SBA Small Business Loan Statistics – FYE 2012

Compared to FYE 9/30/2011, the number of SBA loan approvals for FYE 2012 was down 13% (7,841 loans) and the loan $ volume was down 11% ($2.6 billion) YOY, according to data provided by the SBA.   100% of the decline was due to the 23% ($4.5 billion) decline in approved SBA 7A loan volume.

SBA 7A Loans:  Represented 80% of all SBA loan volume in 2011, falling to 69% by FYE 2012. The large YOY decline was attributed to the following:

1. The SBA reinstated a 3% SBA guarantee fee for SBA 7A loans in 2012, which caused a surge in demand prior to 2012 due to borrowers trying to get the loan before the guarantee fee increased.  This made 2012 a difficult comp year for SBA 7A loans.
2. Rural loans – The loan volume to rural areas experienced the largest decline, with $ loan volume falling 45% or $1.9 billion compared to FYE 9/30/2011 as many of these borrowers preferred the 504 loan to finance their fixed assets.
3. Minority loans – Loans approvals to minorities dropped 20%, or $1.0 billion year-over year (“YOY”).
4. Women – 7A loan approvals for women dropped 22% ($0.5) billion YOY.
5. Veterans – Loans to vets declined 35% ($0.4 billion).
6. All 7A loan categories experienced an annual decline of at least 8%.

SBA 504 Loans:  504 approval volume grew 39%, or $1.9 billion, over 2011 but was not enough to overcome the $4.5 billion drop in SBA 7A loan approvals.  The 504 growth was attributed to the following:

1. The ability to refinance debt. For fiscal year 2012 the SBA permitted 504 loan proceeds to be used to refinance existing debt, where it was previously permitted only for the acquisition of new fixed assets (no refi’s).  Given the lower rates and fixed rates associated with 504 loans (compared to 7A loans) in 2012, many borrowers opted to take advantage of this window and refinanced owner occupied commercial real estate with a 504 loan.  In other words, the 504 loan volume increased at the expense of the 7A loans.
2. Rural loans. Whereas 7A loan approvals to Rural borrowers was down 45% YOY, 504 loan approvals were UP 49% to Rural borrowers in FYE 2012.
3. Minorities and veterans, in particular, took advantage of the 504 program (instead of the 7A program), as approvals for minorities and vets were up 31% ($0.4 billion) and 55% ($ $0.2 billion) over FYE 2011.

Summary: 

• If you’re thinking about getting an SBA loan, we recommend you start the process ASAP before any additional unfavorable changes are implemented (loan purpose restrictions, higher fees, lower amortization, etc).
• 504 loans cannibalized ~$1.9 billion of 7A loans in FYE 2012 due to the lower rates and fees associated with 504 loans relative to 7A loans.
• SBA loan approvals to startups were down 8% or $0.4 billion YOY, while existing businesses experienced an 11% or $2.2 billion decline.

Outlook:

• Absent the impact of the upcoming Presidential election, which creates much uncertainty surrounding the SBA loan program, it’s reasonable to assume that demand will shift back to 7A loans (away from 504 loans) now that the ability to refinance debt with 504 loans has been terminated effective 9/30/2012.
• If in 2013, however, the SBA renews the ability to use a 504 loan to refinance existing debt we believe the mix will continue to shift from SBA 7A loans to SBA 504 loans.
• If in 2013 the SBA lowers the guarantee fees to be more competitive with fees for traditional loans, than we believe overall SBA loan volume will increase by at least 2%-3% over FYE 2012.   If the guarantee fees remain as is, we believe the 504 loans will continue to cannibalize the 7A volume.

To apply for an SBA loan or just to learn more, check out http://www.pluraFinancial.com or see your local SBA Small Business Development Center.

-Brandon Hinkle/pluraFinancial.com

SBA Loan Statistics for 7A and 504 Loans, through 6/8/2012

From the blog of pluraFinancial.com, here are the latest SBA loan statistics for SBA 504 and 7A loan approvals, through 6/8/2012:

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• Summary: The 2012 SBA loan trend continues…
  • On a Year-to-Date basis, SBA 7A Loan approvals are down 34% through 6/8/2012 according to sba.gov
    • The 7A Loan’s higher SBA guarantee fees and lower amortization relative to the SBA 504 Loan is attributed to part of the decline in 7A Loans as demand shifts toward 504 Loans.
    • Existing businesses and rural businesses in particular appear to be fleeing SBA 7A loans.
  • SBA 504 Loan approvals are up 27% YOY
    • Borrowers appear to prefer the ability to refinance existing debt, and the relatively low rates & fees associated with SBA 504 Loans

• A closer look into the numbers: On a YTD basis, total SBA loan approvals were down $4.1 Billion, or 23% YOY
  • SBA 7A Loan approvals were down $4.9B YOY, or 34%, responsible for 100% of the YOY total SBA loan decline
    • 7A Loan approvals to existing business were down $4.1B
      • Loans to Rural businesses were down $1.8 B
      • Loans to Asian-American owned businesses were down $0.9B
      • PLP loans represent ~half of all 7A loans, and were down 57% YOY
    • 7A Loan approvals to startups were down $0.8B
      • Express loans, a popular SBA loan product for startups, were down $0.7B YOY
    • 7A Loans represented 82% of SBA Loans last June, and currently represent 71%.
  • SBA 504 Loan approvals were up $0.8B, or 27% YOY
    • Loans to Existing businesses were responsible for ~90% of the 504 Loan growth.
    • Approvals were up in nearly every SBA 504 loan category (minorities, existing businesses, startups, rural businesses, etc.)
• Projections: We expect a continued shift toward SBA 504 loans in 2012 given the favorable rates and amortization relative to other SBA loan products.  This assumes the SBA will continue to permit 504 loan proceeds to refinance existing debt.  

-James Timberview/www.plurafinancial.com