Though we might have expected the re-start of the PPP program to take some of the air out of SBA 504 market, that is not what has happened.

In fact, loan activity accelerated again in January 2021. Through February 5, 2021, SBA 504 loan originations are up 9.7% compared to the prior year, reaching $2.43 billion year-to-date in FY2021 versus $2.22 billion during the same period in FY2020. Last month, originations were up 6.8% compared to the prior year. Unpaid Principal Balance of SBA 504 loan figures for the June 2020, September 2020, and December 2020 quarters have still not been updated, and 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 are now down 11.0% through February 5, 2021 (they were down 9.9% through January 8, 2020) 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.

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 solid, but not as spectacular growth in 504 fundings. However, 504 fundings of startup businesses (the second largest category) have dropped dramatically year-to-date in FY2021 compared to the prior year.

Fed proposing revamp of landmark law that aims to prevent discrimination in lending. Jacquinn Sinclair, Federal Reserve Bank of Boston

The Federal Reserve System is aiming to significantly modernize the Community Reinvestment Act, a rule developed largely to combat racial discrimination in lending – or “redlining” – in low-to moderate-income communities.