SBA 7(a) Weekly Lending Update- SBA loans fall off the cliff

As of June 25, 2010, the SBA has approved $10,501,889,000 in SBA 7(a) loans. This is only $182,711,000 in loans over the last two weeks. This is a pace slower than the dark days of 2009 when SBA 7(a) lending came almost to a standstill.

What has happened? Lenders are waiting for the 90% guaranty and guaranty fee waiver to come back.

The SBA and surcease

surcease
(suhr-SEES)
noun: Stoppage, especially a temporary one.
verb tr., intr.: To bring or come to an end.
From Middle English sursesen/surcesen, via French from Latin supersedere (to refrain from), from super- + sedere (to sit).
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TIP OF THE WEEK

Is it a surcease in falling commercial real estate values?


The Moody’s/REAL All Property Type Aggregate Index measured a 1.7% price increase in
April. Since the low in prices recorded in October of 2009, prices have rebounded 4.7%.
The peak of the index occurred in October 2007 and prices are currently
41.1% below the peak.

If you would like a copy of this report, let me know.

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SBA Loan Recovery ACT provisions have come to a surcease thanks to our politicians.

Legislation failed by a 57-41 vote. That means no increased guarantee or fee waiver.
Democrats needed 60 votes to overcome the GOP fillibuster of the bill.
The bill will now be pulled, according to Democratic leadership aides.
This leaves many groups in flux, including the jobless who have lost their safety net.

Despite the expiration of these Recovery ACT provisions SBA loans still provide an attractive financing option and are available.
_________________________________________
Indices:
PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2010 = 3.35%
SBA Fixed Base Rate June 2010 = 6.24%
________________________________________________

504 Debenture Rate for June
The debenture rate is 3.88% but note rate is 3.94% and effective yield is only 5.29%.
________________________________________________
AHEAD OF THE YIELD CURVE
SBA Loan Recovery ACT provisions are not the only government stimuli with surcease.

Purchases of new homes in the U.S. fell in May to a record low as a tax credit expired, showing the market remains dependent on government support. Sales collapsed a record 33 percent to an annual pace of 300,000 last month from April, the fewest in data going back to 1963. New-home sales are considered a timelier barometer of the market than purchases of previously owned homes, which account for about 90 percent of the housing market. New home sales are counted when the contract is signed. A report last week showed sales of previously owned homes unexpectedly fell in May, adding to concern the retrenchment following the end of the tax incentive will be deeper than anticipated. Existing house purchases, calculated when a contract closes, dropped to a 5.66 million annual rate, the National Association of Realtors said.

Will this extend to the labor market? Payrolls rose by 431,000 in May, including a 411,000 jump in government hiring of temporary workers for the 2010 census. Those workers were temporary are now being let go.



Keep your eye on Friday’s payroll report from the Department of Labor.


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

June 431,000
April 218,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)


What does all this mean?


The Federal Reserve met last week and as expected they said that they would keep interest rates low are for an “extended period”. What was new and significant in their statement was that they also said “financial conditions have become less supportive of economic growth”.

They had previously been saying “financial market conditions remain supportive of economic growth.”

SBA 7(a) Rate Update

PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2010 = 3.35%
SBA Fixed Base Rate June 2010 = 6.24%
________________________________________________
504 Debenture Rate for June
The debenture rate is 3.88% but note rate is 3.94% and effective yield is only 5.29%.

The Federal Reserve Open Market Committee just indicated that they will continue to keep rates low for an "extended period."

The savings from a low, variable rate of interest should persist for some time.

Moody's: Commercial Real Estate Prices increase 1.7% in April

Moody's reported today that the Moody’s/REAL All Property Type Aggregate Index increased 1.7% in April, after declining for the previous two months. This is a repeat sales measure of commercial real estate prices.

From Calculated Risk: http://www.calculatedriskblog.com/

The SBA and ending the recession ONE LOAN AT A TIME

We have funded another loan.

This time it was a $1,100,000 SBA 7(a) loan to refinance equipment debt. As a result of the longer term amortization available from the SBA loan, the borrower- a video production company in Orange County, improved its cash flow by $10,936 per month.

In the last ten years we have closed $754,188,499 in SBA 7(a) and 504 1st trust deeds.

