What Is a CDC and Why You Must Work with One for a 504 Loan

If you’re exploring SBA 504 loans, you’ve likely heard the term “CDC.” But what exactly is a CDC—and why is it a requirement, not an option, for this type of financing?

A CDC, or Certified Development Company, is a nonprofit organization chartered by the U.S. Small Business Administration (SBA) to deliver the SBA 504 loan program. These loans help small businesses finance major fixed assets like real estate and equipment at long-term, below-market fixed rates.

What Does a CDC Do?

A CDC is a critical part of the 504 loan structure. Their role includes:

• Guiding borrowers through the SBA loan application process.
• Working in partnership with banks to structure 504 loans.
• Ensuring the project meets SBA eligibility and job creation goals.

Why Work with a CDC?

Because you have to—the SBA requires borrowers to work with a CDC in order to obtain a 504 loan. But beyond the requirement, there are meaningful benefits:

• Specialized Expertise: CDCs are experts in SBA lending and understand how to move projects efficiently through the approval process.
• Support from Start to Finish: From application to funding, CDCs stay closely involved.
• Better Loan Structure: With the CDC financing up to 40% of the project and the bank typically financing 50%, borrowers often only need to contribute 10%—preserving working capital.

Final Thoughts

There’s no way around it: if you want a 504 loan, you need to work with a CDC. Fortunately, their involvement makes the process more manageable and improves your chances of a successful, timely closing.