SBA rules · SOP 50 10 8.1

What is a CDC in an SBA 504 loan?

A Certified Development Company (CDC) is an SBA-authorized entity that delivers 504 financing to small businesses by issuing an SBA-guaranteed debenture for up to 40 percent of eligible project costs.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Definition: A CDC is an entity authorized by SBA to deliver 504 financing to small businesses, functioning as an SBA Lender alongside 7(a) Lenders.
Financing role: In a standard 504 project structure, the CDC provides up to 40% of project financing by issuing a debenture that is 100% guaranteed by SBA, partnering with a Third Party Lender that contributes 50% or more and a borrower equity injection of at least 10%.
Underwriting and economic goals: The CDC evaluates applicant creditworthiness in a commercially reasonable manner consistent with prudent lending standards, assuring cash flow repayment and ensuring the project satisfies required job creation, job retention, or other economic development objectives.
Closing and packaging: The CDC and its closing counsel bear ultimate responsibility for closing the 504 loan in compliance with all SBA Loan Program Requirements, and share joint responsibility with SBA for debenture closing and document preparation.
Post-disbursement servicing: Following disbursement, CDCs service the loan and must comply with SBA servicing and liquidation requirements in accordance with SOP 50 55 (Section C, SBA 7(a) and 504 Business Loan Requirements, Post-Disbursement Issues).

The source

What the SOP says

“Certified Development Company (“CDC”): (13 CFR § 120.10 7(a) and 504) An entity authorized by SBA to deliver 504 financing to small businesses.

SOP 50 10 8.1, Appendix 3: Definitions > Borrower (lines 4289-4295)✓ Verified

“A 504 project has three main partners and generally: a Third Party Lender provides 50% or more of the financing; a Certified Development Company (CDC) provides up to 40% of the financing through a 504 debenture (guaranteed 100% by SBA); and an applicant (Borrower) injects at least 10% of the financing (13 CFR §§ 120.801 and 120.900).

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Borrower (lines 3098-3102)✓ Verified

“Debenture: (13 CFR § 120.802 504) An obligation issued by a CDC and guaranteed 100 percent by SBA, the proceeds of which are used to fund a 504 loan.

SOP 50 10 8.1, Appendix 3: Definitions > Current (lines 4304-4315)✓ Verified

“Certified Development Companies (CDCs) must analyze each application in a commercially reasonable manner, consistent with prudent lending standards.

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Credit Standards (lines 3396-3398)✓ Verified

“The CDC is responsible for the 504 loan closing, including compliance with all SBA Loan Program Requirements. Each CDC has its own division of labor and dictates the CDC Counsel’s role. Although SBA counsel is available for advice and assistance, the CDC and its attorney are ultimately responsible for the 504 Loan closing. (13 CFR §§ 120.960 and 120.10)

SOP 50 10 8.1, Chapter 2: SBA Terms and Conditions through Disbursement > Responsibility for Closing the 504 Loan and Debenture (lines 3807-3811)✓ Verified

“The debenture closing is the joint responsibility of the CDC and SBA. CDC must prepare the documents necessary for closing the debenture. SBA counsel reviews the loan closing package for legal sufficiency and opines whether SBA may guarantee the debenture. (13 CFR § 120.960)

SOP 50 10 8.1, Chapter 2: SBA Terms and Conditions through Disbursement > Responsibility for Closing the 504 Loan and Debenture (lines 3807-3811)✓ Verified

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