Through the end of December 2023, loan originations under the 504 loan program are down 5.8% compared to the same point in FY2023.

This represents a noticeable improvement from the 13.6% decline versus the prior year measured one month ago. Comparisons to recent past years are somewhat misleading, as government lending programs surged during the COVId-19 pandemic. Still, the current year figures are down, even compared to pre- Covid years, as FY2020 originations were 8.4% higher at the same point in that fiscal year. SBA 7(a) loan originations are not faring as well as 504 originations. Through December 31, 2023, SBA 7(a) originations are down 7.7% compared to the same period in FY2023, losing ground compared to the 4.7% YTD decline we reported a month ago.

The chart to the right above shows cumulative SBA 504 program net charge-offs by year of origination since 1992. The data for this chart only includes the second lien portion held by the SBA/CDC for the projects funded by a 504 loan. Data for the first lien portion, which is held by many different private lenders, is not available. The most noticeable feature of the chart is the steady climb and then the huge spike in net charge-offs as we approached the Great Recession in 2007-2008. This was followed by a sharp drop in net charge-offs, which fell below 1.0% for the 2013 vintage of 504 loan originations and have remained there for every vintage of years since. Cumulative net charge-offs for the years 2018 and 2019 are just 0.1% and for each subsequent year, they are less than 0.1%.

The slower growth in loan originations in the 504 program in FY2024 is evident across almost all minority groups. Although 504 loans to non-minority borrowers still accounted for 63.5% of all loans so far in FY2024, Asian or Pacific Islander borrowers was the only category showing an increase, rising 37.9% year-to-date compared to the prior year. The Black, American Indian, and Hispanic groups showed significant declines of 56.4%, 31.1%, and 13.5%, respectively, versus FY2023, while the White category showed a 9.1% decrease.