Rural Initiative pilot program

This loan pilot program waives some small business regulations in order to expand capital access to certain rural areas.


About the program

Increasing the amount of CDC operating service areas will lead to more 504 loans. CDCs can only expand their areas of operation by requesting Local Economic Area (LEA) expansion or multi-state authority. This limits CDC expansion to areas and states contiguous to a CDC’s area of operation.

In order to provide rural small businesses with increased opportunities to access capital, SBA created the 504 Loan Rural Initiative pilot program. This program waives some small business regulations in order to help rural development through the 504 Loan Program.

Under the 504 Rural program, a CDC may make a 504 loan outside its area of operations if both apply:

  • The loan is for a 504 project with an address located in a rural county.
  • The rural county is located in the same SBA Region in which the CDC is incorporated.

As part of the 504 Rural program, SBA has waived some of the requirements found in 13 CFR 120.839. Among the changes:

  • The CDC is not required to apply to the Sacramento Loan Processing Center (SLPC) in order to make the 504 loan for the 504 project outside of its area of operations.
  • The CDC does not need to demonstrate that it can adequately fulfill its 504 program responsibilities for the 504 loan.
  • SBA does not determine whether the CDC has satisfactory SBA performance.
  • It is not a requirement for:
    • The CDC to have previously assisted the business to obtain a 504 loan.
    • The existing CDC or CDCs serving the area to agree to permit the outside CDC to make the 504 loan.
    • There to be a CDC within the area of operations in which the 504 project is located.

SBA may approve loans under the 504 Rural program through September 30, 2021.

Program benefits

Benefit to rural small business borrowers

By expanding the operating service areas of CDCs for rural loans, the program will increase the number of CDCs eligible to make 504 loans in rural areas. That also will increase the financing options available to rural small businesses.

Benefit to third-party lenders

Third-party lenders will have access to a larger pool of CDCs to partner with on rural 504 projects within each SBA region.

What areas are eligible?

Under the 504 Rural program, a CDC may make a 504 loan for a 504 project located outside the CDC’s area of operations only if the 504 project address is located in a rural county that is in the same SBA region in which the CDC is incorporated.

The assignment of the rural designation occurs at loan origination in E-Tran, which is SBA’s electronic system for loan submission.

SBA's regions are defined as:

  • Region I: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont
  • Region II: New York, New Jersey, Puerto Rico, and the U.S. Virgin Islands
  • Region III: Delaware, Maryland, Pennsylvania, Virginia, Washington, DC, and West Virginia
  • Region IV: Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee
  • Region V: Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin
  • Region VI: Arkansas, Louisiana, New Mexico, Oklahoma, and Texas
  • Region VII: Iowa, Kansas, Missouri, and Nebraska
  • Region VIII: Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming
  • Region IX: Arizona, California, Guam, Hawaii, and Nevada
  • Region X: Alaska, Idaho, Oregon, and Washington

Program limitations

Adhere to 504 loan program requirements

Except as authorized through the 504 Rural program, CDCs must follow all 504 loan program requirements for processing, underwriting, closing, servicing, and liquidating a 504 Rural loan. Although CDCs will not be required to demonstrate that they can adequately fulfill their 504 program responsibilities before making a 504 Rural loan, they will still be expected to fulfill all such program responsibilities with respect to these loans. CDCs that fail to comply with 504 Loan Program requirements may be prohibited from participating in the 504 Rural program.

No PCLP or ALP authority

504 Rural loans cannot be made using a CDC’s delegated (PCLP or ALP) authority.

Number of loans

SBA will limit the aggregate number of loans made under the 504 Rural program to a maximum of 10 percent of the total number of 504 loans approved by SBA in any fiscal year.

SBA doesn’t expect the number of 504 Rural loans to reach that limit. However, the agency will notify the public if it needs to suspend lending under the program for the remainder of the fiscal year if it determines that the number of 504 Rural loans is approaching the limit.

Other requirements

Multi-state or LEA status

The area in which the CDC may make loans under the authority of the 504 Rural program is limited to one SBA region, which is the SBA region of the CDC’s State of incorporation. If a CDC has multi-state or LEA status that allows the CDC to operate in more than one SBA region, the CDC may not make loans under the 504 Rural program in the additional SBA region.

Closing attorneys

A CDC must provide the local SBA district counsel where the 504 project is located with the name of the designated attorney, or other attorney, who will be closing the 504 Rural loan. The attorney must be licensed in the state where the 504 Rural loan is being made (where the 504 project is located).

Expedited closings

A CDC may not close a 504 Rural loan as an expedited loan unless the closing attorney is a designated attorney licensed to practice in the state where the 504 project is located.

CDC Loan Committees

Unlike a multi-state CDC, a CDC making a loan under the 504 Rural program will not be required to establish a separate loan committee to cover the state in which the 504 project is located.

How to identify a 504 Rural loan

The CDC is responsible for confirming with the SLPC that it’s submitting a legitimate 504 loan application under the 504 Rural program within the SBA Region in which the CDC is incorporated. The CDC also must document in the credit memorandum that it’s submitting the 504 loan application under the 504 Rural program.

Need help?

For assistance, please contact your local state SBA District Office.

Last updated May 18, 2023