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SBA Final Rule: 504 and 7(a) Loan Programs Updates

SBA 504 Debt Refinancing Program

A Certified Development Company (CDC) is a nonprofit corporation set up to contribute to the economic development of its community. CDCs are located nationwide and operate primarily in their state of incorporation (Area of Operation). CDCs work with SBA and private-sector lenders to provide financing to small businesses through the CDC/504 Loan Program, which provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.

Typically, a 504 project includes:

  • A loan secured from a private sector lender with a senior lien covering up to 50 percent of the project cost;

  • A loan secured from a CDC (backed by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost;

  • A contribution from the borrower of at least 10 percent equity.

The Role of CDCs

  • Market the 504 program; package and process 504 loan applications; close and service 504 loans in its Area of Operation; portfolio must be diversified by business sector.

  • Provide small businesses with financial and technical assistance, or help small businesses obtain assistance from other sources, including preparing, closing, and servicing loans under contract with lenders in SBA's 7(a) LoanProgram.

  • Loan amounts to the borrower equal to the value of all or part of the borrower's contribution to a project in the form of cash or land, including site improvements.


A CDC must:

  • Be a nonprofit corporation in good standing.

  • Have at least 25 members representing:

    • Government organizations responsible for economic development in the Area of Operation and acceptable to SBA;

    • Financial institutions that provide commercial long-term fixed asset financing in the

    • Area of Operation;

    • Community organizations dedicated to economic development in the Area of Operation, such as chambers of commerce, foundations, trade associations, colleges, or universities;

    • Businesses in the Area of Operation.

    • Additional membership requirements are provided in 13 CFR 120.822.

  • Have a Board of Directors chosen from the membership, and representing at least three of the four membership groups. Additional Board of Directors requirements are provided in 13 CFR 120.823.

  • Have full-time professional management, including an Executive Director (or the equivalent) managing daily operations and a full-time professional staff qualified by training and experience to market the 504 Program; package and process loan applications; close loans; service, and, if authorized by SBA, liquidate the loan portfolio; and sustain a sufficient level of service and activity in the Area of Operation. CDCs may obtain, under written contract and with prior approval from SBA, marketing, packaging, processing, closing, servicing or liquidation services by qualified individuals and entities who live or do business in the CDC's Area of Operation.

  • Meet a minimum level of lending activity, providing at least two 504 loan approvals each full fiscal year. A CDC's portfolio must reflect an average of one job opportunity per $65,000 of 504 loan funding.

Application Requirements

  • Applications must include an operating budget approved by the applicant's Board of Directors, and a plan to meet CDC operating requirements (without specializing in a particular industry).

  • When its application has been accepted, the corporation must demonstrate that it satisfies the certification and operating criteria in the Code of Federal Regulations (CFR), specifically 13 CFR 120.820 through 120.829, and SOP 50 10 5 (A), Chapter 3.

Probationary Period

Newly certified CDCs will be on probation for a period of two years. At the end of this time, the CDC must petition for either permanent CDC status or a single, one-year extension of probation. SBA will consider failure to file a petition before the end of the probationary period as a withdrawal from the 504 Program. If a CDC elects to withdraw, it must transfer all funded and/or approved loans to another CDC, SBA, or another service provider approved by SBA.

For More Information

For more information on becoming a CDC, or to apply for certification, contact your local SBA District Office.