Press Releases

Witnesses Provide Feedback on SBA’s 504/CDC Loan Program

WASHINGTON – Today, the House Committee on Small Business Subcommittee on Investigations, Oversight, and Regulations heard from a panel of witnesses on the Small Business Administration’s (SBA) 504/CDC Loan Program.

“The Small Business Administration’s 504/CDC Loan Program is one of the most important and unique access to capital tools available to small businesses.  This public-private partnership involves a financial institution, a small business, and a CDC, also known as a certified development company.  The program is a key tool for long-term financing of real estate transactions and small business equipment purchases,” said Ranking Member Ross Spano (R-FL).  “With job creation and job retention requirements, along with community development and public policy requirements, this program is transforming neighborhoods and communities from my home state of Florida to Tennessee to Ohio.”

CDCs Provide Success Stories and Suggestions to Members

Describing a family-owned café that was unexpectedly forced out of its building, Ms. Brooke Mirenda, President and Chief Executive Officer, Sunshine State Economic Development Corporation (SEDCO), in Clearwater, FL, said, “SEDCO partnered with a third-party lender to offer them an SBA 504 loan that would allow them to complete their relocation and make the necessary repairs to their new, much larger restaurant space… to accommodate this business growth, they created an additional 7 jobs.”  Ms. Mirenda suggested that the closing process for 504 loans could be improved, saying, “Currently the process is inconsistent, unpredictable, and lengthy—all characteristics that small business owners try to avoid.”

Ms. Mary Mansfield, President and Chief Executive Officer, Bay Colony Development Corporation, in Waltham, MA, said, “[One] challenge that limits the 504 program from reaching small businesses is occupancy requirements.  In densely populated cities, the real estate options are limited… Right now a 504 owner must occupy the majority of their real estate… The 504 program is almost never a viable option because so few buildings can meet SBA’s occupancy requirements.”

“As [a minority female physician’s] practice expanded, she had to relocate every few years in order to accommodate the growth… A 504 loan allowed her to purchase her own office space, providing stability for both employees and clients,” said Ms. Elaine Fairman, Executive Director, Business Expansion Funding Corporation (BEFCor), in Charlotte, NC.  “[One] matter of concern for small businesses who want to access the 504 program is the onerous rules to refinancing existing debt… rules should be tied to the mission of this program and the risk to the government.  Right now, these rules seem to be tied to neither.”

Mr. Wayne Williams, Senior Vice President, Business Finance Group Inc., in Fairfax, VA, said,  “[A] policy unnecessarily harming small businesses is SBA’s restrictions on the relationship between Eligible Passive Companies and Operating Companies [EPCs and OCs]… EPC/OC relationships within the 504 program have their rent structures dictated by SBA, their lease structures dictated by SBA, and restrictions placed on other business activities outside of the 504 loan project.  All of these are outside the norm of conventional commercial business practices and come at the detriment of the legal and tax advice these small businesses receive.”