Many bankers and real estate brokers feel working with Certified Development Companies (CDCs) to secure a 504 loan for their clients is a win-win-win. The bankers reduce their risk and the real estate brokers make more and bigger sales with an increased pool of eligible borrowers. Plus, for small businesses, five more years to pay off the asset comes cheap; the 25-year option has an effective ongoing rate to the borrower that is only 0.15% higher than the 20-year 504 loan.
SBA Administrator Linda McMahon approved the 25-year loan as one of her first actions in office in February 2017. Certified development companies were able to begin submitting applications to the SBA on April 2, 2018.
The SBA 504 Loan Program
504 Loan Program is an SBA-backed loan program where the small business borrower typically injects 10% equity, a bank or credit union finances 50% of project costs in the first lien position, and CDCs finance 40% of project cost in the second lien position.
About the National Association of Development Companies
NADCO is the trade association of certified development companies – the Small Business Administration’s certified on-the-ground partners charged with administering the 504 Loan. NADCO represents over 200 CDCs, serving all 50 states. In fiscal year 2018, the SBA approved 5,874 504 loans totaling $4.7 billion.
Find a CDC by searching in your area.
SOURCE National Association of Development Companies (NADCO)