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Glossary

What is Certified Development Company (CDC)?

Also called: CDC, 504 lender, development company

In one sentence: A nonprofit, community-based lender certified to deliver the SBA 504 program, funding the second loan in a project alongside a bank’s first loan.

Last updated · Precise SBA editorial

In plain English

The SBA 504 program finances a project in layers. A bank makes the first loan. A Certified Development Company makes the second. The CDC is a nonprofit, community-based organization certified to deliver the program, and it exists to support local economic development.

What it does

  • Funds the second layer of the project, behind the bank’s lien.
  • Packages and services that portion, working with the bank and the borrower.
  • Documents the program goals, for example job creation or retention.

How the split typically works

The commonly cited structure is about 50% bank, 40% CDC and 10% borrower, with more required from the borrower for some projects. The CDC portion is generally a long-term fixed-rate loan, which is the main reason owners consider the program for buildings and heavy equipment.

Hypothetical example

A business buys a $2,000,000 building to occupy. On the typical split: about $1,000,000 from the bank, $800,000 from the CDC and $200,000 from the owner. The owner’s payments combine the bank loan and the CDC loan. Fees and closing costs are extra.

Common mix-ups

  • A CDC is not a bank, and not the SBA. It is a certified nonprofit partner.
  • It is for real estate and equipment, not working capital or most business purchases.
  • Service areas matter. Not every CDC serves every county.

What to do with it

Read SBA 504 explained and compare it with 7(a) in 7(a) vs. 504.

Common questions

Do I choose a CDC or does the bank?

Usually you work with both. The bank makes the first loan and the CDC makes the second. Many CDCs serve a defined geographic area, so ask which one covers your county, and whether it works with the bank you are talking to.

Does a CDC lend on its own?

The CDC portion is funded through an SBA-backed debenture, not from the CDC’s own balance sheet, and it ranks behind the bank’s loan. The CDC packages, approves and services its portion.

What does a CDC cost?

Fees apply to the CDC portion and the project overall, and vary. Ask for a full list of closing costs and the prepayment terms early.

Related terms

Sources and UsesA table of what a project costs in total (uses) and where each dollar comes from (sources), which must match.Personal GuarantyA personal promise by an owner to repay a business loan out of their own assets if the business cannot.

Go deeper

SBA 504 Loans Explained: Financing Buildings and Heavy EquipmentThe 504 program splits one project between a bank and a community-based lender, which is how it delivers a long fixed rate on the larger slice. It is built for owning real estate and equipment, not for working capital.SBA 7(a) vs. 504: Which One Fits Your Plan?Start with what you're buying, not the program name. The asset usually points to the answer, and sometimes the answer is both.

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General information, not legal, tax or financial advice. Precise SBA is not affiliated with the U.S. Small Business Administration. Rules and lender policies change. Examples use hypothetical numbers. We never charge you. If a loan closes, the lender may pay us a referral fee, disclosed on SBA Form 159 (how we get paid). Back to the glossary.