SBA 504 loan originations continued to set a blistering pace in the new SBA fiscal year (FY2022).
Nine weeks into the new fiscal year (started October 1st), 504 loan originations are up 93.2% compared to the same period a year ago. This is not due to COVID slowdowns in the prior year. Originations this year are up 197.9% compared to the same period two years ago, which was pre-COVID. Originations were up 163.4% from the prior year one month ago, so while still showing exceptional growth, the pace has slowed some in recent weeks. Unpaid Principal Balance of SBA 504 loans stood at $28.94 billion as of September 30, 2021, up 6.4% compared to the $27.20 billion figure at year-end FY2020. SBA 7(a) loan originations started the year more slowly, exhibiting an 11.1% decline compared to the same period the previous year, but this is an improvement from a month ago, when originations were down 28.5% compared to the same period in FY2021. The unpaid principal balance of 7(a) loans is $103.89 billion at September 30, 2021, up 6.8% compared to year-end FY2020.
The 7(a) program has shown steady growth in loan outstandings in recent years that continued through the end of FY2021 (6.8% in FY2021, 2.3% in FY2020, and 2.9% in FY2019). 504 loans have shown accelerating growth, rising 6.4% to $28.9 billion at year-end FY2021, after climbing 5.5% in FY2020 and (0.2%) in FY2019. Of course, the published 504 loan figures in the chart above include only the CDC/SBA second lien portion of a 504 loan package, If we include the private lender portion of the same loan projects, which typically accounts for 50% of 504 projects, The total for SBA 504 loan outstandings (1st and 2nd liens combined) would be somewhere in the neighborhood of $65 billion, still below 7(a) totals, but much closer.
The age of the businesses being funded sheds some interesting light on the impact of the COVID-19 pandemic. As seen in the graph at right, there has been tremendous growth in relatively young businesses. Older businesses (which make up the majority of fundings) and existing businesses changing ownership have posted very good, but not as spectacular growth in 504 fundings. 504 fundings of startup businesses (the second largest category) have increased close to 120% compared to the same period last year.
