Thursday, February 27, 2014

SBA Loans Are Good For the Economy

SBA lenders and borrowers took off for Washington's Birthday as only $280,012,000 in SBA 7(a) loans were approved for the week ending February 21th.  This comes after only $302,053,000 in SBA 7(a) loans were approved in the prior week.

If you think that the economy might be sputtering, you might be right.  SBA 7(a) loan approvals are at its slowest pace since the first quarter of 2012.

Keep in mind that the correlation coefficient between SBA 7(a) loan approvals and our economy's Gross Domestic Product is a statistically significant 0.86.

Monday, February 24, 2014

The SBA and Jeremiah

Jeremiah

jer-uh-MY-uh

A person who complains continually, has a gloomy attitude, or one who warns about a disastrous future.

After Jeremiah, a Hebrew prophet during the seventh and sixth centuries before Christ who prophesied the fall of the kingdom of Judah and whose writings are collected in the Book of Jeremiah and the Book of Lamentations.
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TIP OF THE WEEK 

Any negativity about SBA loans is the worthless banter of a jeremiah.

In addition to updating form 1919 for borrowers, the SBA has also just updated form 1920 for lenders.  This results in the elimination of at least five application forms for SBA loan submissions.

SBA loans also have a definite, quantifiable positive impact on the economy.
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Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2014 = 3.16%
SBA Fixed Base Rate February 2014 = 5.31%
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SBA 504 Loan Debenture Rate for February   

The debenture rate is only 3.23% but note rate is 3.28% and the effective yield is 5.309%.
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AHEAD OF THE YIELD CURVE 
Only a jeremiah would be worried about interest rates going up any time soon.

Minutes from the Federal Reserve’s last meeting on interest rates made it clear that it will keep its short-term interest rate near zero "well past" when unemployment reaches 6.5 percent.  Others said the Fed should simply clarify the factors that would cause it to maintain the near-zero rate, such as inflation persistently below the Fed's 2% target.

Inflation is well below the Fed’s target.  U.S. consumer prices barely rose last month.  The Labor Department says the consumer price index rose just 0.1% in January, down from 0.2% in December. Prices have risen 1.6% in the past 12 months. Excluding the volatile food and energy categories, core prices also rose 0.1% last month and 1.6% in the past year.

SBA 7(a) loan volume slowed in the fourth quarter of 2013.  As if on cue, the economy also slowed.

According to the Department of Commerce, the U.S. economy grew at a 3.2% annual clip in the fourth quarter.   That represents a slowdown from the third quarter's growth rate of 4.1%.

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

4th quarter 2013              3.2%
3rd quarter 2013              4.1%
2nd quarter 2013             1.7%
1st quarter 2013              1.1
4th quarter 2012:             0.1%
3rd quarter 2012:             2.8%
2nd quarter 2012:          1.2%
1st quarter 2012:            3.7%

Contrast that with quarterly SBA 7(a) loan volume:

4th quarter 2013:             $3,989,696,000
3rd quarter 2013:             $5,371,662,000
2nd quarter 2013              $4,273,683,000
1st quarter 2013               $4,049,146,000
4TH quarter 2012             $4,173,790,000
3rd quarter 2012              $4,359,166,000
2nd quarter 2012              $4,039,042,000
1st quarter 2012                 $3,443,723,000

Notice how third quarter growth in GDP had jumped over the prior period?  Same thing happened with SBA 7(a) loan volume.

The correlation of SBA 7(a) loan approvals with our nation's economic performance appears to be quite strong.  Just for fun I calculated the correlation coefficient between SBA 7(a) loan volume and GDP for over six years using the Microsoft CORREL function. 

It came out to a statistically significant 0.86.

The Commerce Department’s estimate of fourth quarter growth was its “advance” estimate.  Its “preliminary” estimate of fourth quarter growth will be out later this week.

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OFF BASE

I always thought Jeremiah was a bullfrog.

Wednesday, February 19, 2014

SBA Loans Are Good For the Economy

Only $302,053,000 in SBA 7(a) loans were approved for the week ending February 14, 2014.  This weak week comes after an exceptionally slow January for SBA 7(a) loan approvals.

If you think that the economy might be sputtering, you might be right.  SBA 7(a) loan approvals are at its slowest pace since the first quarter of 2012.

Keep in mind that the correlation coefficient between SBA 7(a) loan approvals and our economy's Gross Domestic Product is a statistically significant 0.86.




Thursday, February 13, 2014

SBA 504 Loan Debenture Rate for February

SBA 504 Loan Debenture Rate for February     

The debenture rate is only 3.23% but note rate is 3.28% and the effective yield is 5.309%.

Wednesday, February 12, 2014

SBA Loans Are Good For the Economy

SBA 7(a) loan approvals jumped to $346,448,000 for the one week period ending February 7th, 2014.

This is so far the best week of 2014.

Don't forget that the correlation coefficient between SBA 7(a) loan volume and the economy's gross domestic product is a statistically significant 0.86.

