SBA 504 loan originations remained strong into the second month of the 2020 fiscal year.
Through November 29, 2019, SBA 504 loan originations were up 24.8% compared to the prior year, reaching $1.11 billion year-to-date in FY2020 versus $888.3 million during the same period in FY2019. The unpaid principal balance of outstanding 504 loans stood at $25.77 billion as of September 30, 2019, down 0.2% compared to the $25.83 billion figure at year-end FY2018. In contrast, SBA 7(a) loan originations are up a healthy 6.5% year-to-date (through November 29) to $3.64 billion and the unpaid principal balance of 7(a) loans is $95.10 billion at September 30, 2019, up 2.9% compared to year-end FY2018.
While 7(a) loans 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.
Loan originations in the 504 program are growing substantially so far two months into FY2020. Total originations in 2020 through November 29th are well in excess of the volumes achieved at this point in any of the last five years. The smallest category, loans of less than $150k, remains low as a percentage of overall volumes at roughly 1% of the total, despite YTD growth of 12.0% in originations compared to last year. Other size categories have seen even faster growth, as originations of loans between $150k and $350k are up 23.9%, loans between $350k and $2 million are up 27.4%, and loans of greater than $2 million are up 21.2% compared to the prior year.
News Blurb of the Week – Statement of Joseph M. Otting, Comptroller of the Currency before the Committee on Financial Services United States House of Representatives, December 4, 2019
December 4, 2019 – Modernization of the Community Reinvestment Act: I, and the dedicated staff at the OCC, continue to work toward the goal of releasing a proposed rule by the end of the year and are working with our colleagues at the FDIC to issue it jointly.