Secondary market premiums on the sale of SBA 7(a) loan guarantees are recovering from declines experienced in June after Ben Bernanke spoke at a June 19th press conference and fixed-income markets roiled in reaction based on perception that the Fed could begin phasing out bond buying later this year and halt purchases around mid-2014 as long as the economy meets its forecast. After premiums held at record levels of 118.75 since February 2013, pricing fell to 117.50 by the end of June. However, indications are pricing has recovered to the 118 level as of mid-July. The market tone is improving along with other fixed-income products as now analysts believe markets overreacted to Bernanke’s comments.
|*Based on Prime + 2.75%, Quarterly Reset, 25-year loan term.|
“We continue to pursue SBA 7(a) loans in the five-state footprint surrounding New York City for our affiliated bank, Country Bank,” said Michael D. Sneden, Executive Vice President at ValueXpress. “We are working on a $5-million SBA 7(a) loan right now, and at 118, that would be a net profit of $525,000 on the $3,750,000 guarantee sale after the split with the government, a nice day’s work! Plus Country Bank will receive $37,500 annually in servicing fees during the life of the loan.”