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WHAT IS THE CDC/504 LOAN PROGRAM?

The CDC/504 loan program is a long-term financing tool, designed to encourage economic development within a community. The 504 Program accomplishes this by providing small businesses with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

A Certified Development Company (CDC) is a private, nonprofit corporation which is set up to contribute to economic development within its community. CDCs work with SBA and private sector lenders to provide financing to small businesses, which accomplishes the goal of community economic development. Typically, a CDC/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 project cost

A contribution from the borrower of at least 10 percent of the project cost (equity)

This type of setup means that 100% of the project cost is covered either by contribution of equity by the borrower, or the senior or junior lien.

HOW 504 LOAN FUNDS MAY BE USED

Proceeds from 504 loans must be used for fixed asset projects, such as:

The purchase of land, including existing buildings

The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping

The construction of new facilities or modernizing, renovating or converting existing facilities

The purchase of long-term machinery and equipment

The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.

ELIGIBILITY

To be eligible for a CDC/504 loan, your business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, a business qualifies as small if it does not have a tangible net worth in excess of $15 million and does not have an average net income in excess of $5 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate.


FOR MORE INFORMATION

To learn about the full benefits, requirements and other important information about the SBA 504 program, please download our full SBA 504 Loan Program document. If you are interested in applying for a 504 loan, please download and fill out all the necessary forms from above and fax or mail to our office. Feel free to contact us if you have any questions. Contact hours are M - F, 8am - 5pm CDT.

SBA 504 Loan Program Info

SBA 504 Loan Application

Assistance Agreement

Checklist