Senate rejects "Tax Extenders" bill, including SBA loan Recovery Act provisions

The Senate effectively rejected a slimmed-down package of jobless benefits and state aid late Thursday, rebuffing President Obama's call for urgent action to bolster the economic recovery. HR 4213 includes a $620 million appropriation that would extend the SBA loan Recovery Act provisions. There will be no votes today (Friday) in the Senate, and right now it is unclear what the next steps might be for HR 4213.

SBA 7(a) Rate Update

PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2010 = 3.35%
SBA Fixed Base Rate June 2010 = 6.24%
________________________________________________
504 Debenture Rate for June
The debenture rate is 3.88% but note rate is 3.94% and effective yield is only 5.29%.

SBA 7(a) Weekly Lending Update

As of June 11, 2010, the SBA has approved $10,319,178,000 in SBA 7(a) loans. This is an increase of $101,319,000 over the previous week. Through the same period last year, $5,366,723,000 in SBA 7(a) loans had been approved. Volume has almost doubled with the increased guarantee and waiver of the guarantee fee.

When will the Fed raise rates?

Some think the Fed won't raise rates now until late 2011.

According to Calculated Risk, the Fed has not raised the Fed Funds rate until unemployment drops significantly. Based on the the Fed's own forecasts of the unemployment rate and inflation, the Fed will probably not raise the Fed Funds rate until late 2011 at the earliest.

Check it out at http://www.calculatedriskblog.com/2010/06/when-will-fed-raise-rates.html

The SBA and vellicate

vellicate
(VEL-i-kayt)
1. To twitch or to cause to twitch.
2. To pluck, nip, irritate, etc.
From Latin vellicare, frequentative of vellere (to pull, pluck, or twitch).
Our government continues to vellicate SBA lenders and borrowers with their abulia (extra word bonus- abulia- abnormal lack of ability to act or to make decisions).
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TIP OF THE WEEK
On June 8, the Senate began its consideration of its substitute amendment to H.R. 4213, the "American Jobs and Closing Tax Loopholes Act of 2010," which was passed by the House of Representatives of May 28. The Senate is expected to vote this week on its version of the extenders package (technically the Senate substitute amendment to the House amendment to the Senate amendment), and Senator. Charles Schumer (D-NY) has predicted that the measure will pass.


The bill before the Senate is very similar to the bill passed by the House. Both bills include many revenue raisers, such as a crackdown on carried interest (how those rich hedge fund guys make their money) making it all but certain that the bill will again be returned to the House.


The bill would extend the American Recovery and Reinvestment Act small business lending program that eliminates the fees normally charged for loans through the SBA 7(a) and 504 loan programs and increases the government guarantees on 7(a) loans from 75% to 90%.


If a lender needs the 90% guaranty, they need to wait for this new legislation. The loan queue is only for the guaranty fee waiver.


If you don’t think this makes a difference, note that only $59,936,000 in 7(a) loans were approved the other week. The week before that SBA 7(a) loan volume had soared to $732,010,000 for the week as stimulus provisions for the 7(a) program ran out of time and money.


Congress is off today however as it is FLAG DAY.
_________________________________________
Indices:


PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2010 = 3.35%
SBA Fixed Base Rate June 2010 = 6.24%
________________________________________________

504 Debenture Rate for June


The debenture rate is 3.88% but note rate is 3.94% and effective yield is only 5.29%.
________________________________________________
AHEAD OF THE YIELD CURVE

Many people think there might be a double dip dragging the economy back down as federal stimulus spending expires. Almost all the new job growth last month was due to census hiring.
Payrolls rose by 431,000 last month, including a 411,000 jump in government hiring of temporary workers for the 2010 census.


May's unemployment report may have been disappointing, but the economy was picking up steam based on an increase in commercial truck traffic and diesel fuel sales, according to the latest Ceridian-UCLA Pulse of Commerce Index. Coming from UCLA, you know that it’s for real. The index rose 3.1% last month — the biggest one month increase since February 1999. In April it fell 0.3%. The West showed the second biggest jump — up 3.8% — after the East North Central, which saw traffic surge 6.2%. The Pulse of Commerce is based on real-time data of diesel purchases across the country. It has proven to be strongly correlated to the economy — when business is up, more trucks are transporting goods and vice versa.


