Loan originations under the 504 loan program remain well below the level of the preceding year so far in FY2023, and are currently just slightly above where they were at the same point in FY2020.

Through May 31, 2023, 504 loan originations are down 35.8% compared to the same point in FY2022, though this is a modest improvement from the 39.2% decline as of April 30, 2023. We believe this slowdown is primarily due to the rapidly rising interest rate environment and fears of a recession. Unpaid Principal Balance of SBA 504 loans stood at $32.00 billion as of December 31, 2022, up 3.7% compared to the $30.87 billion figure at year-end FY2022. Unlike SBA 504 loans, SBA 7(a) loan originations are doing quite well so far in FY2023. Though the pace of originations has slowed compared to the 10.7% jump at April 30, 2023, originations are still up 9.7% at May 31, 2023 compared to the same period in FY2022. The unpaid principal balance of 7(a) loans is $108.43 billion at December 31, 2022, up 1.2% compared to year-end FY2022.

The 7(a) program has shown steady growth in loan outstandings in recent years that continued into FY2023 (up 1.2% year-to-date in FY2023, 3.1% in FY2022, and 6.8% in FY2021). 504 loans have shown accelerating growth, rising 3.7% year-to-date in FY2023, 6.7% to $30.9 billion at year-end FY2022, and 6.4% in FY2021. 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 roughly 50% of 504 projects, The total for SBA 504 loan outstandings (1st and 2nd liens combined) would be somewhere in the neighborhood of $72 billion, still below 7(a) totals, but equal to approximately 67% of the 7(a) balance.

The majority of SBA 504 loans have traditionally gone to male-owned business. After a jump in the gender disparity in FY2022, things have returned to traditional levels. Loan originations to companies owned 50% or more by females have declined 20.4% year-to-date Meanwhile, loans to business owned less than 50% by women have fallen 41.0%. Loans to male-owned businesses have dropped 36.2% so far, this fiscal year. Loan originations to male-owned businesses now account for 70.7% of 504 originations.