cdc / 504 loan program

CDC / 504 Loan Program Eligibility
To be considered for Certified Development Company (CDC)/504 loan, applicants must meet these eligibilty requirements:
  • Operate as a for-profit company
  • Do business (or propose to) in the United States or its possessions
  • Has a tangible net worth less than $15 million and an average net income less than $5.0 million after taxes for the preceding two years.
  • Loans cannot be made to businesses engaged in speculation or investment in rental of real estate.
  • Be an eligible type of business. While the vast majority of businesses are eligible for financial assistance from the SBA, some are not.
  • Under the 504 program, Plan to use proceeds for an approved purpose. CDC/504 loan proceeds may be used for the financing of fixed assets like real estate or equipment.
  • Not have funds available from other sources. SBA does not extend financial assistance to businesses when the financial strength of the individual owners or the company itself is sufficient to provide all or part of the financing. Both business and personal financial resources are reviewed as part of the eligibility criteria. If these resources are found to be excessive, the business will be required to use those resources in lieu of part or all of the requested loan proceeds.
  • Ability to repay the loan on time from the projected operating cash flow of the business.
  • Good character. SBA obtains a "Statement of Personal History" from the principals of each applicant firm to determine if they have historically shown the willingness and ability to pay their debts and whether they have abided by the laws of their community.
  • Relevant management expertise
  • Feasible business plan
The types of businesses that eligible for financial assistance from the SBA, must:
  • Operate for profit
  • Be engaged in, or propose to do business in, the United States or its possessions
  • Have reasonable owner equity to invest
  • Use alternative financial resources, including personal assets, before seeking financial assistance
Special Considerations
Special considerations apply to some types of businesses and individuals, which include:
  • Franchises are eligible except when a franchiser retains power to control operations to such an extent as to equate to an employment contract. The franchisee must have the right to profit from efforts commensurate with ownership.
  • Recreational Facilities and clubs are eligible provided: the facilities are open to the general public,m or in membership-only situations, membership is not selectively denied or restricted to any particular groups.
  • Farms and agricultural businesses are eligible. However, these applicants should first explore Farm Service Agency (FSA) programs, particulary if the applicant has a prior or existing relationship with FSA.
Ineligible Businesses
  • Real estate investment firms when the loan is used for investment purposes.
  • Firms involved in speculative activities that develop profits from fluctuations in price rater than through the normal course of trade, such as wildcatting for oil and dealing in commodities futures, when not part of the regular activities of the business.
  • Dealers of rare coins and stamps
  • Firms involved in illegal activities
  • Gambling activities, including any business whose principal activity is gambling. The rule does not restrict loans to businesses that obtain less than one third of their annual gross income from either the sale of offical state lottery tickets under a state license, or legal gambling activities licensed and supervised by a state authority.
  • Charitable, religious, or other nonprofit or government owned corporations, consumer and marketing cooperatives, and churches and organizations promoting religious objectives.
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