Keep your eye on Wednesday’s release by the Federal Reserve on Industrial Production and Capacity Utilization.


Industrial production in the U.S. rose in April by the most in three months. The Fed’s report showed capacity utilization, which measures the amount of a plant that is in use, rose to 73.7 percent last month, the highest since November 2008, from 73.1 percent in March. Back in August it was 69.9. The August capacity level was the lowest on records dating back to 1967.


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- 69.9
2010- 73.2


What does all this mean?


Talk of the Federal Reserve raising rates is premature.


One of the Federal Reserve’s favorite gauges of inflationary pressure is the capacity utilization rate. 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.
Capacity utilization rates are 3.7 percentage points above the rate from a year earlier, but capacity utilization at 73.7% is still far below normal - and 9.1% below the the pre-recession levels of 80.5% in November 2007.


The economy is recovering but not fast enough to create the kind of hiring needed to reduce unemployment.


The Federal Reserve meets next week on interest rates and it looks like they will continue to keep rates low for as they put it “an extended period”.

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OFF BASE

Today is Flag Day.

Flag Day commemorates the adoption of the flag of the United States, which happened that day by resolution of the Second Continental Congress in 1777.

Exactly 177 years later, on June 14, 1954 President Dwight D. Eisenhower signed a bill into law that places the words "under God" into the United States' Pledge of Allegiance.

For those that don’t buy into that, keep in mind that also on this day in 1648 Margaret Jones was hanged for witchcraft- the first such execution for the Massachusetts colony.

It all makes sense as today is also Bourbon Whiskey Day as on this day in 1789 the Reverend Elijah Craig, a Baptist preacher, distilled the very first bourbon whiskey ever.

SBA 7(a) Weekly Lending Update

As of June 4, 2010, the SBA has approved $10,217,859,000 in 7(a) loans. This is an increase of $59,936,000 over the last week. The week before that SBA 7(a) loan volume had soared to $732,010,000 for the week as stimulus provisions for the 7(a) program ran out of time and money.

With SBA 7(a) lending now at a virtual standstill, legislation is still pending to extend the stimulus provisions of an increased guarantee and waiver of the guaranty fee.

The SBA and ending the recession ONE LOAN AT A TIME

We have funded another loan.

This time it was a $1,697,200 SBA 7(a) loan for the ground up construction of a new Kentucky Fried Chicken in Wildomar. This will be the second location for the borrower.

In the last ten years, we have closed $753,088,499 in SBA 7(a) loans and 504 1st trust deeds. That is over ONE BILLION dollars in total project costs.

As Coach John Wooden once said, "Don't mistake activity for achievement."

SBA 7(a) Rate Update

Indices-
PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2010 = 3.35%
SBA Fixed Base Rate June 2010 = 6.24%

SBA 7(a) Weekly Lending Update

As of May 31, 2010, the SBA has approved $10,157,923,000 in 7(a) loans compared to $4,998,225,000 through the same period last year.

Average loan size was just over $258,000.

Currently, the maximum SBA 7(a) loan is $2,000,0000.

The SBA definition of a small business is net profits after taxes less than $3,000,000 and the net worth of the company less than $8,500,000.

The SBA and pretermit

pretermit

pree-tuhr-MIT

1. To let pass without mention.
2. To suspend or to leave undone.

From Latin praetermittere (to let pass), from praeter (beyond, past) + mittere (to let go, send).
_____________________________________________________
TIP OF THE WEEK

Congress has pretermited the fate of SBA lending.

On Friday, the House of Representatives passed the American Jobs and Closing Tax Loopholes Act (HR 4213) by a vote of 215–204. The trouble lies in the fact that it was the last day of the week, with a very long holiday weekend stretching before Congress.

The bill now goes to the Senate, which will not take it up for consideration until after it returns from its Memorial Day recess on June 7.

The bill contains authorization extensions through the end of the year and an appropriation to extend fee reduction and higher guarantee.

Until then, the recovery loan queue is open.
_________________________________________
Indices:
PRIME RATE: 3.25%
SBA LIBOR Base Rate May 2010 = 3.28%
SBA Fixed Base Rate May 2010 = 6.48%
________________________________________________
504 Debenture Rate for May
The debenture rate is 4.11% but note rate is 4.17% and effective yield is only 5.52%.
________________________________________________
AHEAD OF THE YIELD CURVE
The Federal Reserve Open Market Committee does not meet for another three weeks.

