The SBA and PROpugnaculum

 propugnaculum

praw-puhg-NAK-yuh-luhm

A fortress; defense; protection.

From Latin propugnaculum (bulwark), from propugnare (to fight in defense of something), from pro- (toward) + pugnare (to fight), from pugnus (fist).

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TIP OF THE WEEK

 

Propugnaculums proliferate in protean ways with SBA 7(a) loans.  Almost $400,000,000 in SBA 7(a) loans were approved in just the one week period ending December 4th.    About half those loans were to existing businesses and about 22 percent were for business acquisitions.   The rest were to new businesses.

 

Don’t go procumbent however with the not so propitious promulgation regarding the tax issues for payments made by the SBA for existing 7(a) borrowers that prompted procellous proditomania.   Lenders are required to issue forms 1099-MISC.

 

In addition, The U.S. Treasury Department and Internal Revenue Service had also released guidance on the Paycheck Propugnaculum Program (PPP) that since businesses are not taxed on the proceeds of a forgiven PPP loan, the expenses are not deductible.

 

If a business reasonably believes that a PPP loan will be forgiven in the future, expenses related to the loan are not deductible, whether the business has filed for forgiveness or not.

 

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Indices:

PRIME RATE= 3.25%

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SBA 504 Loan Debenture Rate for December For 20 year debentures, the debenture rate is only 1.11% but note rate is 1.13% and the effective yield is 2.427%.

For 25 year debentures, the debenture rate is only 1.21% but note rate is 1.228% and the effective yield is 2.471%.

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AHEAD OF THE YIELD CURVE

 

The prodigious and promethean propugnaculums attempted by the government may have been profligate.

 

Initial jobless claims soared with a 137,000 increase, reaching 853,000 in the week ended December 5.

 

No larger increase had been recorded since the week ended March 28, when the impact of the pandemic on claims was at its highest.

 

There was a clear slowdown in hiring activity as reflected in the jobs report for November.

 

For what it is worth, Here is a summary of net payroll employment and this week’s interesting little table of data:

November  245,000

October  610,000

September 711,000

August   1,489,000

July         1,761,000

June      4,791,000

May       2,725,000

April       -20,700,000

March     -1,400,000

February  275,000

January   214,000

2019     2,108,000

2018      2,679,000

2017      2,110,000

2016      2,160,000

2015     2,740,000

2014     3,116,000

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 all this mean?

 

I don't know.

 

Last week’s Treasury sale of 30 year bonds was very strong.

 

The incredibly spiking US national debt has soared by $3.75 trillion since March 1, powered by stimulus and bailouts, and by $4.2 trillion over the past 12 months, to $27.3 trillion.

 

Despite this, the 30 year auction saw a high yield of only 1.665% which is 1.5 basis points below last month’s auction rate.

 

It is a propitious time for prospicient borrowers.

 

 

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OFF BASE

 

What is the propugnaculum for these times?

 

We might want to remember the following from John Barry’s “The Great Influenza”:

 

“The 1918 virus, like all influenza viruses, like all viruses that form mutant swarms, mutated rapidly.  There is a mathematical concept called reversion to the mean; this states simply that an extreme event is likely to be followed by a less extreme event. This is not a law, only a probability.  The 1918 virus stood at an extreme; any mutations were more likely to make it less lethal than more lethal. In general, that is what happened.  Just as it seemed that the virus would bring civilization to its knees, as it would do what the plagues of the Middle Ages had done, would remake the world, the virus mutated toward its mean, toward  the behavior of most influenza viruses.  As time went on, it became less lethal.”

 

If the past is indeed prologue, that’s one prognosis.

 

Monday, December 21st is the darkest and longest night of the year- the Winter Solstice.   After that the days begin to get longer and the hope and promise of Spring approaches.