With just one month of fiscal year 2021 under our belt, SBA 504 loan activity has slowed compared to last year.
Through October 30, 2020, SBA 504 loan originations were down 18.2% compared to the prior year, reaching $497.2 million year-to-date in FY2021 versus $607.9 million during the same period in FY2020. However, 504 loan originations are up 14.0% when compared to the same period in FY2019. Figures for the June 2020 and September 2020 quarters have not yet been updated, but the unpaid principal balance of outstanding 504 loans 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 are down 24.1% through October 30, 2020 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 closer to 7(a) loan totals.
The slower growth in loan originations in the 504 program one month into FY2021 is demonstrated among a variety of groupings. In percentage terms, we see negative growth in the Asian or Pacific Islander, Black and “Undetermined” groups, which recorded declines of 36.5%, 21.1% and 46.1%, respectively, year-to-date through October 30, 2020. On the other hand, Hispanic and White borrowers posted YTD growth of 5.4% and 0.5%, respectively.
Don’t stand in the way of CRA reform, Brian P. Brooks, BankThink, American Banker
Now is not the time to slow Community Reinvestment Act modernization. Meaningful help is on the way to low- and moderate-income neighborhoods and underserved communities nationwide since the Federal Reserve Board began its rulemaking process in September, and the Office of the Comptroller of the Currency finalized its CRA rule in May.