The SBA and discursive

discursive

dis-KUHR-siv

1. Jumping from topic to topic; rambling.

2. Proceeding logically, using reason or argument rather than emotion.

From Latin discurrere (to run about), from dis- (apart) + currere (to run).

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TIP OF THE WEEK 

SBA has revised SBA form 413, the personal financial statement.

Make sure that you are using the current version that has an expiration date of 01/31/2018.

While a personal guarantee will always be required with a SBA loan, guidance for SBA 7(a) loans don’t necessarily require the personal guarantee be secured by personal real estate.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate March 2015 = 3.17%

SBA Fixed Base Rate March 2015 = 5.15%

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SBA 504 Loan Debenture Rate for March

The debenture rate is only 2.72% but note rate is 2.76% and the effective yield is 4.799%.       

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AHEAD OF THE YIELD CURVE 

Will Good Friday be a good Friday?

That’s when the Bureau of Labor Statistics will release its jobs report for the month of March.

February reflected total employment increasing 295,000.  The year-over-year change was 3.3 million jobs. This was the highest year-over-year gain since March of 2000.

Here is a summary of net payroll employment and this week’s interesting little table of data:

February                             295,000

January                               239,000

2014     3,116,000

2013     2,074,000

2012     2,193,000

2011      2,103,000

2010     1,022,000

2009     -5,052,000

2008     -3,617,000

2007    1,115,000

2006     2,071,000

2005     2,484,000

2004     2,019,000

What does all this mean?

I don’t know.

Revisions to employment gains in December and January ended up 18,000 lower than previously reported.  There will be additional revisions with the report for March.

The Federal Reserve at its last meeting on monetary policy slightly downgraded its economic outlook, saying that growth "has moderated somewhat."

It said it will raise its benchmark short-term rate, now near zero, only when the labor market improves further.

There was a lot of consternation after the Fed's policymaking committee dropped a pledge to "be patient" as it considers raising the fed funds rate.

Despite claiming to no longer being patient, Federal Reserve officials lowered their median estimate for the federal funds rate at the end of 2015 to 0.625 percent, compared with 1.125 percent in December forecasts.

The 30-year Treasury bond yield has declined to 2.529% as inflation remains below the Federal Reserve’s 2 percent target, increasing speculation the central bank won’t rush to raise interest rates.

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OFF BASE

The Federal Reserve unexplainably does not recognize Good Friday as a bank holiday.

It should as its existence can be tied in some ways to Good Friday itself.  

While Good Friday isn't a federal holiday, it is a stock market and bond market holiday.  After being usually closed on Good Friday, 1907 was the final year in which the exchange was open on Good Friday.

That last one was the same year as the infamous Panic of 1907, when the total value of all Big Board stocks plunged by more than a third.   

Traders took it as a sign from God that he didn’t want the exchange open.

By November 1907, the aggregate value of all shares on the NYSE had plunged 37 percent, and at least 25 banks and 17 trust companies collapsed

The crisis ultimately prompted the creation of the Federal Reserve system.

So what is Good Friday?

The day marks the crucifixion and death of Jesus Christ.  How could that possibly be considered good?  

Many believe this name simply evolved—as language does. Originally it was called "God's Friday."

This seems a reasonable conjecture, given that "goodbye" evolved from "God be with you."

Goodbye.

SBA 504 Loan Debenture Rate

SBA 504 Loan Debenture Rate for March       

The debenture rate is only 2.72% but note rate is 2.77% and the effective yield is 4.799%.

The SBA and triskaidekaphobia

triskaidekaphobia

tris-ky-dek-uh-FO-bee-uh 

Fear of the number 13.

From Greek treiskaideka (thirteen), from treis (three) + kai (and) + deka (ten) + phobia (fear).

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TIP OF THE WEEK 

13 is an important number for SBA loans.

The Code of Federal Regulations (CFR) is a public record of all permanent rules and regulations published by the executive departments and federal agencies of the U.S. government.

The code is broken up into 50 titles that cover a broad range of topics subject to federal regulation.

Title 13 of the CFR deals with business credit and assistance and governs the SBA.

