What is a Certified Development Corporation?

We have previously discussed the SBA 504 loan program and how it was created to help small businesses get the financing they need to promote job creation and retention. The Small Business Administration established the Certified Development Corporation Program to finance these loans, since the SBA does not loan money directly.

A CDC is a nonprofit organization certified by the SBA to provide 504 loans to small businesses. This certification allows the CDC to operate statewide, sometimes in contiguous states. It operates with a board of directors whose members work in the area the CDC services.

Under the 504 loan program, a CDC partners with another lender to share the total financing for a loan. Both partners make a loan to a qualifying small business. The lender issues a first lien loan for 50 percent of a project's cost. The CDC issues a second lien loan for up to 40 percent of the project's cost. The CDC's loan is then backed by a 100 percent SBA-guaranteed debenture.

The program is designed this way to reduce the lender's risk and encourage them to provide affordable long-term financing to businesses, and thereby promote economic growth.

The SBA tracks a CDC's compliance with all rules and regulations through its Office of Lender Oversight. A CDC must submit annual reports to the SBA, and it must provide at least four 504 loan approvals during two consecutive fiscal years to retain its certification.

There are approximately 270 CDCs nationwide. Community Business Finance proudly serves the SBA Houston District and businesses throughout Texas. Working as a team, we want to foster partnerships with lenders and provide 504 loans that benefit businesses in our service area.

Contact us and let Community Business Finance become your partner of choice for a 504 loan. Our knowledge of the 504 loan program and experience with a variety of lenders can get you the financing you need to grow your business.

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