Monday, February 10, 2014

The SBA and bromide

bromide
BRO-myd
1. A tired or meaningless remark.
2. A tiresome or boring person.
From bromine, from Greek bromos (stench).

Bromine got its name from the Greek bromos (stench) due to its strong smell. In earlier times, potassium bromide used to be taken as a sedative. So any statement that was intended to be soothing ("Don't worry, everything will be OK.") acquired the name bromide.  Eventually any commonplace or tired remark and anyone uttering such remarks came to be known as a bromide.
The term was popularized in the title of Gelett Burgess's 1906 book "Are You a Bromide?"  

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TIP OF THE WEEK 

Ignore the bromides about SBA loans.

The SBA has just updated form 1919 which is now needed for all individuals getting a SBA loan.  It updates the personal history questions.   

It used to ask: Have you EVER been charged with, and/or arrested for, any criminal offense other than a minor motor vehicle violation?

It now asks: Have you BEEN arrested in the past six months for any criminal offense?
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Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2014 = 3.16%
SBA Fixed Base Rate February 2014 = 5.31%
________________________________________

SBA 504 Loan Debenture Rate for January  

The debenture rate is only 3.46% but note rate is 3.516% and the effective yield is 5.541%
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AHEAD OF THE YIELD CURVE 
Keep your eyes and ears open for Thursday’s auction of 30 year Treasury bonds.

The slope of the yield curve—the difference between the yields on short- and long-term maturity bonds—has achieved some notoriety as a simple forecaster of economic growth.   The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession in about a year while a flat curve indicates weak growth and a steep curve indicates strong growth.  The long end of the curve seems to be tilting down.

Last month’s auction of $13 billion of 30 year Treasury bonds sold at a yield of 3.899% compared to December’s 3.90%.   In November the 30 year Treasury bonds drew a yield of 3.81% while in October it was 3.758%.   The 30 Treasury yield has since dropped down to 3.68%.

On Friday, the Federal Reserve will report on capacity utilization.

One of the Fed’s favorite gauges of the economy is the capacity utilization rate which measures how much plants and factories are being used.  The Federal Reserve watches capacity utilization rates to see if production constraints are threatening to cause inflationary pressures. Bottlenecks or shortages often lead to inflationary pressures that would drive prices even higher.   Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.  The Federal Reserve typically won’t initiate increases in interest rates until then.

Here is what capacity utilization rates have done:

1997- 83.6
1998- 83.0
1999- 82.4
2000- 82.6
2001- 77.4
2002- 75.6
2003- 74.6
2004- 79.2
2005- 80.7
2006- 82.4
2007- 81.5
2008- 79.9
2009- 66.9
2010- 74.8
2011- 76.7
2012- 79.0
2013- 77.8

What does all this mean?

I don’t know.

Last month the Fed reported that capacity utilization for total industry moved up 0.1 percentage point to 79.2 percent.

While capacity utilization is up 12.3 percentage points from the record low set in June 2009, it is still 1.0 percentage point below its long-run (1972-2012) average and still well below the Federal Reserve’s trigger point.

So this week’s bromide on interest rates is that they are not going up.

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OFF BASE
I don’t have any bromides for Valentine’s Day which is this Friday.   It is also the beginning of a three day weekend as we celebrate Washington’s Birthday.

That seems a little strange as Washington’s Birthday is not until the 22nd while Lincoln’s is on the 12th.   

Officially it is Washington’s Birthday and NOT “President’s Day.” 

In 1968, Congress passed the Uniform Monday Holidays Act, which moved the official observance of Washington's Birthday from February 22nd to the third Monday in February.  An early draft of the Uniform Monday Holiday Act would have renamed the holiday to "Presidents' Day" to honor the birthdays of both Washington and Lincoln, since Lincoln’s is February 12th.  This proposal however failed in committee and the bill as voted on and signed into law on June 28th 1968, kept the name Washington's Birthday.

Not only is Lincoln not getting his due, but Ronald Reagan is also being shortchanged.  His birthday is February 6th. 

Obviously the only equitable way to remedy this grievous oversight is to give each of these great Presidents their own birthday holidays.   Keeping in the spirit of the Uniform Monday Holidays Act, we could celebrate Reagan’s on the first Monday in February, Lincoln’s on the second Monday in February, and George still gets the third Monday.


Are you a bromide?

Friday, February 7, 2014

SBA Loans Are Good For the Economy

Only $1,193,005,000 in SBA 7(a) loans were approved in the month of January.

SBA 7(a) loan volume for month of December ended up at $1,806,928,00 compared to November's $1,303,555,000 in SBA 7(a) loan approvals.

Keep in mind that the correlation coefficient between SBA 7(a) loan approvals and the Gross Domestic Product is a statistically significant 0.86.

If you are thinking the economy might be slowing down, you might be right.  SBA loan volume is now crawling along at its weakest pace since the first quarter of 2012.

Wednesday, February 5, 2014

SBA 7(a) Loan turn-around time

I just submitted a Small Loan Advantage 7(a) request to the Loan Guaranty Processing Center and SBA approved it in less than 1 week!