What Is a Certified Development Company and Why Are They Involved in 504 Loans?

Certified Development Companies: What You Need to Know

According to the SBA, “A Certified Development Company (CDC) is a nonprofit organization that promotes economic development within its community through 504 loans. CDCs are certified and regulated by the SBA, and work with SBA and participating lenders (typically banks) to provide financing to small businesses, which in turn accomplishes the goal of community economic development.”

Of course, that really doesn’t shed a lot of light on the situation. For another definition, we can turn to the Office of the Comptroller of the Currency, within the Treasury Department. The OCC shares a similar description of what a CDC is, but then continues by explaining that there are currently 252 CDCs in operation nationwide, and each of them is able to offer 504 loans within the entire state in which it is chartered. It is within the bounds of possibility that the SBA could authorize a CDC to offer 504 loans within the continental United States. While each of these organizations is certified by the SBA, they are not part of the organization. While most CDCs work strictly with 504 loans, some of them also work with applicants seeking 7(a) loans, as well.

How CDCs Got Their Start


CDCs actually trace their lineage back to 1958. When the Small Business Investment Act passed, organizations called Small Business Investment Companies (SBICs) began operating in order to help business owners navigate the loan process. However, borrower needs evolved and changed over time, and SBICs were not able to serve all businesses. CDCs were established to help finance real estate and project financing, things that SBICs could not do. CDCs today offer help for business owners who are ready to purchase real estate or buildings for their companies, or who want to expand their business by investing in new equipment, or upgrading their building/real estate.

Perhaps the most important thing to understand about CDCs is their relationship with the wider community, specifically the state in which they operate, and even the regions of that state where they are headquartered. CDCs are designed to help strengthen local businesses and support local economies, revitalize neighborhoods, and breathe new life into these areas.

In addition to their focus on building and improving local economies and making it possible for local businesses to thrive, CDCs also focus on achieving specific public policy goals. For instance, they ensure that women and minority business owners are supported, while also providing help for veterans, and even offering advice and guidance for business owners.

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