SBA Loans Are Good For the Economy

SBA 7(a) loan approvals totaled $1,590,460,000 for the month of March.  

That’s up from February’s approvals of $1,323,495,000 which was an improvement from January's $1,193,005. 

Overall, that’s a nice pick-up over the fourth quarter of 2013:

1^st quarter 2014                $4,106,960,000

4^th quarter 2013:             $3,989,696,000

3^rd quarter 2013:             $5,371,662,000

2^nd quarter 2013              $4,273,683,000

1^st quarter 2013               $4,049,146,000

4^TH quarter 2012             $4,173,790,000

3^rd quarter 2012              $4,359,166,000

2^nd quarter 2012              $4,039,042,000

1^st quarter 2012                 $3,443,723,000

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.

SBA Loans Are Good for the Economy

SBA 7(a) loan volume is dramatically improving.

SBA 7(a) loan approvals for the week ending March 28th totaled $459,475,000.

The correlation coefficient between SBA 7(a) loan volume and the economy's gross domestic product is a statistically significant 0.86.

SBA Loans Are Good for the Economy

SBA 7(a) loan volume continues to improve as $381,129,000 in SBA 7(a) loans were approved for the week ending March 21st.  

This is better than last week which so far had been the best week of the new year.

The positive impacts of these new loans will ripple through the economy as the correlation coefficient between SBA 7(a) loan volume and the economy's gross domestic product is a statistically significant 0.86.

SBA Loans Are Good For the Economy

SBA 7(a) loan volume picked up with loan approvals totaling $377,386,000 for the week ending March 14th.

So far this is the best week of the year!

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.

The SBA and nimiety

nimiety

ni-MY-i-tee

Excess or redundancy.

From Latin nimius (too much)

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TIP OF THE WEEK 

The perceived nimiety of SBA rules and regulations is improving.

 The elimination of the Personal Resource Test will be effective, April 21, 2014.  Business owners no longer need to pass a personal resource test that could restrict high-net worth owners from participating in SBA loan programs.

With the definition of a small business now at net profits less than $5,000,000 and a SBA loan size up to $5,000,000, more borrowers are eligible for more financing!

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate March 2014 = 3.16%

SBA Fixed Base Rate March 2014 = 5.31%

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SBA 504 Loan Debenture Rate for March  

The debenture rate is only 3.21% but note rate is 3.26% and the effective yield is 5.289%.

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AHEAD OF THE YIELD CURVE 

A nimiety of proclamations emanated from the Federal Reserve last week at their meeting on monetary policy.

The key sentence in the announcement was: "The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

Near mandate consistent levels?  What does that mean?  The Federal Reserve has a statutory mandate, which by law means it is supposed to foster maximum employment and price stability.  Starting in December 2012, the FOMC said the federal funds rate would stay low at least as long as unemployment was higher than 6.5 percent and the outlook for inflation didn’t exceed 2.5 percent.  With the jobless rate at 6.7 percent last month, that guidance was fast becoming obsolete and the Fed has now dropped any specific reference to the unemployment rate.

So how about inflation?  The central bank’s preferred gauge of consumer prices climbed 1.2 percent in the year through February and hasn’t exceeded its 2 percent goal since March 2012.

So where then are interest rates going?

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:

DEC14- 0.35

DEC15- 1.16

DEC16- 2.29

DEC17- 3.12

DEC18- 3.70

DEC19- 4.12

DEC20- 4.42

What does all this mean?

I don’t know.

Traders are betting the Federal Reserve won’t raise interest rates any time soon.

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OFF BASE

There is no nimiety of Federal holidays.

According to the Federal Reserve, here are our remaining holidays for 2014:

Memorial Day May 26
Independence Day July 4
Labor Day September 1
Columbus Day October 13
Veterans Day November 11
Thanksgiving Day November 27
Christmas Day December 25 

Obviously another holiday needs to be inserted somewhere.

One possible candidate could be Opening Day for Major League Baseball which is next week (the Dodgers in Australia don’t count).  Of course that would take all the fun out of playing hooky.  

By the way, playing hooky apparently developed from the colloquial phrase "hooky-crooky" common in the early 19th century, which meant "dishonest or underhanded." The connection between the two phrases becomes clearer when we recall that to "play hooky" properly, one had to pretend to go to school.  Hooky-crooky," came from "by hook or by crook," meaning "by any means or tactic, fair or foul." Although this phrase first occurs in print way back in 1380 and is still common today, no one is sure of what the hook and crook were. One theory is that while tenants on English manors were not allowed to cut trees for firewood, the lord of the manor permitted them to have all the branches they could pull down with a shepherd's crook or a curved knife on a pole called a "hook."

Enough of this nimiety.

SBA 504 Loan Debenture Rate for March

SBA 504 Loan Debenture Rate for March      

The debenture rate is only 3.21% but note rate is 3.26% and the effective yield is 5.289%.

SBA Loans Are Good For the Economy

The month of March began slowly for SBA lenders and borrowers as only $285,390,000 in SBA 7(a) loans were approved for the week ending March 7th.  

Total  SBA 7(a) loan approvals for the entire month of February were $1,323,495,000 compared to January's $1,193,005.   Forth quarter 2013 loan approvals totaled $3,989,696,000.

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.

