The SBA and PROtract

protract

pro-trakt

1: to prolong in time or space : CONTINUE

2: to extend forward or outward

 

From Latin protractus, past participle of protrahere, literally, to draw forward, from pro- forward + trahere to draw

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TIP OF THE WEEK

 

The Paycheck Protection Program (PPP) has been has been protracted in protean ways.  This propugnaculum for small business will re-open the week of January 11 for new borrowers and certain existing PPP borrowers.

There is also a propitious promulgation that all borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of P&I, starting in February 2021. Going forward, those payments will be capped at $9,000 per borrower per month.  After the three-month period described above, borrowers considered to be hardest-hit by the pandemic will receive an additional five months of P&I payments, also capped at $9,000 per borrower per month.

 

SBA payments of P&I on the first 6 months of newly approved loans will resume for all loans approved between February 1 and September 30, 2021, also capped at $9,000 per month.

 

Lender and borrower fees for both the 7(a) and 504 loan programs through September 30, 2021 are waived.  For 7(a) this includes the up-front guaranty fee and the ongoing fee.

 

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Indices:

PRIME RATE= 3.25%

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SBA 504 Loan Debenture Rate for January

For 20 year debentures, the debenture rate is only 1.18% but note rate is 1.207% and the effective yield is 2.496%.

For 25 year debentures, the debenture rate is only 1.28% but note rate is 1.299% and the effective yield is 2.540%.

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AHEAD OF THE YIELD CURVE

 

Protracted profligacy continues as in December the year-over-year change in employment was a negative 9.37 million jobs.

 

Total combined jobs created in 2017, 2018 and 2019 totaled 6.9 million.

 

The overall picture, however, was uneven, as private-sector job losses were concentrated in service.  For the month of December there was a 498,000 drop in leisure and hospitality.

 

Employment in goods-producing sectors, on the other hand, was up 93,000, including a 38,000 gain in manufacturing.

 

Keep your eyes and ears open for this week’s report on Industrial Production and Capacity Utilization from the Federal Reserve.

 

Here is what capacity utilization has been doing and this week’s interesting little table of data:

2007- 81.5

2008- 79.9

2009- 66.9

2010- 74.8

2011- 76.7

2012- 79.0

2013- 77.8

2014- 78.8

2015- 76.5

2016- 75.4

2017- 76.2

2018- 78.5

2019- 77

2020- 72.7

 

What does all this mean?

 

I don’t know.

 

In November capacity utilization crawled up to 73.3 percent.  Back in April it was at an all-time low of 64.9 percent.

 

If this pace doesn't improve, it will be well into next year if not longer before the industrial economy will finally make up Covid's destruction.

 

The long end of the yield curve implies that the pace may indeed improve.   Also keep your eyes and ears open for this week’s auction of the 30 year Treasury bond.

 

At last month’s auction of $24 billion in 30 year Treasury bonds, the high yield was 1.665%.  The yield is now up to 1.877%.

The yield curve is getting steeper.

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OFF BASE

 

As the calendar turns to a new year, a three day weekend already approaches!

The Federal Reserve has promulgated that these are our holidays for 2021:

Birthday of Martin Luther King, Jr. January 18 

Washington's Birthday February 15 

Memorial Day May 31 

Independence Day July 4 

Labor Day September 6 

Columbus Day October 11 

Veterans Day November 11 

Thanksgiving Day November 25 

Christmas Day December 25