The pace of SBA 504 loan originations slowed a bit more in May.
Thirty-five weeks into the new fiscal year (started October 1st), 504 loan originations are up 32.2% compared to the same period a year ago. Originations this year are also up 208.6% compared to the same period in FY2019. Originations were up 36.6% 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 (5.2)% compared to the same period the previous year, down slightly from the pace a month ago, when originations were down (4.1)% 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.
The accelerated growth in loan originations in the 504 program eight months into FY2022 has been most dramatic in the American Indian group, which shows a 475.6% increase in dollar volume so far in FY2022, and a 258.3% rise in the number of loans approved. Still, this group accounts for just 0.5% of all 504 loan approvals year-to-date. All groups are experiencing exceptional growth, with slowest growth so far this fiscal year appearing in the “undetermined” group, which has posted growth of 16.9%.
