The SBA and frabjous

frabjous

FRAB-juhs

Wonderful; delightful.

Coined by Lewis Carroll in his 1871 novel Through the Looking-Glass. A blend of fair, fabulous, and joyous.

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TIP OF THE WEEK 

Things are not so frabjous with being able to refinance debt with a 504 loan. 

Each refinancing project must meet either the 504 program’s existing job creation and retention goals, or alternatively meet at least one of the public policy or community development goals of the program.   Under the temporary refinance program you simply had to show the benefit of the refinance (cash flow savings and working capital benefit if paying off eligible business expenses - typically a current liability) and it was generally deemed eligible.

Under the new guidelines, projects that include an amount for Business Operating Expenses will max out at 75% LTV and that portion of the financing cannot exceed 25% of the value of the 'Eligible Fixed Asset' securing the qualified debt.

If that doesn’t work, you can still utilize a SBA 7(a) loan for real estate debt refinance.  If you need to go beyond the $5,000,000 maximum 7(a) loan, you can utilize a guarantee through the State of California SBLGP (if the project is in California) up to $20,000,000.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate June 2016 =3.47%

SBA Fixed Base Rate June 2016 = 5.00%

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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 

The Federal Reserve may have to galumph along after the no so frabjous jobs report that came out Friday.

The government said 38,000 jobs were created in May.  It was the worst month for job creation since September 2010.  Adding insult to injury, employment gains in March and April were revised down 59,000 less than previously reported. Over the past 3 months, job gains have averaged 116,000 per month.  That doesn’t even keep up with population growth.

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

April                                     123,000

March                                   186,000

February                             244,000

January                               172,000

2015     2,740,000

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.

In a matter of minutes after the release, the market-implied probability of a June rate increase nearly vanished, with federal-funds futures traders pricing in a 4% probability of a June rate increase Friday morning, down from 21% on Thursday afternoon, according to CME Group’s FedWatch tool. Even the possibility of a July increase fell to about 29 percent from 55 percent on Thursday.  The yield on the 30-year bond lost 6.5 basis points to 2.522%, its lowest level since April 4.

The Federal Reserve Open Market Committee next meets on interest rates June 14-15.

If you are a borrower, this is a frabjous time! 

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OFF BASE

Did you notice that I used the word galumph above?  It means to move clumsily or heavily.  Like frabjous it was coined by Lewis Carroll in his 1871 novel Through the Looking-Glass and is a blend of gallop + triumph.

It’s rare that a word someone coins goes on to grace the pages of a dictionary. What about multiple words coined by a person? What if those words were in a single work? Well, anything is possible if your name is Lewis Carroll. 

That wasn’t even his real name.  The pseudonym derived from his real name- Charles Lutwidge Dodgson. Lewis derived from Ludovicus which was Latin for Lutwidge. Carroll was similar to the Latin name Carolus which derives from the name Charles. Charles Lutwidge in Latin is Carolus Ludovicus and when translated into English, it is Carroll Lewis.

The real Alice, who lent her name to the story, was the daughter of Henry Liddell, the dean of Christ Church College at Oxford, where Carroll taught mathematics.  When Carroll began telling a fantastic tale to Alice Liddell and her two sisters on a summer 1862 boating trip up the Thames, he didn’t plan on becoming a children’s author. But just like your kid or grandkid that won’t stop begging to watch Frozen again, the kids wouldn’t stop asking him to tell the story.  He eventually turned it into a written novel, presenting it to Alice as an early Christmas gift in 1864. By the time he self-published the final version of Alice’s Adventures in Wonderland in 1865, it had doubled in length, with new scenes including those with the Mad Hatter and the Cheshire Cat.

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 

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.

The SBA and intractable

intractable

in-TRAK-tuh-buhl

Not easily handled, managed, or controlled.

From Latin tractare (to handle),

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TIP OF THE WEEK 

SBA lending may seem intractable if you don’t know what you are doing.  That’s why many lenders utilize lender service providers such as Stultz Financial to avoid any splenetic presentiment.

The recrudescence in hospitality has been oppugned as occupancies are on a declining trajectory.  This should not come as a surprise because more and more hotels and motels are opening, often with SBA financial assistance.  Supply growth has outpaced demand growth for two consecutive months, but the 61.7% occupancy for February is still the second-highest occupancy ever recorded.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate April 2016 =3.44%

SBA Fixed Base Rate April 2016 = 4.87%

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SBA 504 Loan Debenture Rate for April  

The debenture rate is only 2.26% but note rate is 2.30% and the effective yield is 4.311%.

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AHEAD OF THE YIELD CURVE 

Intractable is the perfect adjective to describe both the economy and the Federal Reserve.  At least the smart money seemed to be saying that.

