Becoming a CDC
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The 504 Certified Development Company (CDC) Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private-sector lenders to provide financing to small businesses. CDCs are located nationwide and operate, primarily, in their state of incorporation (Area of Operation). CDCs may expand beyond their Area of Operation into a contiguous local trade area, referred to as a Local Economic Area (LEA) expansion. LEAs are limited to contiguous counties in a state contiguous to the CDCs Area of Operations of its state of Incorporation or Metropolitan Statistical Areas (MSA) bisected by a state line. CDCs may also seek authority to operate in an entire state contiguous to its State of Incorporation. This type of expansion is referred to as a Multi-state expansion. CDCs must market the 504 program, package and process 504 loan applications, and close and service 504 loans in its Area of Operations and its portfolio must be diversified by business sector CDCs may provide small businesses with financial and technical assistance, or may help small businesses obtain such assistance from other sources, including preparing, closing, and servicing loans under contract with Lenders in SBA's 7(a) program. A CDC also may loan amounts to the Borrower equal to the value of all or part of the Borrower's contribution to a Project in the form of cash or land, including site improvements, previously acquired by the CDC. A CDC must be a non-profit corporation in good standing. Newly certified CDCs will be on probation for a period of two years, at the end of which the CDC must petition for: (1) Permanent CDC status; or (2) A single, one-year extension of probation.
A CDC must have at least 25 members and comprised of persons representing: (2) Financial institutions that provide commercial long term fixed asset financing in the Area of Operations; (3) Community organizations dedicated to economic development in the Area of Operations such as chambers of commerce, foundations, trade associations, colleges, or universities; and (4) Businesses in the Area of Operations. The CDC must have a Board of Directors chosen from the membership by the members, and representing at least three of the four membership groups. Additional Board of Director requirements membership requirements are provided in 13 CFR 120.823. A CDC must have full-time professional management, including an Executive Director (or the equivalent) managing daily operations. It must also have a full-time professional staff qualified by training and experience to market the 504 Program, package and process loan applications, close loans, service, and, if authorized by SBA, liquidate the loan portfolio, and sustain a sufficient level of service and activity in the Area of Operations. CDCs may obtain, under written contract, marketing, packaging, processing, closing, servicing or liquidation services provided by qualified individuals and entities who live or do business in the CDC's Area of Operations under the following circumstances. Contracts to provide these services require prior approval from SBA. A CDC must provide at least two 504 loan approvals each full fiscal year. A CDC's portfolio must reflect an average of one Job Opportunity per $50,000 of 504 loan funding. CDC Certification Guide |