Through November 1, 2019, which is one month into the new fiscal year (2020) for the program, SBA 504 loan originations were up a whopping 35.5% compared to the prior year, reaching $656.4 million year-to-date in FY2020 versus $484.4 million during the same period in FY2019.
The unpaid principal balance of outstanding 504 loans stood at $25.77 billion as of September 30, 2019, down 0.2% compared to the $25.83 billion figure at year-end FY2018. In contrast, SBA 7(a) loan originations are down 1.1% year-to-date (through November 1) to $1.82 billion and the unpaid principal balance of 7(a) loans is $95.10 billion at September 30, 2019, up 2.9% compared to year-end FY2018.
While 7(a) loans continue to grow at solid pace (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 chart above includes only the CDC/SBA second lien portion of a 504 loan package, which typically amounts to roughly 40% of the financing. The first lien loan, usually supplied by a bank or other private sector lender, typically provides another 50% of the project funding.
Charge-off rates for the major SBA loan programs remain very low. The chart to the left shows charge-off rates for the CDC/SBA-held second lien position, as well as charge-off rates for the short-lived FMLP program, authorized in 2009 and ending in 2012. This program held pools of 504 first liens. While accurate data on the privatelyheld 504 first lien loans is not available, the fact that these loans are in a last loss position after the second lien loans leads to a presumption that charge-off rates would be considerably lower than for the second lien loans.
News Blurb of the Week – Growing Pains: Examining Small Business Access to Affordable Credit in Low-Income Areas, Claire Kramer Mills, Jessica Battisto, and Scott Lieberman, Federal Reserve Bank of New York Outreach & Education Function
November 4, 2019 – Since the end of the last recession, low-income neighborhoods have experienced larger declines in the number of banks and larger increases in the number of alternative financial services companies compared to higher-income areas.