The SBA and concinnity

concinnity

kuhn-SIN-i-tee

A harmonious arrangement of various parts.

From Latin concinnare (to put in order) and concinnus (skillfully put together)

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TIP OF THE WEEK 

The concinnity of SBA lending continues as the Personal Resources Test has been eliminated.  

SBA applicants with excess personal resources had been required to utilize those assets first prior to SBA financial assistance.

A formal announcement from SBA is on the way.

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Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate March 2014 = 3.16%
SBA Fixed Base Rate March 2014 = 5.31%

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SBA 504 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 

Much like Goldilock’s porridge being neither too hot nor too cold, the Federal Reserve seeks a comforting concinnity between inflation and unemployment.

It has said that it will keep its short-term interest rate near zero "well past" when unemployment reaches 6.5 percent, especially with inflation well below the Fed's 2% target.

The unemployment rate has bumped back up to 6.7 percent.  

But the job market actually rebounded from a two-month slump in February as employers added 175,000 jobs.  Employment gains for December and January were revised up by a total 25,000. December's were revised to 84,000 from 75,000 and January's to 129,000 from 113,000.

Despite the solid payroll advances, the unemployment rate ticked up.  The main reason for the increase in the unemployment rate was a surge in the labor force — the number of people working or looking for work.  The labor force jumped by more than half a million people in February.  After seeing many months of people giving up looking for work, it could be an indication that more people are coming off the sidelines and back into the labor force.  Employment is now 0.5% below the pre-recession peak (666 thousand fewer total jobs). Private employment is now just 129 thousand below the previous peak in January of 2008.

The Federal Open Market Committee meets March 18-19.  Keep your eyes and ears open to the 6.5% unemployment rate threshold in its March statement as it is not a sufficient or particularly informative measure of labor market slack and therefore not the best guidepost for monetary policy.

Also keep your eyes and ears open for this week’s sale of 30 year Treasury bonds.

Last month the Treasury Department sold $16 billion of 30-year bonds at a high yield of 3.690%.  January’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%.

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:

2001- 5.49

2002- 5.43

2003- ND

2004- ND

2005- ND

2006- 4.91

2007- 4.84

2008- 4.18

2009- 3.89

2010- 4.61

2011- 2.89

2012- 2.77

2013- 3.25

The 30 year Treasury bond is currently at 3.72 percent.

What does all this mean?

I don’t know.

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.

According to the Federal Reserve Bank of Cleveland the steeper slope had a negligible impact on projected future growth. Projecting forward using past values of the treasury yield spread and GDP growth suggests that real GDP will grow at about a 1.3 percentage rate over the next year.   According to the Bureau of Economic Analysis, GDP for all of 2013 expanded at a 1.9 percentage rate.

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OFF BASE

Our seasonal concinnity is always disrupted by daylight saving time.   

This barbaric torture began with the Germans during World War I to alleviate hardships from wartime coal shortages and air raid blackouts.  The United States adopted it in 1918 as a result of our joining in on the war.  Daylight saving time was repealed in the United States after the war ended in 1919.  During World War II, Congress enacted the War Time Act with year round daylight saving time.  This remained in effect until after the end of the war when daylight saving time was once again repealed. 

With the escalation of the war in Vietnam, politicians naturally thought we needed to once again have daylight saving time.  The U.S. federal Uniform Time Act became law on April 13, 1966 and it mandated that daylight saving time begin nationwide on the last Sunday in April and end on the last Sunday in October, effective in 1967.

In 1987, the Federal Fire Prevention and Control Act of 1986 moved the beginning of daylight saving time to the first Sunday in April.  Its primary support came from both of the Senators from Idaho based on the premise that during daylight saving time fast-food restaurants sell more French fries, which are made from Idaho potatoes.  Not enough French fries were being eaten so in 2007, daylight saving time was extended another four to five weeks, from the second Sunday of March to the first Sunday of November.

Since daylight saving time moves sunrise one hour later by the clock, late sunrise times become a problem when daylight saving time is observed either too far before the vernal equinox or too far after the autumnal equinox.

The vernal equinox, the first day of Spring, is not until March 20^th.

SBA Loans Are Good For the Economy

February ended with SBA 7(a) loan approvals totaling $392,982,000 for the last week of the month.  This is nice bump up from the $280,012,000 in SBA 7(a) loans for the week ending February 21th and the $302,053,000 in SBA 7(a) loan approvals for the prior week.

Total SBA 7(a) loan approvals for the entire month were $1,323,495,000 in February compared to January's $1,193,005.  

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.

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate March 2014 = 3.16%
SBA Fixed Base Rate March 2014 = 5.31%

Lenders can charge up to 2.75% over these indices.

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.

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%

________________________________________

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:

4^th quarter 2013              3.2%

3^rd 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:

4^th quarter 2013:             $3,989,696,000

3^rd quarter 2013:             $5,371,662,000

2^nd quarter 2013              $4,273,683,000

1^st quarter 2013               $4,049,146,000

4^TH quarter 2012             $4,173,790,000

3^rd quarter 2012              $4,359,166,000

2^nd quarter 2012              $4,039,042,000

1^st 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.

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.

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%.

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.

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%

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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 22^nd while Lincoln’s is on the 12^th.   

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?

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.

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!