They will continue to keep interest rates low, as they put it, for an “extended period” until the economy shows definite signs of recovery.

One of the most visible signs will be jobs.


Keep your eye on Friday’s payroll report from the Department of Labor.

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

April 290,000
March 230,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

The economy has lost 1.4 million jobs over the last year, and 7.8 million jobs since the recession started in December 2007. For the current recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).
When the numbers do come out on Friday, look at it closely.

A government boost to hiring is already under way at the Census Bureau. The agency said it will take on about 970,000 temporary workers from April through June to conduct the population count that occurs every 10 years. It will be important to remove the Census hiring to try to determine the underlying trend. The Census Bureau will release the actual number with the employment report.
_________________________________________________
OFF BASE

All those census workers hired are going door-to-door to roughly 48 million households that did not mail back their forms.

The word 'census' originates in ancient Rome from the Latin word 'censere' (meaning ‘estimate’). Perhaps the best known census was the one that forced Mary and Joseph to go to Bethlehem. The U.S. Census is mandated by the Constitution primarily to allocated congressional representation.

The last census in 2000 estimated that US population at 281,421,906, an increase of over 32,000,000 from 1990. With the population growing by almost three million people per month, it is estimated that at least 150,000 new jobs should be generated monthly just to keep up with a growing population.

Census data can also be used for all sorts of queries.

In two centuries, the country’s most common names have not changed all that much. Smith is still the best name for signing into a hotel anonymously. Johnson has moved up a notch to second. And the top five at the turn of the 18th century are still in the top six.

Over 147 people named Smith have played major league baseball. The one with the best nickname is Phenomenal Smith. Phenomenal Smith was born John Francis Gammon and got his nickname when he struck out 16 batters in a game in 1885 while pitching for the Newark Domestics, with no batter hitting the ball out of the infield.

Having been nicknamed "Phenomenal", he reportedly claimed that he was so good that he didn't need his teammates to win. While playing for the Brooklyn Grays, his team decided to punish him for his perceived brash and cocky demeanor by intentionally committing 14 "errors", losing the game 18-5. The intentional misplays of his teammates soon caused Smith to be released from the team.

SBA Reactivates Recovery Loan Queue as Funding Is Exhausted

SBA has reactivated its Recovery Loan Queue today. The queue will operate in the same manner as when originally implemented in November 2009.

Here is the notice from SBA-

http://www.sba.gov/idc/groups/public/documents/sba_homepage/news_release_10-32.pdf

SBA 7(a) Weekly Lending Update

As of May 22, 2010, the SBA has approved $9,425,913,000 in SBA 7(a) loans since October 1st, 2009. This compares to only $4,788,315,000 through the same period last year.

25% of the loans approved so far this year has been for start-up businesses. Two years ago almost 40% of SBA 7(a) loans were for start-ups.

SBA Rate Update

7(a) Indices
PRIME RATE: 3.25%
SBA LIBOR Base Rate May 2010 = 3.28%
SBA Fixed Base Rate May 2010 = 6.48%________________________________________________
504 Debenture Rate for May
The debenture rate is 4.11% but note rate is 4.17% and effective yield is only 5.52%.

FDIC Quarterly Banking Profile

The FDIC released the Q1 Quarterly Banking Profile today. The FDIC listed 775 banks with $431 billion in assets as “problem” banks in Q1, up from 702 banks with $403 billion in assets in Q4, and 305 banks and $220 billion in assets in Q1 of 2009.

Bump in the Road for Commercial Real Estate Values

The Moody’s/REAL All Property Type Aggregate Index measured a 2.6% price decline in commercial properties in February. This decrease comes on the heels of three consecutive months of rising prices, and brings the level of commercial property prices 41.8% below the peak measured in October 2007. Values are now down 25.8% from a year ago, and 41.6% from two years ago.

For a copy of the report, drop me an email.

