SBA Hot Topic Tuesday – 7(a) Delinquencies and Purchases are Down in Fiscal Year 2021
February 15, 2022
Delaney Sexton
Contributing Editor
SBA Hot Topic Tuesday – 7(a) Delinquencies and Purchases are Down in Fiscal Year 2021
“Strong economic growth, strong profit performance, and tighter lending standards by financial institutions during the past several years have reduced delinquency rates for all business loans, which have been steadily declining since reaching cyclical peaks in the latter part of 2009. Delinquency rates for the Agency’s major loan programs followed this national downward trend,” reads the SBA FY 2021 Agency Financial Report.
•From 2009 to 2020, the 7(a) loan delinquency rates dropped by 3% to 0.84%. In July of 2021, the 0.6% delinquency rate was below the average delinquency rate in fiscal year 2020, 0.7%.
•The 12-month charge-off rate to cover defaulted loans was at 0.5% for the 7(a) program in July 2021. 7(a) loans that are not sold on the secondary market become a charge-off after all efforts to recover the delinquent balance is exhausted.
•The average 504 delinquency rate in fiscal year 2021 was 1.9% while the average delinquency rate in FY20 was 0.8%.
•In July 2021, the 12-month charge-off rate for the 504 program was 0.2%.
•The upward trend in the 504 delinquency rate could affect the future 504 charge-off rates in the upcoming fiscal years.