Originations of SBA 504 loans continued at a rapid pace during the past month.
Through June 11, 2021, SBA 504 loan originations are up 32.0% compared to the prior year, reaching $5.18 billion year-to-date in FY2021 versus $3.92 billion during the same period in FY2020. Last month, originations were up 23.0% compared to the prior year. Unpaid Principal Balance of SBA 504 loan figures for the June 2020, September 2020, December 2020, and March 2021 quarters have still not been updated. They stood at $25.72 billion as of March 31, 2020, down 0.2% compared to the $25.83 billion figure at year-end FY2019. SBA 7(a) loan originations also accelerated during the past month. They are now up 22.6% through June 11, 2021 (they were up 4.8% through April 30, 2021) compared to the same period in FY2020 and the unpaid principal balance of 7(a) loans is $95.64 billion at March 31, 2020, up 0.6% compared to year-end FY2019.
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 a bit closer to 7(a) loan totals.
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 relatively young businesses. Older businesses (which make up the majority of fundings) and existing businesses changing ownership have posted solid, but not as spectacular growth in 504 fundings. However, 504 fundings of startup businesses (the second largest category) have dropped dramatically year-to-date in FY2021 compared to the prior year.
News Blurb of the Month
Community Reinvestment Act Rule Revision Can Boost Small Mortgage Loans, Nick Bourke and Tracy Maguze, The Pew Charitable Trusts
Congress passed the Community Reinvestment Act (CRA) in 1977 to encourage local financial institutions to help meet their communities’ credit needs, particularly in low- and moderate-income neighborhoods. Now, the Federal Reserve Board is considering ways to modernize CRA regulations to reflect how the sector works in the 21st century creating an opportunity to reverse the years-long decline in the availability of mortgage loans under $150,000.
