The U.S. Small Business Administration’s 504 Loan Program, also known as the Certified Development Company Program, provides affordable long-term, fixed-rate business loans to help small businesses grow. The loans are for acquiring long-term fixed assets, such as land, buildings, machinery and equipment, or for building, modernizing, renovating or restoring facilities.

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Why a 504 Loan?
When a conventional business loan is not possible, a 504 business loan may be the answer. The SBA’s 504 Loan Program gives small business owners access to the same low-cost, fixed-rate, long-term financing large businesses have through bond markets. Other borrower advantages include:

• lower down payment;
• below-market, fixed-rate financing
• a longer repayment term

What Are 504 Certified Development Companies?
CDCs are nonprofit organizations, often sponsored by state and local governments, established to promote economic development in their communities. CDCs help small businesses with financing for fixed-asset projects by assembling, analyzing and making recommendations on loan packages, submitting their analyses and recommendations to the SBA for approval, and closing and servicing the 504 loans.

Typically a 504 loan project includes:

• a loan secured with a senior lien from a private-sector lender (covering a percentage of the total cost);
• a loan secured with a junior lien from a CDC (a 100% SBA-guaranteed debenture), covering up to 40% of the total cost; and
• a contribution of at least 10% equity from the borrower.

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