The SBA and fugacious

fugacious
(fyoo-GAY-shuhs)
Lasting a very short time.
From Latin fugere (to flee) which also gave us other words such as fugitive
_____________________________________________________
TIP OF THE WEEK

On February 17th , 2009, SBA’s secondary market program for First Lien Position 504 Loans (“Program”) was established by statute in Section 503 of the American Recovery and Reinvestment Act of 2009 (the “Recovery Act” or the “Act”).

On November 5th , 2009 SBA published the guide for the Secondary Market First Lien Position 504 Loan Pool Guarantee Program.

On May 13th , 2010, the SBA announced the start of the Secondary Market First Lien Position 504 Loan Pool Guarantee Program.

On July 15th, 2010, the first loan pools are expected to be ready for sale.

On February 16th, 2011 the Secondary Market First Lien Position 504 Loan Pool Guarantee Program terminates.

If that sounds fugacious, keep in mind that there are only 10 working days left until Recovery Act SBA loan provisions providing an increased guarantee and fee reductions expire.
_________________________________________
Indices:

PRIME RATE: 3.25%

SBA LIBOR Base Rate May 2010 = 3.28%

SBA Fixed Base Rate May 2010 = 6.48%
________________________________________________
504 Debenture Rate for May

The debenture rate is 4.11% but note rate is 4.17% and effective yield is only 5.52%.
________________________________________________
AHEAD OF THE YIELD CURVE

Did you notice that the SBA LIBOR base rate jumped up this month?

Historically, LIBOR rates have consistently been about three percentage points less than the Prime Rate.

In November of 2008, the SBA LIBOR base rate was provided as the secondary market for 7(a) guaranteed portions died when LIBOR and PRIME rates actually converged.

Now LIBOR is once again acting up.

30 day LIBOR is at .34 percent while 90 day LIBOR is at .45 percent. This is at the highest level since last August. The rate was as high as 482 basis points in 2008 during the global credit crisis.

The fear and paranoia extend to the long end of the yield curve.

Last week a $16 billion sale of 30-year bonds drew a yield of 4.49 percent. The yield has dropped from 4.77 percent at the last sale of the securities on April 8.

The bond’s average yield was 4.49 percent from Dec. 31, 2007, through Sept. 12, 2008, just before the collapse of Lehman Brothers.

It is now at 4.32 percent.

Here is what the 30 year bond has been doing:
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

What 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. It would appear that the savings from low variable rates of interest should continue for an "extended" period.
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OFF BASE

The fugacity of one’s life can be predicted based upon a smile.

When researchers Ernest Abel and Michael Kruger from Wayne State University examined the 1952 Baseball Register photos of 230 Major League Baseball players who started playing before 1950, they found the span of their smile accurately predicted their life span. The players were rated as to "no smile" if they stared blankly at the camera, "partial smile" if the muscles around their mouths were only slightly raised and "full smile" if they had a wide grin with both cheeks raised.

The researchers found that the wide-grinning players were half as likely to die in any year compared to non-smilers. As of June, 2009, the players who were deadpan for the cameras lived an average of 72.9 years, those with slight smiles died at age 75 and those with the most beaming smiles lived the longest — 79.9 years. Of the 230 players, 46 players were still alive. The scientists also did a follow-up study to see whether attractiveness correlated with longevity and found that good looks did not add significantly to life span. In any case, far fewer individuals had full smiles — 23 — than partial (64) or no smiles (63).

So smile, you'll live longer.

SBA Lending is the ONLY Government Program That Works

According to the Congressional Oversight Panel's recent report on the government's efforts to stimulate lending to small business, nothing is working with one notable exception- SBA lending.

For a copy of the Panel's recent report go here- http://cop.senate.gov/documents/cop-050709-report.pdf

According to the SBA, lending is up over 90%. Check out their report card- http://www.sba.gov/idc/groups/public/documents/sba_homepage/recov_perform_rptcard_04_2010.pdf

SBA Rate Update

504 Debenture Rate for May
The debenture rate is 4.11% but note rate is 4.17% and effective yield is only 5.52%.

SBA Rate Update

Indices:
PRIME RATE: 3.25%
SBA LIBOR Base Rate May 2010 = 3.28%
SBA Fixed Base Rate May 2010 = 6.48%

The maximum rate a lender can charge for a 7(a) loan is one of the above indices plus 2.75%

Why did the unemployment rate rise?

