SBA 504 loan originations are up 3.8% compared to the prior year at September 30 (the end of the fiscal year).
This represents a significant slowdown compared to the prior year versus the 6.1% increase we reported last month. Regardless of the slower growth, both month’s results show a big decline from the origination levels produced during the pandemic years of FY2021 and FY2022. The SBA’s other major loan program, SBA 7(a) loans, showed a 13.1% increase in originations in fiscal year 2024 compared to the 16.2% reported last month (through August 31).
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.
Loans to new businesses or businesses less than 2 years old have dropped 29% versus the same point in the prior fiscal year, while loans going to fund established businesses 2 or more years old have declined much less, falling just 2% compared to this time last year. On the other hand, loans funding a change of ownership have risen 25% over the same period, and loans to start-ups are up 34% compared to the prior fiscal year.