At last week’s auction of $12 billion in 30-year Treasury bonds there was record demand from so-called buy-side institutions, such as mutual funds, life insurance companies, hedge funds, and pension funds.   The yield on the 30-year bond gained 2.5 basis points to 2.602%.   That compares to last month’s auction where the yield ended up at 2.72%.

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

2015- 2.91

What does all this mean?

I don’t know.

The day after the 30 year Treasury auction, 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.  The yield on the 30 year Treasury bond then tumbled 4.4 basis points to 2.556%.  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.  It should be noted however that like the drop in hotel occupancy mentioned above, part of the decline in capacity utilization can be attributed to a 1.2% growth over the last 12 months in capacity.

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. 

It is arrant nonsense that the Fed will be raising interest rates when they meet later this month.

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OFF BASE

If things seem intractable right now, maybe you need a day off.  Unfortunately according to the Federal Reserve our next holiday is not until 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

If you need an excuse for day off, Passover starts Friday evening.  The start of Passover, which celebrates the Israelite exodus from Egypt, begins in the evening with the Seder which is a ritual feast. 

So Friday could be a day off.  To put this in perspective: imagine if you had to work during the day of Thanksgiving, then prepare for Thanksgiving dinner after getting home from work. 

That would be intractable.

The SBA and arrant

arrant

AR-uhnt

 Complete; thorough.

Here's a word that has had both its spelling and meaning bent out of shape from use. It's a variant of errant (wandering). Earlier the word was used in the sense of wandering or vagrant, for example, an arrant thief or an arrant knave. Over time the word began to be taken as an intensifier so an arrant fool was no longer a vagrant fool, but a complete fool.

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TIP OF THE WEEK 

Don’t be so arrant with completing IRS form 4506 with the signatures being in blue ink.

When blue ink is used to complete Form 4506-T requests, the information sometimes does not show up to the IRS.  To alleviate rejections for missing information and to better service the taxpayer the IRS is asking that the use of blue ink be discontinued immediately.

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate March 2016 =3.44%

SBA Fixed Base Rate March 2016 = 4.89%

________________________________________

SBA 504 Loan Debenture Rate for March

The debenture rate is only 2.50% but note rate is 2.54381% and the effective yield is 4.553%.

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AHEAD OF THE YIELD CURVE 

The Federal Reserve meets later this month.  Will they be raising interest rates?

Keep your eyes and ears tuned for this week’s release of the minutes from the Federal Reserve’s last meeting on monetary policy.

FOMC Minutes is a vital piece of information that is released three weeks to the day after the conclusion of each FOMC meeting.    Though the gist of the Fed’s official views are disclosed at the end of each FOMC meeting with a public statement, we can arrantly scrutinize details of the Fed opinions in the minutes for better understanding.

Friday afternoon the market was pricing no real probability of a rate increase at that meeting.

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:

APR 16- 0.63

DEC16- 0.85

DEC17- 1.06

DEC18- 1.32

DEC19- 1.58

DEC20- 1.83

DEC22- 2.24

What does all this mean?

I don’t know.

Eurodollar futures currently imply a federal funds rate that really is not going to be moving up all that much any time soon.

It is arrant nonsense that they will be raising interest rates.

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OFF BASE

Spring training is over, play ball.

The Washington Nationals closed spring training with an 18-4 record. That’s a winning percentage of .818, best in the bigs.

Big deal, you’re thinking, it’s spring training. And everybody knows that spring training results don’t matter.  Or do they?  In the past 20 years, only once has a team finished spring training with a winning percentage of .800 or better. That team? The 1997 Miami Marlins, who went 26-5 in Grapefruit League action (.839), then proceeded to win 92 regular-season games, plus another 11 in the postseason, including four in the World Series.

Of the 40 teams that have made the World Series over the past two decades, only 30 percent of them had losing records in spring training that year, and those same 40 teams had a combined winning percentage of .536 in exhibition play during their World Series seasons.

Second in Cactus League play were the Angels.

How’s that for an arrant dissection of nothing?

SBA 504 Debenture Rate

SBA 504 Loan Debenture Rate for March      

The debenture rate is only 2.500% but note rate is 2.54381% and the effective yield is 4.553%.

The SBA and recrudescence

recrudescence

(ree-kroo-DES-uhns) 

A renewed activity after a period of dormancy.

From Latin recrudescere (to become raw again), from re- (again) + crudescere (to get worse), from crudus (raw).

When something that's bad comes back to haunt you, call it a recrudescence. It's not a word you'll hear often, but it's useful. As a bonus, it lets you say "crud" while sounding really smart.

