The pace of SBA 504 loan originations continued to slow over the past month, but originations are still well above last year’s pace.
Forty-nine weeks into fiscal year 2022 (started October 1st), 504 loan originations are up 7.4% compared to the same period a year ago. Originations this year are also up 188.9% compared to the same period in FY2019 (pre-COVID). Originations were up 13.9% from the prior year one month ago. 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 (22.7)% compared to the same period the previous year, down slightly from the pace a month ago, when originations were down (16.6)% 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.
The age of the businesses being funded sheds some interesting light on the impact of the COVID-19 pandemic. As seen in the graph at right, there has been tremendous growth in businesses changing hands along with relatively young businesses. Older businesses (which make up the vast majority of fundings) have posted modest growth in 504 fundings. 504 fundings of startup businesses (the second largest category) have increased more than 29% compared to the same period last year, while changes of ownership have climbed 34.6%.