We’re still awaiting updates to SBA Loan Program Outstandings through March.
SBA 504 loan origination growth continued to slow, due partly to reduced economic activity and partly to the significant efforts expended for the PPP and EIDL programs. Through July 3, 2020, SBA 504 loan originations were up 14.9% compared to the prior year, reaching $4.22 billion year-to-date in FY2020 versus $3.67 billion during the same period in FY2019. Through June 5, 2020, SBA 504 loan originations were up 20.4% compared to the prior year. Despite the slowdown, 504 loan originations are still growing, whereas SBA 7(a) loan originations are down 12.5% through July 3, 2020 compared to the same period in 2019.
While 7(a) loan outstandings were still growing at solid pace through the end of FY2019 (2.9% in FY2019 and 7.2% in FY2018), 504 loans have remained in a fairly tight range between $25 billion and $27 billion over the last nine years. Of course, the published 504 loan figures in the chart above includes only the CDC/SBA second lien portion of a 504 loan package, which typically amounts to roughly 40% of the financing. If the first lien loan and borrower investment were included, the 504 loan totals would be closer to 7(a) loan totals.
The strong growth in loan originations in the 504 program nine months into FY2020 is largely driven by existing businesses. However, loans to new business or businesses existing for less than two years, while still a small 0.7% of all 504 loan originations, have jumped 1393.9% compared to the same time in FY2019. Loans facilitating a change of ownership are also up substantially, rising 341.5% compared to the prior year. Still, loans to existing businesses, which account for 78.5% of YTD originations, are also growing at a strong 24.0% pace.
Three Takeaways from CRA Modernization, Krista Shonk, ABA Banking Journal
July 9, 2020 – The regulatory rulemaking process in Washington is known for being thoughtful and deliberative. Some would characterize it as bureaucratic and slow. After nearly two years of extensive stakeholder outreach, the OCC issued a final rule on May 20 that overhauls the agency’s regulations implementing the Community Reinvestment Act. To those outside of the Beltway, two years may seem like a leisurely pace. But it is warp speed for a regulatory revamp.
