A Certified Development Corporation, or CDC, is a nonprofit organization certified by the Small Business Administration (SBA) that provides 504 loans to small businesses around the country, in partnership with private lenders. SBA certification allows a CDC to operate statewide as well as within contiguous states (for example, 504 Capital Corporation is a certified SBA CDC providing 504 loan assistance in Virginia, North Carolina, and Maryland). Because CDCs exist to support local economies, help strengthen local businesses and revitalize neighborhoods, these organizations are closely tied to the communities they serve.
CDCs also tend to focus on achieving specific public policy goals, ensuring that women, minority, and veteran business owners are supported financially, and offering advice and guidance.
How did CDCs get their start? In 1958, when the Small Business Investment Act passed, organizations known as Small Business Investment Companies (SBICs) were created to help business owners navigate the loan process. Over time, as the borrower needs to be evolved and SBICs were no longer able to serve every business, CDCs were established to help finance real estate and project financing.
Today, they offer help for business owners who want to purchase property, expand their business by investing in new equipment, or by upgrading an existing building.
Why Do You Need Both a CDC and a Private Lender, to Obtain A 504 Loan?
Under the 504 loan program, a CDC shares the loan financing with another lender. Each partner makes a loan to the qualifying small business, with the first lien loan financing 50% of a project’s cost. The second-lien loan covers up to 40% of the total. The CDC’s loan is backed by a 100% SBA-guaranteed debenture.
This reduces the lender’s risk, which makes it easier for them to provide affordable long-term financing to businesses. Some benefits of working with a CDC include easier financing, fixed rates, and longer terms. The more small businesses that are given the opportunity to flourish, the greater the catalyst for economic growth.
CDCs work in partnership with traditional banks and are a great choice for potential borrowers with lower credit scores who might assume they’ll be turned down for loans.
To ensure compliance with all rules and regulations, through its Office of Lender Oversight, the SBA requires CDCs to submit annual reports as well as at least four 504 loan approvals within two consecutive fiscal years.
504 Capital Corporation is a nonprofit CDC set up to help small businesses achieve financial prosperity through the 504 SBA loan program. We connect SBA and CDC lenders with small business owners looking to finance projects that range from purchasing land to buying equipment and machinery.
We’ll work with you and a third-party lender to purchase the fixed assets that will best fulfill your business needs. We see ourselves as your partner in navigating the 504 SBA loan application, handling the paperwork, answering any questions you may have, and making sure you understand the entire process.
Our goal is to help ensure you get a loan that best supports your business goals.
In our designation as an Accredited Lenders Program (ALP), we have increased authority to process, close, and service SBA loans. We can help your application be processed more quickly.