A CDC (Certified Development Company) is a key entity in the SBA 504 loan ecosystem, especially for projects involving owner-occupied commercial real estate, machinery, and equipment. Under SBA’s regulations, a Certified Development Company (CDC) is “an entity authorized by SBA to deliver 504 financing to small businesses.”
SBA describes 504 loans as being available through CDCs, its community-based nonprofit partners, and states that CDCs are certified and regulated by SBA.
What Is a CDC (Certified Development Company)?
A Certified Development Company (CDC) is a specialized SBA partner that helps deliver 504 financing for fixed-asset projects. SBA’s regulations define a CDC as an entity authorized by SBA to deliver 504 financing.
SBA further frames CDCs as community-based partners that promote economic development, and notes that 504 loans are available through CDCs that are certified and regulated by SBA.
Are CDCs Nonprofits? (And Why That Matters)
In practice, CDCs are commonly nonprofit organizations that exist to promote economic development through SBA 504 lending. An OCC overview of the 504 program describes a CDC as a nonprofit organization certified by the SBA to provide 504 loans, and notes most CDCs hold nonprofit designations such as 501(c)(4) or 501(c)(6) (and some are 501(c)(3)).
Why nonprofit status matters in 504 lending
- It reinforces the CDC’s mission orientation: supporting community development and small business growth (not operating as a typical profit-maximizing lender).
- It aligns with the 504 program’s emphasis on economic development outcomes.
What CDCs Actually Do in an SBA 504 Transaction
At a practical level, a CDC processes and helps coordinate the entire 504 project with:
- the borrower (the operating business),
- the SBA, and
- the Third-Party Lender (TPL) providing the first-lien portion.
In regulatory terms, SBA’s 504 rules explain that small businesses apply for 504 financing through a CDC serving the project area, and SBA issues a loan number if it agrees to guarantee part of the funding.
How CDCs Work With Third-Party Lenders (TPL)
A defining feature of the 504 program is the partnership between the CDC and a Third-Party Lender (TPL), often a bank or other commercial lender.
SBA’s 504 financing regulation lays out the standard structure:
- The small business contributes at least 10% of project costs
- The CDC debenture finances up to 40% (secured by a second lien)
- The Third-Party Loan (TPL portion) finances the balance and is secured by a first lien on the project property
SBA’s regulation also explains the 504 debenture is guaranteed 100% by SBA and sold into pools for investors, part of what enables long-term fixed-asset financing at scale.
Why this CDC–TPL partnership matters
- The TPL often wants strong collateral protection (first lien), predictable closing, and clear documentation.
- The CDC helps package the project for SBA compliance, coordinates the debenture process, and assists the borrower through requirements and timing.
How CDCs Are Formed in Regulations (and Who Monitors Them)
CDC authority and operations are governed by SBA’s 504 regulations (13 CFR Part 120, Subpart H). These regulations include:
- how projects are financed (including the 10/40/TPL structure),
- definitions and operational concepts like the Area of Operations and the SBA’s Lead SBA Office relationship to a CDC,
- and the process for applications for certification as a CDC.
Ongoing monitoring and servicing oversight
SBA also monitors CDC servicing behavior. SBA’s CDC/504 loan servicing guidance explains that CDCs submit unilateral servicing actions to SBA’s Commercial Loan Service Center (CLSC) and must retain documentation for SBA review to confirm actions were prudent, commercially reasonable, and compliant with program requirements.
How to Find a Local CDC (and the Right TPL)
SBA publishes a list of Certified Development Companies, noting 504 loans are available exclusively through CDCs and that CDCs are certified and regulated by SBA.
For the TPL side, lender selection can strongly influence timeline, bank terms, and execution. Platforms like SBARates.com are useful for identifying active SBA lenders,helping borrowers shortlist TPL candidates that regularly finance owner-occupied real estate or equipment projects alongside CDCs.