SBA 504 loan origination growth continued to progress at an accelerated pace in the sixth month of the 2020 fiscal year.
Through April 3, 2020, SBA 504 loan originations were up 33.8% compared to the prior year, reaching $3.10 billion year-to-date in FY2020 versus $2.31 billion during the same period in FY2019. The unpaid principal balance of outstanding 504 loans stood at $25.83 billion as of December 31, 2019, up 0.2% compared to the $25.77 billion figure at year-end FY2019. In contrast, SBA 7(a) loan originations are down 12.2% year-to-date (through April 3) to $10.17 billion and the unpaid principal balance of 7(a) loans was $95.37 billion at December 31, 2019, up 3.0% compared to year-end FY2019.
While 7(a) loan outstandings continue to grow at solid pace (2.9% in FY2019 and 7.2% in FY2018), 504 loans have remained in a fairly tight range between $25 billion and $27 billion over the last nine years. Of course, the chart above includes only the CDC/SBA second lien portion of a 504 loan package, which typically amounts to roughly 40% of the financing. The first lien loan, usually supplied by a bank or other private sector lender, typically provides another 50% of the project funding.
The strong growth in loan originations in the 504 program six months into FY2020 is largely driven by existing businesses. However, loans that facilitate a change in ownership, while still a modest 2.3% of all 504 loan originations, have jumped 555.6% compared to the same time in FY2019. Loans to start a business are also up substantially, rising 36.7% compared to the prior year. Still, loans to existing businesses, which account for 77.7% of YTD originations, are also growing at a strong 44.1% pace.
News Blurb of the Week – Joint Statement on CRA Consideration for Activities in Response to COVID-19
March 19, 2020 – The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have issued the attached joint statement on Community Reinvestment Act (CRA) consideration for activities in response to the Coronavirus Disease (referred to as COVID-19).