For aspiring entrepreneurs and small business owners seeking financial assistance, navigating the world of loans and government programs can be daunting. Certified Development Companies (CDCs) exist to guide eligible borrowers through the process for certain types of SBA loans. As non-profit organizations associated with the federal government, they must meet stringent guidelines in order to earn and maintain certification by the SBA. Let’s take a closer look at these requirements and why the SBA uses CDCs to facilitate the 504 loans.
What Do CDCs Do?
Certified Development Companies (CDCs) are non-profit organizations designated and regulated by the Small Business Administration (SBA). They are an integral part of the SBA’s 504 loan programs, which aim to provide financial assistance to small businesses to foster their growth, expansion, and job creation.
A CDC’s primary mission is to promote economic development within their communities by offering affordable, long-term financing options to small businesses. They achieve this by partnering with private lenders and the SBA to provide loans that entrepreneurs might not otherwise qualify for due to their higher risk or lack of collateral.
Why Does the SBA Use CDCs for Loan?
The SBA’s 504 loan is available exclusively through a CDC. Their certification indicates that they have demonstrated to the SBA both their expertise in commercial lending and their dedication to bolstering the local community. Furthermore, being backed by the government means that CDCs can often secure loans from private lenders who might otherwise view a borrower as too high risk.
504 loan generated by a CDC might be compared to an FHA loan for a mortgage. Both are federally endorsed and can help borrowers qualify for a loan despite certain risk factors, such as a lower credit score or downpayment. Both tend to have interest rates similar to or lower than conventional loans, although this can vary according to market fluctuations.
CEDCO is a Colorado Proud CDC that is passionate about giving business owners the jumpstart they need to bring their goods and services to our diverse community. We have 45 years of experience assisting hundreds of Colorado businesses in securing fixed asset financing. If you are an entrepreneur ready to start or expand your small business in Colorado, call or go online today to schedule a free consultation.