Why would the unemployment rate increase in April if payrolls increased so sharply? The short answer: more people are looking for jobs.

From the Wall Street Journal- http://blogs.wsj.com/economics/2010/05/07/why-did-the-unemployment-rate-rise/

How the SBA turned $730 million into $26 billion

The SBA received $730 million in the American Recovery and Reinvestment Act (ARRA) to help unlock the small business lending market and get capital flowing again to America’s small businesses.

With that money, SBA has supported more than $26 Billion in Recovery Loans to Small Businesses.

More detail can be found at http://www.sba.gov/idc/groups/public/documents/sba_homepage/sba_rcvry_aara_imp_factsheet.pdf

The SBA and wieldy

wieldy

(WEEL-dee)

Easily handled or managed.

From Old English wealdan (to rule).
_____________________________________________________
TIP OF THE WEEK
SBA loans are wieldy.

Recovery Act SBA loan provisions providing an increased guarantee and fee reductions expire on May 31st.

There is still time to take advantage.

Pending legislation providing an increased guarantee, continued fee reductions, and increased loan amounts still needs to pass.
_________________________________________
Indices:
PRIME RATE: 3.25
SBA LIBOR Base Rate April 2010 = 3.25%
SBA Fixed Base Rate April 2010= 6.57%
________________________________________________

504 Debenture Rate for April
The debenture rate is 4.36% but note rate is 4.42% and effective yield
is only 5.774%.
________________________________________________
AHEAD OF THE YIELD CURVE

Last week the Federal Open Market Committee said that they would continue to keep rates low for an “extended period.”

One of their reasons is because “employers remain reluctant to add to payrolls”.

That does not seem to be the case with small businesses.

Small businesses added approximately 66,000 new jobs in April and roughly 300,000 new jobs since June 2009, when the upward trend in employment began.

Intuit, the accounting software company, said that small businesses added about 66,000 new jobs in April. Intuit released the monthly report, based on figures from the country's smallest businesses that use Intuit Online Payroll. The Intuit Small Business Employment Index reflects data from approximately 55,000 small business employers who use Intuit Online Payroll.

Keep your eye on Friday’s payroll report from the Department of Labor.
Here is a summary of payroll employment and this week’s interesting little table of data:
March 162,000
February (36,000)
January (26,000)
2009
December (150,000)
November (11,000)
October (111,000)
September (215,000)
August (201,000)
July (304,000)
June (443,000)
May (322,000)
April (504,000)
March (699,000)
February (651,000)
January (655,000)
2008
December (681,000)
November (597,000)
October (423,000)
September (403,000)
August (127,000)
July (67,000)
June (100,000)
May (47,000)
April (67,000)
March (88,000)
February- (83,000)
January- (76,000)

What does all this mean?

The big increase in jobs last month likely reflected a rebound from the February blizzards that set seasonal snowfall records in cities including Washington and Philadelphia, shuttering some businesses during the week of the government survey. Any hiring that would have taken place that week is figured into the March job count instead. The March increase also included 48,000 temporary workers hired by the government to conduct the 2010 census. The economy has lost 2.3 million jobs over the last year and 8.2 million jobs since the beginning of the current employment recession. Employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).

Futures on the CME Group Inc. exchange showed a 64 percent chance the Fed will raise its target rate for overnight bank lending by at least a quarter-percentage point by December, compared with 63 percent odds a week ago. The central bank has kept the rate between zero and 0.25 percent since December 2008.
_________________________________________________
OFF BASE

Today, May 3rd, in 1899 Tom O'Brien of the New York Giants receives perhaps the first intentional walk in major league history. In the eighth inning, with runners on second and third bases with one out, Ed Delahanty of the Philadelphia Phillies tells teammate pitcher Jack Fifield to walk O'Brien, who has hit well all day. Then next batter, Fred Hartman, hits into a double play.

Intentional walks are normally issued for two reasons: to bypass a good hitter for a weaker one and/or to set up a double play. The usefulness of intentional walks for either reason is a matter of considerable argument, and different managers have taken very different attitudes toward the intentional walk. Walter Alston even changed his attitude in mid-career, moving from issuing 101 (the 8th most ever) in 1967 to just 9 (the fewest ever) in 1974. In 1974 the Dodgers did go on to the World Series.

