The 411 on the 504: One of SBA’s Zero Taxpayer-Funded Loan Program
WASHINGTON – Today, members of the House Small Business Subcommittee on Economic Growth, Taxes, and Capital Access heard from key players in the 504/CDC Loan Program.
“Although we are working feverishly to roll back red tape, small businesses face an uncertain lending environment that is compounded due to their reliance on traditional bank borrowing to raise capital. One program to bridge the funding gap that too often acts as a roadblock for small businesses is the SBA’s 504/CDC Loan Program,” said Subcommittee Chairman Dave Brat (R-VA). “As we work to assist small businesses, it is important to hear from those who have on the ground experience with the program.”
A Review of SBA’s 504/CDC Loan Program
“Under the program, a financial institution partners with a CDC, a specialized SBA-certified nonprofit corporation, to finance small businesses looking to expand,” said Natasha Merz, Vice President of Commercial Lending at the Langley Federal Credit Union, Newport News, VA. “The program helps financial institutions attract and serve small business borrowers that need financing for plant and major-equipment acquisition that may not meet conventional underwriting criteria.”
“My role as a loan officer was to meet with borrowers and referral sources to educate them about the 504 loan program and to generate loans. Borrowers in turn would share with me their plans and dreams for growing their businesses and making a difference in their communities,” said Wayne Williams, Senior Vice President of the Business Finance Group Inc., Fairfax, VA. “And for me has become one of the best things about CDCs and 504 lending – the feeling that our lending can and does make a tangible difference in our communities.”
“The fact that 504 requires no subsidy from the taxpayers is a point of pride, and we hope to work to ensure the loan portfolio continues to operate that way each year,” said Barbara Vohryzek, the President and CEO of the National Association of Development Companies. “Since 1991, 504 loans have created or sustained 2.1 million jobs through 128,000 loans, delivering $70 billion in financing to Main Street. The Otterbox was a 504 borrower…Chobani yogurt is a 504 product…and if you’re into music, SXSW is a 504 product.”
Sherwood Robbins, Managing Director of Seedcopa, a CDC in Exton, Pennsylvania said, “The true impact of 504 lending goes beyond the number of jobs created at a borrower site to include the inferred job creation that occurs throughout the surrounding community and the overall increase in consumer confidence that generates and maintains consumer spending across the economy.”