Through September 6, 2019, SBA 504 loan originations are up 4.7% compared to the same period in the prior year, reaching $4.64 billion year-to-date in 2019 versus $4.43 billion during the same period in 2018.
This reflects a deceleration in originations over the past month, as originations were up 7.2% year-to-date a month ago. The unpaid principal balance of outstanding 504 loans stood at $25.68 billion as of June 30, 2019, down 0.6% compared to the $25.83 billion figure at year-end 2018. In contrast, SBA 7(a) loan originations are down 9.0% year-to-date (through September 6) to $21.20 billion and the unpaid principal balance of 7(a) loans is $94.60 billion at June 30, 2019, up 2.4% compared to year-end 2018.
While 7(a) loans continue to grow at solid pace (7.2% in 2018), 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.
Loan originations in the 504 program are growing again after a modest decline in 2018. Total originations in 2019 through September 6th are approaching the levels recorded in 2017. However, the mix of loans by loan size is changing. The smallest categories, loans of less than $150k and loans of between $150k and $350k, remain low as a percentage of overall loan volumes. Loans between $350k and $2 million, which have always constituted a majority of SBA 504 loans, have grown rapidly in 2019. On the other hand, loans of greater than $2 million are down compared to the prior year.
News Blurb of the Week – Understanding the CRA performance context, Michael Grover and Molly Majerle, Community Dividend, Federal Reserve Bank of Minneapolis
September 4, 2019 – In an essential component of a CRA evaluation, examiners use a blend of quantitative and qualitative information to form a research-based narrative about each bank’s unique environment.