Monday, May 16, 2016

The SBA and quiescent

quiescent
kwee-ES-uhnt, kwy
Still; inactive; not showing symptoms.
From Latin quiescere (to rest), from quies (quiet).

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TIP OF THE WEEK 

Things remain quiescent for small businesses according to the National Federation of Independent Business’ (NFIB) monthly economic survey.

According to the NFIB monthly report, loan demand remains historically weak as owners can’t find many good reasons to borrow to invest when expectations for growth are not very positive.

Interest rates are low, but prospects for putting borrowed money profitably to work have not improved enough to induce owners to step up their borrowing and spending.

This is being reflected in SBA 7(a) loan volume as it up only 9% through April 29th compared to the 23% growth a year ago.

If you would like a copy of the NFIB monthly report, let me know.


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Indices:
PRIME RATE= 3.50%
SBA LIBOR Base Rate May 2016 =3.44%
SBA Fixed Base Rate May 2016 = 4.97%
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SBA 504 Loan Debenture Rate for May  
The debenture rate is only 2.27% but note rate is 2.31% and the effective yield is 4.32%.
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AHEAD OF THE YIELD CURVE 

Quiescent inflation is keeping interest rates low.

On Friday, the yield on the 30-year Treasury bond fell 5.1 basis points to 2.552% and was down 8 basis points over the week.

Last week the $15 billion auction of the 30 year Treasury bond saw lackluster demand, after two auctions earlier this week — $23 billion in 10-year Treasuries on Wednesday and $24 billion in 3-year Treasuries on Tuesday—experienced stellar demand, driving yields to their lowest level in a month on Wednesday and perhaps reflecting a market preference for shorter maturities given economic uncertainty.

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

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
2014- 78.8
2015- 76.5

What does all this mean?

I don’t know.

Last month, the Federal Reserve reported that capacity utilization, which measures the amount of a plant that is in use at factories, mines and utilities, fell to 74.8 percent from 75.3 percent.  While up 10.2 percentage points from the record low set in June 2009, capacity utilization at 74.8% is 5.2% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.  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. 

Until there is a recrudescence in capacity utilization, it is arrant nonsense that the Fed will be soon raising interest rates.

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OFF BASE
If splenetic presentiment is creating a need to be quiescent, a holiday soon approaches. 

According to the Federal Reserve our next holiday is Memorial Day.  Here are the officially recognized Federal Reserve holidays:

Memorial Day May 30
Independence Day July 4
Labor Day September 5
Columbus Day October 10
Veterans Day November 11
Thanksgiving Day November 24

Christmas Day December 26 

Thursday, May 5, 2016

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.50%
SBA LIBOR Base Rate May 2016 = 3.44%
SBA Fixed Base Rate March 2016 = 4.97%
Lenders can charge up to 2.75% over these indices.