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Monday, November 17, 2008

Daily Observations - LIBOR is IN

The SBA has formally announced today that the new preferred index is LIBOR. As for Prime we are not sure as of this writing if Prime is completely out or the lender has an option to go with LIBOR or Prime. What we do know is that if you have filed for and received an SBA number for deals in transition you will continue to stay at the index that was presented and approved by the SBA.

Should the lender want to change to the more aggressive LIBOR rate they would have to cancel the SBA control number that was issued and re-apply for a new number. SBA will now have to change all of their base assumptions to the following.

Index - LIBOR

Pricing to get to the base index is LIBOR plus 300 basis points

Lender can then add up to another 275 basis points.

LIBOR Rate is the One month LIBOR

Which now means that loans are to be adjusted monthly rather than quarterly as they have been over the last decade or so.

As I shared with you a few posts ago this should bring the secondary market back and thus lenders will start to free up credit to stimulate small business, and thus start to stimulate the economy as a whole. There are also other provision which the new administration is recommending that will also help grow the economy. I will share those as they become available.

As we find out more about the LIBOR change I will continue to bring to this blog that information. Should you want to know more about SBA Financing please visit loanforbiz.com. To get your 10 FREE Special Reports sign up here.

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