Certified Development Company Loan Program Benefits

The 504 loan program provides long-term, fixed rate financing for major fixed assets, such as equipment or real estate. 504 loans are available through Certified Development Companies (CDCs), SBA's community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA. Small business applicants work directly with a participating SBA lender and not with SBA. The loan program is designed to assist for-profit businesses that are not able to get other financing from other resources.

Certified Development Company Loan Program Benefits

The Certified Development Company (CDC) 504 Loan Program is a financing program provided by the U.S. Small Business Administration (SBA) to assist small businesses in acquiring long-term, fixed-rate financing for major fixed assets. The program aims to promote economic development and job creation by providing funding for projects that contribute to the growth of small businesses.

Certified Development Company (CDC) (504) Loan Program

The Certified Development Company (CDC) 504 Loan Program is a U.S. Small Business Administration (SBA) loan program designed to provide small businesses with long-term, fixed-rate financing for major fixed assets, such as real estate and equipment. The program aims to promote economic development and job creation.

Here are key features of the CDC 504 Loan Program:

Structure:

  • The loan is typically structured as a three-part loan with contributions from the borrower, a conventional lender (typically a bank), and a Certified Development Company (CDC).
  • The borrower typically contributes 10% of the project cost, the conventional lender provides 50%, and the CDC funds up to 40%.

Use of Funds: The funds from the loan can be used for the purchase of land, buildings, and improvements; the construction of new facilities; and the purchase of long-term machinery and equipment.

Eligibility:

  • Small businesses that meet the SBA size standards are eligible for the program.
  • The business must demonstrate the ability to repay the loan.
  • The project financed must promote economic development and create or retain jobs.

Job Creation or Retention: The CDC 504 Loan Program is particularly focused on job creation or retention. As a result, businesses are required to create or retain a specific number of jobs for each $500,000 of the loan amount.

Interest Rates: 

  • The CDC portion of the loan (up to 40%) is funded with bonds that have a fixed, below-market interest rate.
  • The bank or conventional lender's portion (50%) typically has a market-based interest rate.

Terms: The terms for the CDC 504 Loan Program are typically long-term (10 to 20 years) and fixed-rate, providing stability for the borrower.

Collateral: The assets being financed by the loan serve as collateral for the loan.

SBA Approval: The loan must be approved by the SBA and meet its requirements.

Public Policy Goals: The program is designed to encourage economic development, job creation, and community growth.

The CDC 504 Loan Program is a valuable option for small businesses seeking long-term financing for major assets while promoting economic development in their communities. Businesses interested in this program should work with a Certified Development Company to navigate the application and approval process.

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Additional Information

Max Loan LengthCell 10 or 20 year maturities
Interest RatePegged to the 10 year Treasury Index
Max Loan Amount$5 million (or $5.5 million for public policy goals: Manufacturing and Green Public Policy Goals)
Payment FrequencyMonthly
Prepayment PenaltiesVaries
FeesYes

Program Requirements

To be eligible for financing under SBA's 504 loan program, the applicant business must meet all of the following:

  • SBA size standards
  • Be for-profit
  • Not already have the internal resources (business or personal) to provide the financing, and
  • Be able to demonstrate repayment.

For more information, please visit SBA’s 504 Loan Program Quick Overview page.

Small Business Investment Company Program Benefits

Certified Development Company (CDC) (504) Loan Program Application Process

The application process for the Certified Development Company (CDC) 504 Loan Program involves several steps. Here is a general overview of the process:

  • Determine Eligibility: Ensure that your business qualifies for the CDC 504 Loan Program by meeting the Small Business Administration's (SBA) size standards and demonstrating the ability to create or retain jobs.
  • Select a Certified Development Company (CDC): Identify and choose a CDC to work with. CDCs are nonprofit organizations certified and regulated by the SBA to promote economic development.
  • Prepare a Business Plan: Develop a comprehensive business plan that outlines your business, its financial history, and the purpose of the loan. Include details about the project you intend to fund and how it aligns with the goals of the CDC 504 program.
  • Contact a Conventional Lender: Approach a conventional lender, such as a bank, to discuss your financing needs. The conventional lender will typically provide 50% of the project financing and will have its own application process.
  • Submit Initial Application to CDC: Submit an initial loan application to the CDC. The CDC will review your application and assess the eligibility of your business and the project.
  • Credit Review and Underwriting: The CDC will conduct a credit review and underwriting process to assess your business's financial stability and ability to repay the loan. This may involve a review of your credit history, financial statements, and other relevant documentation.
  • Loan Package Submission: Once your application is approved by the CDC, you will need to submit a comprehensive loan package, including financial statements, tax returns, business plans, and other relevant documents.
  • SBA Approval: The CDC will submit the loan package to the Small Business Administration (SBA) for final approval. The SBA will review the application to ensure it meets the program requirements.
  • Closing: If the SBA approves the loan, the closing process will take place. During the closing, legal documents will be executed, and the loan funds will be disbursed.
  • Project Execution: Use the loan funds to complete the approved project, whether it involves purchasing real estate, constructing a new facility, or acquiring machinery and equipment.
  • Loan Repayment: Repay the loan according to the terms and conditions outlined in the loan agreement. Keep in mind that the CDC 504 Loan Program offers long-term, fixed-rate financing.

Throughout the application process, it's crucial to work closely with both the CDC and the conventional lender to ensure that all requirements are met. Each step involves careful documentation and collaboration to secure approval from the SBA and successfully obtain funding for your business project.

Loan Terms

Maximum loan amounts are determined by how funds will be used based on which goal they support. To view this list, please visit the CDC/504 Loan Amounts Interest Rates and Fees page.

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