For the first time in three months, it seems the data provided for year-to-date 504 lending volumes on the SBA website is up to date.
Through April 30, 2024, 504 loan originations are down 1.2% compared to the same point in FY2023, a significant improvement from the 3.1% decline reported at the end of March 2024. SBA 7(a) originations showed a similar improvement over the prior month, but they are now up 6.5% fiscal year-to-date compared to the same period in FY2023, which is a solid improvement over the 1.7% advance measured at March 31, 2024.
The chart on the right above shows cumulative gross charge-offs on SBA 504 second lien loans by year of origination. As a reminder, an SBA 504 project has three components; an equity portion contributed by the borrower, the second lien portion held by the SBA through a CDC, and the first lien portion originated by a private lender. Comprehensive statistics on the private lender portion are not available, but statistics on the SBA/CDC second lien portion are. Since this is the loan that takes the first loss position, this portion of the loan project is likely to see higher charge-offs than the private lender first lien portion. As shown in the chart above, gross charge-offs for the SBA/CDC portion have been very low since the end of the financial crisis. In fact, cumulative gross charge-offs have been below 1.0% for every fiscal year since FY2013, and below 0.5% since FY2017. There have been no gross charge-offs in any of the fiscal years starting with FY2020.
Loans to new businesses or businesses less than 2 years old have dropped 24% versus the same point in the prior fiscal year and loans funding a change of ownership have fallen 10% over the same period. Loans going to fund established businesses 2 or more years old have declined much less, falling just 4% compared to this time last year. However, loans to start-ups are moving in the opposite direction, climbing 20% compared to the prior fiscal year.
