Originations of SBA 504 loans are accelerating as vaccinations proceed and COVID-19 restrictions are eased in some parts of the country, leading to increased loan activity in March.
Through April 2, 2021, SBA 504 loan originations are up 19.2% compared to the prior year, reaching $3.69 billion year-to-date in FY2021 versus $3.10 billion during the same period in FY2020. Last month, originations were up 16.8% compared to the prior year. Unpaid Principal Balance of SBA 504 loan figures for the June 2020, September 2020, December 2020, and March 2021 quarters have still not been updated. They stood at $25.72 billion as of March 31, 2020, down 0.2% compared to the $25.83 billion figure at year-end FY2019. SBA 7(a) loan originations accelerated much like 504 originations and are now up 7.4% through April 2, 2021 (they were down 4.2% through March 5, 2021) compared to the same period in FY2020 and the unpaid principal balance of 7(a) loans is $95.64 billion at March 31, 2020, up 0.6% compared to year-end FY2019.
While 7(a) loan outstandings were still growing at solid pace through the end of FY2019 (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 published 504 loan figures in 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. If the first lien loan and borrower investment were included, the 504 loan totals would be a bit closer to 7(a) loan totals.
Loan originations in the 504 program are growing noticeably, despite an uncertain economic environment. Total originations in FY2021 through April 2nd are up 19.2% compared to FY2020 and well in excess of the volumes achieved at this point in any of the last five years. In dollar terms, most of the growth is being led by mid- and large size loans. However, the smaller size loan groupings are achieving the highest percentage growth, with loans of $150k and under up 24.9% YTD and loans between $150k and $350k up 31.7% YTD.
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