A walk is only considered intentional if the catcher gives a clear sign that he is calling for an unhittable ball. Normally he does this by standing up instead of crouching and reaching one hand outside. The pitcher then throws the ball toward the catcher's hand, and the catcher steps over to catch the ball.

The single season record for intentional walks came in 2004 when Barry Bonds was intentionally walked 120 times. One of those passes came on April 17th against the Dodgers. In the bottom of the third inning with two outs and a runner on second, Jose Lima intentionally walked Bonds. The next batter popped out and Lima went on to win the game.

The intentional walk it is often referred to as a "four-finger salute". This reference stems from the manager's holding up four fingers to signal an intentional walk to his pitcher or catcher.

The SBA and the Fed- Part II

How long is an "extended period"?

From Calculated Risk http://www.calculatedriskblog.com/

Short answer: Longer than many analysts expect.

First we can compare to the "considerable period" language in 2003:

June 25, 2003: Lowered Rate to 1%, Unemployment Rate peaked at 6.3%

August 12, 2003: “the Committee believes that policy accommodation can be maintained for a considerable period.” Unemployment rate at 6.1%

December 9, 2003: Last statement using the phrase "considerable period". Unemployment rate at 5.7%

January 28, 2004: the Committee believes that it can be patient in removing its policy accommodation. Unemployment Rate 5.7%

May 4, 2004: “the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.” Unemployment Rate 5.6%

June 30, 2004: FOMC raised the Fed Funds rate 25 bps. Unemployment Rate 5.6%

So "extended period" is probably 6+ months after the language changes - the next meeting is June 23rd and 24th, so the earliest rate hike would probably be in December (barring a significant pickup in inflation or rapid decline in unemployment).

The SBA and the Fed

Today, the Federal Open Market Committee said that it will continue to keep interest rates low for an "extended period."

The key language about rates stayed the same: "The Committee ... continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

It would appear that the savings from the low interest rates available with the SBA 7(a) loan program should continue for an “extended period.”

So what is the current rate on a SBA 7(a) loan? Here's the answer from the SBA:

http://www.sba.gov/mostrequesteditems/CON_FAQ10.html

Currently, most lenders are offering a rate of Prime plus 2.75%.

For the complete release from the Federal Open Market Committee, go here:

http://www.federalreserve.gov/newsevents/press/monetary/20100428a.htm

The SBA and a gormandizer

gormandizer

(GOR-man-dyz-er)

A greedy person.

From French gourmandise (gluttony). Both a gourmand and a gourmet enjoy good food, but a gourmand is one who eats to excess while a gourmet is considered a connoisseur of good food.

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TIP OF THE WEEK

For SBA loans, the borrower’s ability to repay the loan from the cash flow of the business is the most important consideration in the loan making process.

SBA allows lenders to determine repayment ability through either an analysis of actual cash flow or by using the “rule of thumb” method. “Rule of thumb” cash flow is defined as earnings before interest and taxes, plus depreciation and amortization, less total debt service.

According to the SBA Office of the Inspector General, the “rule of thumb” method should not be used in determining repayment ability for businesses that are on an accrual accounting basis.

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Indices:

PRIME RATE: 3.25

SBA LIBOR Base Rate April 2010 = 3.25%

SBA Fixed Base Rate April 2010 = 6.57%

The maximum rate a lender can charge for a 7(a) loan is one of the above indices plus 2.75%
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504 Debenture Rate for April

The debenture rate is 4.36% but note rate is 4.42% and effective yield

is only 5.774%.

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AHEAD OF THE YIELD CURVE

The Federal Reserve Open Market Committee meets this week and the question is not what they will do but what they will say.


Will they continue to say that they will keep interest rates “exceptionally low” for an “extended period?”

The Fed has repeated the “extended period” language at each meeting since March 2009, over a year ago.

So how long is an extended period?



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:



DEC10- 0.82

DEC11- 2.23

DEC12- 3.35

DEC13- 4.15

DEC14- 4.73

DEC15- 5.11

DEC16- 5.33

DEC17- 5.47

DEC18- 5.60


What does all this mean?



It would appear that the savings from a low variable rate of interest should persist for an “extended period."

