The Certified Development Company (CDC) (504) Loan Program is a long-term financing tool that is channeled towards economic development within a community. Like some other small business financing options, this business loan program funds growing businesses on a long-term and fixed-rate basis for assets including real estate and equipment.

In order to be eligible for the CDC/504 Program, you must meet certain criteria, including:

1. You must operate as a for-profit company.
2. You must do business, or plan to, in the United States or its possessions.
3. For the preceding two years, you must have a net worth of less than $15 million and an average net income of less than $5 million.
4. Be an eligible type of business. There are eligible and ineligible business as stipulated by the SBA, so be sure to check whether you fall on the list of eligible.
5. You must not be a business engaged in speculation or investment in rental real estate.
6. You must plan to use the proceeds for an approved purpose. The proceeds from the 504 program may be used for financing of fixed assets such as real estate and equipment.
7. You must not have funds available from other sources.
8. You must be able to repay the loan. This is determined from the projected operating cash flow of the business.
9. Good character. This is determined from the ‘Statement of Personal History’ that is obtained from the principals of each applicant firm. These statements are used to check whether the principals have a history of honoring their debt obligations and abide by applicable laws.
10. You must have the necessary management expertise; and
11. A feasible business plan

The maximum amount of the loan is determined by how the funds will be used.  There are several SBA goals used to determine the maximum loan amount. These include:

• Job creation: The maximum SBA debenture is $5 million. In general, your business must create or retain one job for every $65,000 provided by SBA.
• Public policy: The maximum SBA debenture is $5 million or $5.5 million for small manufacturing or when the funds are aimed at meeting public policy goals of energy reduction or alternative fuels.
• Small manufacturing: For small manufacturers, the maximum debenture is $4 million.

The project assets being financed are used as collateral, and personal guarantees of the principal owners are also required. The maturity terms of the loan are 10 years and 20 years. The 504 loans attract interest rates that are pegged to a rate slightly above the current market rate for 5-year and 10-year U.S Treasury issues.

The fees charged total 3 percent of the debenture and may be financed with the loan.

A company seeking a Certified Development Company (CDC) (504) Loan may also be interested in exploring a business cash advance or other alternative financing.