4 basis points to 1.216%, and 44.2 basis points for the week, its biggest such drop since September 2011.

With the 30 year bond now at an all time historical low, keep your eyes and ears open for Thursday’s auction of the 30 year Treasury bond.

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:
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- 3.97
2015- 2.91
2016- 2.32
2017- 3.16
2018- 3.13
2019- 2.594
2020- 1.216

What does all this mean?

I don’t know.

Prognostication right now with procellous proditmania proliferating can be profligate.

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OFF BASE

Yogi Berra once proclaimed, "It's tough to make predictions, especially about the future."

One of the most famous prognostications of all time was from the soothsayer in Shakespeare’s Julius Caesar in Act I, scene 2, line 103 when he said “Beware the ides of March.”

So what the heck is an ide?

The Ides Of March refers to how the Romans kept track of the days in a month, which is quite different from how we do it. While we count the days sequentially from the first day all the way to the last day, the Romans used a different system. They counted backward from three fixed points of the month. For instance, the Nones usually fell on the 7th, the Ides on the 15th and the Kalends was the beginning of the month.

It is now known as the day Caesar was assassinated.  After being warned, Caesar took the prophecy very lightly. In fact, as he passed the seer on his way to the Theater of Pompey where he ends being stabbed to death by Brutus and 60 other Senators,  Caesar commented that “The Ides of March have come.” To that, the seer is reported to have replied, “Aye, Caesar; but they have not gone.”

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