SBA 504 Loans Decline YoY 2017-2018

Funding of SBA 504 loans decreased by 26 percent from January through March 2017 compared to January through March of 2018, according to SBA (Small Business Administration) data. In the first three months of 2017, $1,326,601,000 of SBA 504 loans were funded compared to $987,896,000 of SBA 504 loans in the first three months of 2018. The number of companies that received SBA 504 loans also fell January through March year over year. There were 1,574 companies that took SBA 504 loans from January through March of 2017, compared to 1,290 companies over the same period this year, a decrease of 18 percent.

The SBA 504 loan is a government-backed loan that can only be used for commercial real estate or long-term machinery purchases. It differs from the more common SBA 7(a) loan, which is a general purpose loan that can be used for anything from working capital to business acquisition.

When contacted regarding the decline in the dollar amount volume of loans issued this year compared to last, the SBA submitted the following response from Bill Manger, Associate Administrator for the SBA’s Office of Capital Access:

“After a very strong FY17 of 504 SBA Lending, this year the program has performed on par with longer-term trends. We have also seen banks making more conventional loans without the SBA guarantee due to the strength of the U.S. economy and increased small business optimism brought about by the regulatory reforms and tax cuts championed by the Trump Administration. The SBA continues to work with our Certified Development Companies and Lending Partners to further strengthen the 504 Program and ensure it is helping create and grow U.S. small businesses. In addition to our 10 Year and 20 Year Debentures, last month the SBA implemented a 25 Year Debenture for 504 loans, offering fixed-rate financing for an additional 60 months to our small business owners. We believe this new product will be looked upon favorably by our stakeholders and borrowers  by offering a longer term loan that will improve the cash flow of entrepreneurs utilizing the program.”

Todd Stone was a reporter for deBanked.