SBA Prepay Commentary
February 2022 SBA Prepayment Speeds
Concerns among small business owners over inflation remain high, as 22% of respondents to January’s NFIB Small Business Economic Trends survey listed it as their primary concern, unchanged from the prior month’s 41-year high. A net 61% of respondents also told the NFIB that they plan to raise their average selling prices, which is the highest reading since 1974. Combine this with the 48-year-record 50% of respondents planning on raising compensation (with 27% planning on doing so in the next three months), 11% claiming cost of labor as their primary worry, and 23% concerned over quality of labor, and it comes as no surprise that inflation is on many small business owners’ minds. How those concerns translate to prepayments remains to be seen in the coming months.
Both equipment and real-estate loan pools saw an increase in prepayments over the last month. Equipment loan pools’ prepayments rose from 17.2 to 21.5 CPR, an increase reflected among most individual vintages as well. Speeds on real-estate loan pools also picked up, going from 15.3 to 18.4 CPR, which was also the case for most pools when viewed on a vintage-by-vintage basis.
Equipment Loan Pool CPRs
- Equipment loan pools experienced their tenth increase in eleven months.
- The largest of these increases was seen in the 2013 vintage, which went from 22.9 to 72.8 CPR.
- Speeds on most vintages are above their respective 6- and 12-month averages.
|1Equipment loan pools have original WAMs between 8 and 13 years|
Real-Estate Loan Pool CPRs
- Most individual vintages saw an increase in prepayment activity, though there were a few outliers that experienced slight decreases.
- The largest pick up was experienced by the 2012 vintage, which went from 7.5 to 35.6 CPR. The largest decrease was seen by the 2015 vintage, which went from 22.6 to 21.7 CPR.
- All vintages have faster prepayments than their respective 12-month averages, and most are above their respective 6-month averages as well.
|2Real-estate loan pools have original WAMs greater than 18 years|
Prepared according to methodologies described by SIFMA.
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NFIB Small Business Economic Trends (January) | Monthly, 2nd Tuesday of each month
Analyst, Investment Product Strategies
Kevin A. Smith, CFA
SVP, Director Investment Product Strategies