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Statement of the Hon. Judy Chu on Review of the SBA’s 504/CDC Loan Program

Washington, December 10, 2019

On this Committee, we are focused on making sure that small businesses, whether in my district in California – in Ranking Member Spano’s district in Florida – and in every district across America – can access the capital they need to start, grow, and create new jobs. And we know that when capital is affordable and accessible, small businesses can do what they do best: strengthen our communities, create jobs, and fuel our economy.

This is something I have witnessed firsthand in my home state of California, where 4 million small businesses make up 99.8 percent of the businesses in our state, and employ almost half of our workers –California is the fifth largest economy in the world, and small businesses are the backbone of our thriving economy.

But, accessing capital is one of the biggest challenges facing these small business owners, and it can be even more difficult if that capital is needed to purchase or improve major fixed assets such as real estate, buildings, equipment, and heavy machinery.

Recognizing the additional barriers to capital faced by small businesses at this stage of growth, Congress enacted the 504 Loan Guarantee Program to meet the long-term fixed-rate financing needs of small businesses who need an injection to reach the next level. The 504 program is a public-private partnership between the Small Business Administration, nonprofit Certified Development Companies, also known as “CDCs,” and private-sector lenders, typically banks and credit unions, that offers a unique financing structure for small businesses.

For most 504 loans, the structure works as follows: the private-sector lender provides 50 percent of the total cost of the project, the CDC provides 40 percent, and the small business borrower provides 10 percent. One of the primary purposes of the 504 loan program is job creation, and to participate in the program, small businesses must meet certain job creation or retention requirements.

If the small business is unable to meet those requirements, it can still qualify for the program if it meets one of several community development or public policy goals outlined in the Small Business Investment Act of 1958, such as expanding minority- or women-owned business development, reducing energy consumption, or expanding exports.

The 504 program can also be a powerful tool in helping small businesses achieve relief from high-interest commercial loans. Eligible businesses can refinance their loans through the 504 program and take advantage of lower interest rates, allowing them to reinvest more capital into keeping their businesses afloat. I was proud to have authored the Commercial Real Estate and Economic Development, or CREED, Act, which was enacted into law in 2015 and revitalized the refinancing program after it expired in 2012.  

According to SBA, in FY2018, the number of jobs supported by 504 loans was down slightly over previous years, which has raised questions regarding the program’s performance and whether we need to modify and make improvements to the program.

As part of our congressional oversight of the program, today we will hear from various CDCs across the country about their views on the 504 program. The Committee would like to know what’s working, what’s not, and what we can do to improve the program.

I look forward to hearing from the witnesses to today and working with my colleagues on both sides of the aisle to minimize the barriers facing our small business owners when it comes to securing affordable capital.


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