The SBA and defenestrate

defenestrate
(dee-FEN-uh-strayt)
To throw someone or something out of a window.
From Latin de- (out of) + fenestra (window).
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TIP OF THE WEEK

Don't defenestrate SBA loans just yet.

The Recovery Act SBA loan provisions have been extended through May 31. New legislation provided $80 million for 7(a) and 504 fee reductions/waivers and the 90% 7(a) guarantees. The $80 million is twice the amount provided for in the April extension.
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Indices:
30 DAY LIBOR: 0.26
90 DAY LIBOR: 0.31
PRIME RATE: 3.25
SBA Fixed Base Rate April 2010 = 6.57%
SBA LIBOR Base Rate April 2010 = 3.25%
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504 Debenture Rate for April
The debenture rate is 4.36% but note rate is 4.42% and effective yield is only 5.774%. ________________________________________________
AHEAD OF THE YIELD CURVE
I guess the recession is not yet over.

Last Monday, the National Bureau of Economic Research’s Business Cycle Dating Committee — the group that determines the start and end dates of recessions — said that it could not yet declare an end to the recession that began in December 2007.
How can that be?

The economy expanded at a 5.6 percent annual rate in the fourth quarter, the most in six years. But if you look closely, inventories provided the biggest boost by adding 3.8 percentage points to gross domestic product, based on data from the Commerce Department in Washington. The danger is that sales won’t rise as much as companies expect, leaving them with more inventory than they need and setting the stage for an economic slowdown later in the year.

Do we face a “significant risk” of a double-dip recession?

It depends on what the Federal Reserve does. The economy may slow as the Fed begins withdrawing a record $1 trillion in excess cash that propped up the banking system during the recession.

But the Fed won’t start doing that until inflation begins to stir.

One of the Federal Reserve’s favorite gauges of inflationary pressure is the capacity utilization rate. 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.

Last week the Federal Reserve reported capacity use advanced 0.2 percentage point to 73.2 percent for the month of March. Back in August it was 69.9. The August capacity level was the lowest on records dating back to 1967.

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- 69.9
2010- 73.2

What does all this mean?

Capacity utilization rates are 3.7 percentage points above the rate from a year earlier, but capacity utilization at 73.2% is still far below normal - and 9.1% below the the pre-recession levels of 80.5% in November 2007.

Talk of the Federal Reserve raising rates is premature.

The long end of the bond market seems to agree. Two weeks ago, the U.S. sold $13 billion of 30-year bonds, the last of four note and bond auctions that week totaling $82 billion. The so-called long bond gained the most in six weeks after a $21 billion sale of 10-year notes drew the strongest demand in at least 16 years. The 30-year bonds sold drew a yield of 4.77 percent. The 30 year bond is now down to 4.67 percent.

It appears that savings from a low, variable rate of interest should persist for an “extended period.”
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OFF BASE

Happy Patriots’ Day.

The perfect holiday to wedge between that long stretch between Washington’s Birthday and Memorial Day has been found.

Monday marked the anniversary of the Battles of Lexington and Concord, the first battles of the American Revolutionary War. It is observed in the Commonwealth of Massachusetts and state of Maine (once part of Massachusetts), and is a public school observance day in Wisconsin. Now it just needs to be a national holiday.

Ralph Waldo Emerson, in his "Concord Hymn", described the first shot fired by the Patriots at the North Bridge that day as the "shot heard 'round the world."

The other shot heard around the world was the game-ending home run hit by New York Giants outfielder Bobby Thomson off Brooklyn Dodgers pitcher Ralph Branca at the Polo Grounds to win the National League pennant in 1951. The Giants won the game 5–4, defeating the Dodgers in their pennant playoff series, two games to one. An article recapping the game in the New York Daily News on October 4 was accompanied by the headline, "The Shot Heard 'Round the Baseball World". The phrase quickly spread to other media, and soon became a widely-recognized slogan for Thomson's homer. It turns out that the Giants had cheated that day. Giants coach Herman Franks with a telescope had stolen the pitching signs of the Dodger catcher, Rube Walker, subbing for the injured Roy Campanella. Franks was positioned in the Polo Grounds center field with a line-of-sight view of the catcher. A buzzer system was installed so that Franks could signal a player in the Giants' bullpen, located on the field of play in deep left field. The player would then signal the batter as to what pitch was coming.