Interpretation of Title 13 of the CFR is left to SOP 50-10-5(G). 

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate March 2015 = 3.17%

SBA Fixed Base Rate March 2015 = 5.15%

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SBA 504 Loan Debenture Rate for February      

The debenture rate is only 2.46% but note rate is 2.51% and the effective yield is 4.546%.       

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AHEAD OF THE YIELD CURVE 

Will 13 be the economy’s lucky number?

For the last 12 months in a row, the economy has added at least 200,000 jobs.  This is the longest streak since 1995.

In February, jobs increased 295,000.  New jobs are now 2.8 million above the previous peak.

Over the last week, the 30 year Treasury bond yield has increased 12.4 basis points to 2.841%.

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.  More generally, a flat curve indicates weak growth and conversely, a steep curve indicates strong growth.

Keep your eyes and ears open for this week’s auction of the 30 year Treasury bond.

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

2014- 3.97

What does all this mean?

I don’t know.

The yield on the 30-year bond ended the year at only 2.74 percent.  It was at 3.97 percent in January of 2014.

Last month’s auction of $16 billion in 30-year bonds yielded only 2.56 percent.

A flattening of the curve may be an expectation of rising short-term rates at a time when inflation is still low. 

The Federal Reserve meets next week.

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OFF BASE

Not only is there a word for fear of the number 13, there is a word for the fear of Friday the 13^th.  It is friggatriskaidekaphobia.

This has been a tough year for friggatriskaidekapobics.

Friday the 13^th appears three times in the 2015 calendar.

February 13, 2015 was the first appearance of the day. Because February is 28 days, expect March to follow the exact same pattern. That means the second Friday the 13th will appear just 4 weeks after the first one on March 13, 2015.

That’s right, this Friday is another Friday the 13^th.

Luckily for those with is friggatriskaidekaphobia, there is a long break between the second and third dates. The third Friday the 13th just narrowly missed October, which would have been fitting for the month of Halloween and perfect for a “Friday the 13th” movie marathon. Instead, the date falls two weeks before Thanksgiving on November 13, 2015.

The odds of Friday the 13th happening three times in one year aren’t that uncommon, but it won’t happen again for a while. The last time this happened was in 2012, and the next time it’ll take place is 2026.  Those who are terrified by the idea of three Friday the 13ths will be happy to know that 2016 will only have one in May.

Triskaidekaphobia stems from the belief that the 13th guest to attend the Last Supper was thought to be the same person who betrayed Jesus prior to his death. His death, coincidentally, is said to have occurred on a Friday.

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate March 2015 = 3.17%
SBA Fixed Base Rate March 2015 = 5.15%

Lenders can charge up to 2.75% over these indices.

The SBA and pervicacious

pervicacious

puhr-vi-KAY-shuhs

Very stubborn.

From Latin pervicax (stubborn). Earliest documented use: 1633.

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TIP OF THE WEEK 

Nothing pervicacious about commercial real estate.

According to CoStar, commercial real estate prices are up over 10% from last year.  

Real estate has also recovered from the recession with prices now above the previous peak in 2007.

This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at December 2014 commercial real estate pricing. Based on 1,672 repeat sales in December 2014 and more than 130,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity. 

Let me know if you would like a copy of CoStar’s February 2015 CCRSI release.

SBA loans can be used for commercial real estate purchases and refinances.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate February 2015 = 3.17%

SBA Fixed Base Rate February 2015 = 4.75%

________________________________________
SBA 504 Loan Debenture Rate for February      

The debenture rate is only 2.46% but note rate is 2.51% and the effective yield is 4.546%.       

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AHEAD OF THE YIELD CURVE 

Do you think interest rates are being pervicacious?

Many people think that the Federal Reserve will soon shed their pervicacious ways and start raising interest rates soon.

Minutes from the last Fed meeting on monetary policy however noted something different.   It sounds like rates might stay lower longer than a lot of people think.

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

2014- 78.8

Last week the Federal Reserve reported that capacity utilization was unchanged in January at 79.4 percent.

What does this mean?

I don’t know.

