Section 504 Certified Development Company Loan Program

Even in rural but urbanizing areas like the five-county South Central Region, small businesses often have big ideas and plans which can directly relate to large scale capital financing needs. When the project's total financing is not possible through one of the region's conventional lenders due to credit limits or collateral standards . . . the Certified Development Company's Section 504 loan provisions may be able to assist in making the project a reality.

The Section 504 loan program (administered by the US Small Business Administration or SBA) is intended to aid qualifying, credit worthy small businesses in gaining access to more flexible long-term, competitively priced, fixed-rate, subordinated financing for fixed asset needs through its reliance upon federally-recognized local or regional Certified Development Companies (or CDC's). The Commission was recognized as a CDC by SBA in October of 1981.

Section 504 funding is designed to promote local economic development by empowering its network of CDC's to aid profitable, growing commercial or industrial businesses finance the acquisition of long-term, fixed assets which in turn directly create (or at least retain) important local job opportunities for area residents. When properly capitalized with sufficient cash equity, the 504 program can also be used to assist start-up firms as well.

Certified Development Companies are the key to the Section 504 program's success in that such non-profit organizations usually have first-hand knowledge about worthwhile economic development projects and when asked, can follow-up with hands-on assistance in: structuring the project's financing strategy; accommodating SBA loan application requirements; processing the 504 loan for SBA's concurrence, closing and debt service the approved loan, etc.

In a typical Section 504-assisted project, the borrower injects between 10% to 25% as cash equity complemented by 40% to 50% from the participating first-mortgage lender. The balance of the project's financing requirement (up to a maximum of 40% or $1.3 million whichever is less) is then provided through the sale of 10 or 20 year debentures issued by the CDC and guaranteed by SBA so that they are easily sold in the the capital bond market. The participating first mortgage lender normally provides interim construction period financing and the CDC's Section 504 debenture is used as permanent take-out financing.

RBI Rural Business Initiative Loan

CDI Community Development Initiative Loan

Title IX Revolving Loan