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TIP OF THE WEEK 

A recrudescence of notices with deadlines has come out from the IRS and the SBA.

The original implementation date for the new IRS Form 4506-T with the attestation box was to be March 1, 2016.  The implementation date has been moved to March 28, 2016.

Versions of the Form 4506-T with a date other than 09-2015 will be rejected.  The attestation box must be checked.

Lenders and borrowers should make sure they are using the correct form.

SBA One use will become mandatory for GP loan submissions to the Loan Guaranty Processing Center by Delegated Lenders effective July 1, 2016 (non-delegated loans) and for non-Delegated Lenders beginning FY17 (October 1, 2016).

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Indices:

PRIME RATE= 3.50%

SBA LIBOR Base Rate March 2016 =3.44%

SBA Fixed Base Rate March 2016 = 4.89%

________________________________________

SBA 504 Loan Debenture Rate for February

The debenture rate is only 2.27% but note rate is 2.31% and the effective yield is 4.324%.

 ________________________________________________
AHEAD OF THE YIELD CURVE 

Federal Reserve recrudescence on monetary policy is causing some splenetic presentiment.

The $12 billion auction of 30 year Treasury bonds last week however saw strong demand with the yield ending at 2.72%.  The yield curve is staying flat.  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.

This comes after a strong jobs report for the month of February that saw 242,000 jobs being added.  Also encouraging is that job gains for December and January were revised up by a total 30,000.

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

February                             244,000

January                               172,000

2015     2,740,000

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.

Total employment is now 5.1 million above the previous peak.  Total employment is up 13.8 million from the employment recession low. 

Yet despite the robust recovery in jobs, economic growth remains sluggish.  How can that be? 

U.S. gross domestic product would have been about $3 trillion higher in real, inflation-adjusted terms in 2015 if productivity hadn’t slowed over the last decade. 

It’s a paradox that’s been puzzling economists for a while. How can U.S. productivity growth be slowing down at the same time that innovation in everything from smartphones to 3D printing seems to be speeding up?  But that doesn’t translate into more economic output.  From the early 1970s through 1995, productivity rose about 1½% per year. Between 1995 and 2003, that pace more than doubled to a rate that was comparable to its fast pace before 1973. Considerable evidence suggests this acceleration in the late 1990s reflects the production and use of information technology (IT).   Over the past decade, however, the exceptional pace of productivity growth has disappeared, returning to roughly its pre-1995 pace.  

You can’t deny that technological innovation has made Americans’ lives easier and more enjoyable in many ways, from calling up directions on Google Maps to trading cat videos on Facebook. 

For example, instead of really working, you are reading this email.

The Federal Reserve meets this week on March 15^th and 16^th. 

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OFF BASE

Doesn’t it seem like spring is coming early? 

It is and a recrudescence of global warming has nothing to do with it.

Remember our LEAP day just a few weeks ago?   It all happens because the number of days in a year isn’t even. A year lasts 365 days, 5 hours, 48 minutes, and 46 seconds.   That’s the actual length of time it takes for the Earth to complete one orbit around the Sun.   The Earth's elliptical orbit is changing its orientation relative to the Sun (it skews), which causes the Earth's axis to constantly point in a different direction.  Since the seasons are defined as beginning at strict 90-degree intervals, these positional changes affect the time Earth reaches each 90-degree location in its orbit around the Sun. 

As a result, spring is currently being reduced by approximately one minute per year and winter by about one-half minute per year. Summer is gaining the minute lost from spring, and autumn is gaining the half-minute lost from winter. Winter is the shortest astronomical season and its seasonal duration is continuing to decrease.

But the Earth spins a hair less than 365 ¼ times per year (365 days, 5 hours, 48 minutes, and 46 seconds) . Call it 365.2422 days.  If only the year were 11 minutes longer, or 365.25000 days, we could simply add one day every fourth year and take care of the fraction forever.

As a result, the calendar seems to think spring is coming earlier and earlier. 

While it's true that we've traditionally celebrated the beginning of spring on March 21, astronomers now say that the spring season starts earlier.  Unheard of? Not if you look at the statistics. In fact, did you know that during the 20th Century, March 21 was actually the exception rather than the rule?  The vernal equinox landed on March 21, only 36 out of 100 years. And from 1981 to 2102, Americans will celebrate the first day of spring no later than March 20.

And in 2016, it will start on March 19 for the entire United States.  To conclude? This will be the earliest spring since 1896!

SBA 7(a) Loan Rate Update

Indices:

PRIME RATE= 3.50%
SBA LIBOR Base Rate March 2016 = 3.44%
SBA Fixed Base Rate March 2016 = 4.89%

Lenders can charge up to 2.75% over these indices.