The pace of SBA 504 loan originations continued to slow from the torrid pace set early in FY22.
Forty weeks into fiscal year 2022 (started October 1st), 504 loan originations are up 25.9% compared to the same period a year ago. Originations this year are also up 201.1% compared to the same period in FY2019 (pre-COVID). Originations were up 32.2% from the prior year one month ago, so while slowing, this is still exceptional growth. Unpaid Principal Balance of SBA 504 loans stood at $30.14 billion as of March 31, 2022, up 4.1% compared to the $28.94 billion figure at year-end FY2021. SBA 7(a) loan originations have not shown the same uptick versus last year, as they are down (7.9)% compared to the same period the previous year, down slightly from the pace a month ago, when originations were down (5.2)% compared to the same period in FY2021. The unpaid principal balance of 7(a) loans is $106.69 billion at March 31, 2021, up 2.7% compared to year-end FY2021.
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 $68 billion, still below 7(a) totals, but much closer.
Loan originations in the 504 program are growing noticeably, despite the volatility driven by changing COVID conditions. Total originations in FY2022 through July 1st are up 25.9% vs FY2021 and 201.1% compared FY2019. In dollar terms, most of the growth is being led by mid- and large size loans. In fact, the largest size loan groupings are achieving the highest percentage growth, with loans of $350k-$2.0M rising 18.9% YTD and loans greater than $2.0M climbing 50.3%. Meanwhile, loan originations in the smallest two categories are down compared to last year.