Monday, October 4, 2021

The SBA and prow

 prow

(prou)

1. The front of a ship or a boat above the water 2. The projecting front part of something, as a building.

 From the Greek word prōira, from a base meaning “in front.”

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TIP OF THE WEEK

 

The terms Prow and Bow are often used interchangeably, but they’re not exactly the same thing.  The Bow is the forward part of the ship.   The prow however is the forward most part of the bow above the waterline.

 It’s the part you can see.     Often there is a lot of bow under the water.   A lot may go on we don’t see, like a duck calm on the surface but paddling hard underneath.

 What we can see is the new fee structure now in effect for SBA 7(a) loans:

-For loans of $350,000 or less: 0.00%.

-For loans of $350,001 to $700,000: 2.77% of the guaranteed portion.

-For loans of $700,001 to $1,000,000: 3.27% of the guaranteed portion.

-For loans of $1,000,001 to $5,000,000: 3.5% of the guaranteed portion up to $1,000,000, plus 3.75% of the guaranteed portion over $1,000,000.

 The guarantee fee for the Small Business Loan Guarantee Program through IBank is now 2.5% of the guaranteed portion.

 

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Indices:

PRIME RATE= 3.25%

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SBA 504 Loan Debenture Rate for September For 20 year debentures, the debenture rate is only 1.38% but note rate is 1.406% and the effective yield is 2.860%.

For 25 year debentures, the debenture rate is only 1.56% but note rate is 1.58% and the effective yield is 2.977%.

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AHEAD OF THE YIELD CURVE

 

Like the prow of a ship, the most visible aspect of the Federal Reserve is their Federal Open Market Committee Statement.   After their last meeting on monetary policy the Fed presented a slightly more upbeat picture of the US economy.  The FOMC opted to remove "significantly" from the phrase "The path of the economy continues to depend on the course of the virus" which suggests policymakers see less risk of the pandemic worsening and endangering the current robust expansion.

 

The under the water or behind the scenes look will happen on October 13th when minutes from their  last meeting are released.

 

Also keep your eyes and ears open for this week’s announcement on employment for September.

 

Initial jobless claims rose  again in the week ended September 25.  While at a slower pace, this is the third week in a row for higher claims for regular unemployment benefits and will add to the gathering gloom that the September report for nonfarm payrolls may be weak enough to derail anticipation of a start to the tapering of asset purchases after the November 2-3 FOMC meeting.

 

What’s the prognostication on interest rates?

 

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years.

 

Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

 

DEC21- 0.17

DEC22- 0.17

DEC23- 1.09

DEC24- 1.52

DEC25- 1.79

DEC26- 2.01

 

What does all this mean?

 

I don’t know.

 

The December 2023 Eurodollar rate was at 0.85 four months ago.   It is now up almost 20 basis points.

 

Prognostications proliferate over the protean slope of the yield curve but now a procellous propugnaculum might be prospicient.

 

 

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OFF BASE

 

From the prow of the Pinta, Rodrigo de Triana sighted land on October 12, 1492.   it appeared he had also won himself the Royal Reward of 10,000 silver coins per annum for the rest of his life.

 

The king and queen of Spain had decreed that the man who first sighted land, there would be a Royal Reward of 10,000 silver coins, per year, for the rest of that man’s life.

 

When Rodrigo returned to Spain to claim his reward, Christopher Columbus claimed that the previous evening, he sighted the land first.  He added that the event was so inconsequential that he did not feel the need to tell anyone about it. He noted all of that in his diary however, and used this as a basis to challenge Rodrigo de Triana’s claim to the Royal Reward.   Columbus won, and was awarded 10,000 silver coins for the rest of his life.   Rodrigo sailed off to Africa and obscurity.

 

As a result, a three day weekend approaches.

 

According to the Federal Reserve, here are our remaining holidays:

 

Columbus Day October 11

Veterans Day November 11

Thanksgiving Day November 25

Christmas Day December 25