A lender certified by SBA to package, close and service 504 loans and to issue the debenture that funds up to 40 percent of a project.
A CDC works with the bank on a 504 project. It packages the request, sends it to SBA’s processing center, closes the loan with its own counsel and issues the debenture. Authority has levels. Standard processing leaves the decision to SBA. Accredited Lenders status gives the CDC more authority to process, close and service, and its ALP Express loans of $500,000 or less carry the CDC’s own credit decision. Premier Certified status adds the power to liquidate and, when SBA allows it, to litigate.
The borrower may be charged a processing fee of up to 1.5 percent of the net debenture, a reasonable closing fee (up to $10,000 can be financed), and a servicing fee of 0.625 to 2 percent a year on the unpaid balance. A deposit of the smaller of $2,500 or 1 percent of the net debenture may be taken at the start and must be refunded within 10 business days if the request is declined. The CDC owes SBA an annual fee of 0.125 percent of the debenture, which it must pay from its servicing fees and cannot add to the borrower’s charges.
Example: on an $800,000 net debenture the processing fee is at most $12,000, and on a $824,000 gross debenture the CDC’s annual fee to SBA is $1,030.
How it shows up in the data here
In the 504 file, CDC_Name, city and state name the development company on each project, and ProcessingMethod shows its authority: ALP, 5EX for ALP Express and PCP for Premier Certified. See development companies by projects. The file does not show the company's authority today.
Go further
- SBA 504 development companies by projects: The 36-month count for each development company, with the method printed above the table.
- SBA 504 structure calculator: Bank loan, debenture and down payment for a project, and the fees that sit around them.
- SBA 504 loan package checklist: A 504 project has three parties, two loans and a closing date set by a monthly bond sale. Build the package for all three.
- SBA Preferred Lenders Program and Express: how they differ: Some SBA lenders decide a loan on their own authority and some send it to SBA first. The difference changes who reads your file and who carries the risk.
Related terms
- SBA 504 loan: A fixed-asset financing in which a bank lends 50 percent or more, a certified development company funds up to 40 percent through an SBA debenture, and the borrower puts in at least 10 percent.
- Debenture (SBA 504): The bond a certified development company issues to fund SBA's share of a 504 project. SBA guarantees it in full, and debentures are normally sold once a month.
- Third-party lender (SBA 504): The bank or other lender that makes the first-lien loan, usually about half the project cost, in an SBA 504 project. SBA does not guarantee its loan.
- Delegated authority (SBA lending): Authority SBA grants a lender to make its own eligibility and credit decision before SBA issues a loan number: PLP and SBA Express for 7(a), ALP and PCLP for 504.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.