Have you ever wondered what a certified development corporation or CDC is? As you look to grow your small business, you may hear about them as a potential funding source. CDCs are unique lending institutions that provide financing to small businesses, particularly those in low-income and rural areas. Here’s more information about these loans from a CDC lender.
Who Runs CDCs?
Certified development corporations are private nonprofit corporations that are certified and regulated by the U.S. Small Business Administration. They use capital derived from the sale of debentures guaranteed by the SBA to make loans to qualifying small businesses. CDCs work closely with the SBA and local governments to promote economic development in their communities. According to Zippia, approximately 32% of small businesses, or one in three, applying for loans apply to non-bank lenders.
They Offer Patient Capital
One of the key benefits of certified development corporation loans is that they provide patient capital, offering more flexible terms than traditional bank loans. For instance, CDCs may be willing to take more risks on startups or businesses without lengthy credit histories. They can also offer longer repayment terms, helping businesses conserve cash flow. This patient approach allows CDCs to fulfill their mission of spurring growth in disadvantaged areas. CDC loans are also a great financing source for well-established, healthy companies because of the long-term, low interest rates. In addition, the low down payment allows companies can retain more working capital.
They Can Connect Small Businesses With Funding
To receive a certified development corporation loan, your business must meet SBA size standards, be located in the CDC’s service area, and demonstrate a credit need that cannot be fully met through conventional lenders. The CDC will work with you to put together a funding proposal and loan package to submit to the SBA. Once approved, the SBA provides a guarantee on a portion of the loan, enabling the CDC to offer favorable rates and terms.
They Go Beyond Lending
Beyond providing financing, certified development corporations aim to be strategic partners supporting the success of small businesses. Many offer free consulting and training programs to help new entrepreneurs hone their business plans and operations. They may also connect businesses with other resources, such as accounting support, marketing services, or legal advice. By promoting entrepreneurship at the local level, CDCs strengthen regional economies.
If you need capital to get your business off the ground or fund an expansion, then a certified development corporation loan could be a smart move. A CDC lender can help you learn more about this type of loan and whether you may qualify for one. Reach out to us to get started.