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Small Business Administration 504/CDC Loan Guaranty Program (CRS Report for Congress)

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Release Date Revised June 16, 2022
Report Number R41184
Report Type Report
Authors Robert Jay Dilger, Senior Specialist in American National Government
Source Agency Congressional Research Service
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Summary:

The Small Business Administration (SBA) administers programs to support small businesses, including several loan guaranty programs designed to encourage lenders to provide loans to small businesses “that might not otherwise obtain financing on reasonable terms and conditions.” The SBA’s 504 Certified Development Company (504/CDC) loan guaranty program is administered through nonprofit Certified Development Companies (CDC). It provides long-term fixed rate financing for major fixed assets, such as land, buildings, equipment, and machinery. Of the total project costs, a third-party lender must provide at least 50% of the financing, the CDC provides up to 40% of the financing through a 100% SBA-guaranteed debenture, and the applicant provides at least 10% of the financing. Its name is derived from Section 504 of the Small Business Investment Act of 1958 (P.L. 85-699, as amended), which provides the most recent authorization for the sale of 504/CDC debentures. In FY2015, the SBA approved 5,787 504/CDC loans amounting to about $4.3 billion.