The pace of SBA 504 loan originations slowed a bit in April.
Thirty-one weeks into the new fiscal year (started October 1st), 504 loan originations are up 36.6% compared to the same period a year ago. Originations this year are also up 70.1% compared to the same period two years ago. Originations were up 46.3% 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 (4.1)% compared to the same period the previous year, down slightly from the pace a month ago, when originations were down (0.4)% 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.
Charge-off rates for the major SBA loan programs remain very low. The chart to the left shows charge-off rates for the CDC/SBA-held second lien position (504 Regular), as well as charge-off rates in the short-lived FMLP program (504 First Lien), authorized in 2009 and ending in 2012. This program held pools of 504 first liens. While accurate data on the privately-held 504 first lien loans is not available, the fact that these loans are in a last loss position after the second lien loans leads to a presumption that charge-off rates would be considerably lower than for the second lien loans.