While up 12.5 percentage points from the record low set in June 2009 it is still below the pre-recession level of 80.8% in December 2007.

The Federal Reserve can continue to be pervicacious about interest rates.

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OFF BASE

The most pervicacious people in the world just might be Cubs fans.

The Cubs have not been to the World Series since 1945 and have not won a World Series since 1908.

The Cubs will win the 2015 World Series, at least according to the 1989 movie Back to the Future 2.

Only 13 days to daylight savings time and 42 days to Opening Day.

SBA 504 Loan Debenture Rate

SBA 504 Loan Debenture Rate for February      

The debenture rate is only 2.46% but note rate is 2.51% and the effective yield is 4.546%.

The SBA and frustraneous

frustraneous

(fruhs-TRAY-nee-uhs) 

Useless; unprofitable.

From Latin frustra (in vain).

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TIP OF THE WEEK 

SBA loans are NOT frustraneous.

SBA 7(a) loan volume has totaled $6,489,661,500 since the government’s fiscal year began October 1^st.  This is a 26% increase over the same period last year.  

The proposed budget for next year calls for SBA to support $21 billion in loan guarantees for the flagship 7(a) program, the biggest such request in history.  

This is not a frustraneous use of taxpayer dollars.  For fiscal year 2016, the administration contemplates a $701 million budget for SBA, less than the $733 million Congress granted it for the current year.

But the proposed cuts appear to have more to do with improved loan performance rather than a reduction in programs or services.  There is $0 in taxpayer subsidy for the SBA guarantee loan programs.

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate February 2015 = 3.17%

SBA Fixed Base Rate February 2015 = 4.75%

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SBA 504 Loan Debenture Rate for January      

The debenture rate is only 2.52% but note rate is 2.56% and the effective yield is 4.60%.       

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AHEAD OF THE YIELD CURVE 

The economy is not as frustraneous as it once was.

The U.S. labor market leaped forward in January, capping the greatest three-month jobs gain in 17 years.  Payrolls advanced by 257,000 last month following increases in December and November that were even bigger than previously reported.  Employment in November was revised up to a 423,000 gain, the most since May 2010.  Payroll gains averaged 336,000 over the last three months, the strongest since 1997.  Total employment is now 2.5 million above the previous peak and up 11.2 million from the employment recession low.

Last time the Federal Reserve met, they said that they could be “patient” on raising interest rates.  The Fed also dropped a clause from its December statement that the assurance of patience was consistent with a previous pledge to hold rates low for a “considerable time.”

So how long before the Fed loses patience and starts to raise 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:

DEC15- 0.865

DEC16- 1.66

DEC17- 2.125

DEC18- 2.37

DEC19- 2.54

DEC20- 2.69

What does all this mean?

I don’t know.

Eurodollar futures currently imply a federal funds rate well below the indications of just three months ago.  For example, the December 2020 rate is now 66 basis points lower.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.

After the Fed’s meeting, the 30 year Treasury bond dropped 10 basis points to 2.30 percent, an all-time low.  

Last month’s auction of $13 billion in 30-year bonds drew a yield of 2.430 percent, below the previous record of 2.580 percent in July 2012.  

After the jobs report on Friday,  the 30-year Treasury added 10.1 basis points to 2.523%.

This distinct flattening of the long end of the yield curve implies investors are rethinking the timing of Federal Reserve interest-rate hikes.

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OFF BASE

If it ends up being a frustraneous week, go ahead and take Monday off.

It’s Washington’s Birthday!

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.

According to the Federal Reserve, here are our holidays for 2015:

Washington's Birthday February 16
Memorial Day May 25
*Independence Day July 4
Labor Day September 7
Columbus Day October 12
Veterans Day November 11
Thanksgiving Day November 26
Christmas Day December 25 

*Independence Day this year falls on a Saturday – so the Board of Governors is closed on July 3, 2015 and bankers get a three day weekend!

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate February 2015 = 3.17%
SBA Fixed Base Rate February 2015 = 4.75%

Lenders can charge up to 2.75% over these indices.

