After the first full month of fiscal year 2025, SBA 504 loan originations are up 8.8% compared to the prior year at October 31, 2024.
This represents a significant acceleration compared to the 3.8% recorded for all of FY2024. Still, this month’s results show a big drop from the origination levels produced during the pandemic years of FY2022. The SBA’s other major loan program, SBA 7(a) loans, showed a sharp 75.6% increase in originations in October compared to the prior fiscal year’s first month and the 13.1% reported for the full year FY2024 (through September 30).
The 7(a) program has shown steady growth in loans outstanding in recent years that continued into FY2024 (up 1.2% year-to-date in FY2023, 3.1% in FY2022, and 6.8% in FY2021). 504 loans had shown accelerating growth, rising 9.7% in FY2023, 6.7% in FY2022, and 6.4% in FY2021. However, after two years reduced origination volumes following the big jump in originations during the COVID pandemic, the outstanding loan balances in the 504 program have begun to decline, falling 6.4% fiscal-year-to-date in FY2024. We continue to note that 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 projects supported by the SBA 504 second lien loans at March 31, 2024 would be roughly $79 billion, equal to approximately 70% of the 7(a) balance.
The faster growth in loan originations in the 504 program in FY2025 is most pronounced among two minority groups. 504 loans to American Indian borrowers are up 202.4% so far in FY2025 and loans to Black borrowers are up 144.2% in FY2025 through October 31. Loans to non-minority borrowers (White and Undetermined) still accounted for 46.0% and 21.0%, respectively, of all loans so far in FY2025, these categories enjoyed smaller, but still significant advances of 9.8% and 26.3% respectively compared to the prior year, while loans to Hispanic borrowers grew 34.4%. On the other hand, loans to Asian or Pacific Islander borrowers decreased versus the prior period by 20.7%.
