SBA Update

September 4, 2018

SBA activity is expected to be focused on the DCPC auction Thursday, which includes 10yr, 20yr and 25yr terms.  Investors have also remained active in floating rate equipment pools offered at par and premium pricing as yields on SBA floating rate pools moved higher over the last month and are likely to move higher if the Fed raises rates later this month.


The SBA has announced and the Federal Register now reflects a slight tightening of the maturity bands for new SBA pools issued subsequent to October 1st.  The shortest maturity of any loan in a pool issued subsequent to October 1st will now need to be at least 95% of the longest, adjusted upward from the current 94%. This brings cash flows on pools in closer alignment with cash flows on the underlying loans, a stated objective of the SBA.  In essence, this brings pools one small step closer to being true pass-throughs.  The change has zero effect on any existing pools.


Floating-Rate 7(a) Pools


Fixed-Rate (DCPC and SBIC) Pools

Government Guaranteed Loan Trading



August SBA Prepayment Speeds


Prepayment speeds for equipment loan pools slowed and real estate pools sped up this month, each reversing their direction from July. Equipment loan pools fell below their six-month moving average and real estate pools ascended above theirs. Seasoning continues to overwhelm other pool characteristics and the path of speeds as pools season remains consistent with previous months. While the direction of the monthly aberration may fit well with narratives based on the recent course of the economy and interest rates, statistical variations and technical factors probably attributed more to the one-month changes than a flatter yield curve or economic growth trends and the moving averages provide a truer representation of prepayment trends. For additional charts and SBA prepayment commentary, click on the link.

Built by grouping buckets based on twelve-month intervals counting backward from today, the following historical graphs depict vectors based on the eleven months of prepayment history subsequent to procedural changes related to distributions of principal implemented last October.

Dan Stimpson, CPA

Senior Vice President

Vining Sparks


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