SBA 504 Loan Debenture Rate

SBA 504 Loan Debenture Rate for January      

The debenture rate is only 2.52% but note rate is 2.56% and the effective yield is 4.60%.

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.25%
SBA LIBOR Base Rate January 2014 = 3.17%
SBA Fixed Base Rate January 2014 = 5.15%

Lenders can charge up to 2.75% over these indices.

The SBA and serendipity

Serendipity

(ser-uhn-DIP-i-tee) 

Luck that takes the form of finding valuable or pleasant things that are not looked for

Coined by novelist Horace Walpole based on the fairy tale The Three Princes of Serendip. The Princes were supposedly making these happy discoveries they were not looking for.

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TIP OF THE WEEK 

Serendipity comes with SBA 7(a) loans.

The IRS has issued a new Form 4506-T and all SBA 7(a) and 504 related requests for IRS tax transcripts must be submitted to IRS Service Centers using the new IRS Form 4506-T (Rev. August 2014).

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Indices:

PRIME RATE= 3.25%

SBA LIBOR Base Rate December 2014 = 3.16%

SBA Fixed Base Rate December 2014 = 5.19%

________________________________________SBA 504 Loan Debenture Rate for December     

The debenture rate is only 2.70% but note rate is 2.74% and the effective yield is 4.782%.       

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AHEAD OF THE YIELD CURVE 

Serendipitously, the yield curve has flattened.

What a minute, how can a flatter yield curve be considered a good thing?  Doesn’t a flatter yield curve mean things will actually slow down?

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.  More generally, a flat curve indicates weak growth and conversely, a steep curve indicates strong growth.

The difference between yields on two-year notes and 30-year bonds, is at 207 basis points. It flattened to 201 basis points Dec. 23, the least since 2009.

The yield on the 30-year bond ended the year at only 2.74 percent.  It was at 3.97 percent in January of 2014.

Are these lower longer term rates a harbinger of slower economic growth ahead?

Actually, robust economic growth has helped push the U.S. budget deficit down to the lowest level since 2008, marking the sharpest turnaround in the government’s fiscal position in at least 46 years.  The shortfall of $483.4 billion in the 12 months ended Sept. 30 was 2.8 percent of the nation’s gross domestic product of $17.2 trillion over the same period.  The figure peaked at 10.1 percent of GDP in December 2009.  The Congressional Budget Office in August predicted the deficit will shrink further this fiscal year, to 2.6 percent of GDP, before rising to 2.9 percent in the presidential election year of 2016. Before the fourth quarter of 2008, the last time the deficit-to-GDP share reached 2.8 percent was in April 2005.  The reprieve is enabling the government to reduce the amount of debt sold in the short term.  

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

2014- 3.97

Wait a minute, why no numbers for 2003, 2004, and 2005?

One month after the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury mothballed the 30-year bond in 2001, experts speculated it was trying to drive down long-term interest rates, which had remained stubbornly high while the Federal Reserve was slashing short-term interest rates to revive the economy. When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis points in one day. Why? A shrinking supply of the 30-year Treasury bond caused increased demand to drive rates down.

What does all this mean?

I don’t know.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.

Last month’s auction of $13 billion in 30-year bonds yielded only 2.86 percent.

In its final policy statement of the year, the Fed used a new word — "patient" — to basically let the market know that it isn't in a rush to hike short-term rates.

This distinct flattening of the long end of the yield curve implies investors are rethinking the timing of Federal Reserve interest-rate hikes.

Now isn’t that serendipitous?

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OFF BASE

Happy New Year!

If the prospect of a full work week after the Christmas and New Year’s holidays seems daunting, hang in there.  We’ve got a three day weekend coming up.

According to the Federal Reserve, here are our holidays for 2015:

Birthday of Martin Luther King, Jr. January 19
Washington's Birthday February 16
Memorial Day May 25
*Independence Day July 4
Labor Day September 7
Columbus Day October 12
Veterans Day November 11
Thanksgiving Day November 26
Christmas Day December 25 

*Independence Day this year falls on a Saturday – so the Board of Governors is closed on July 3, 2015 and bankers get a three day weekend!

Talk about serendipity!