If you are a small business owner, CDC loans are a topic in which you should become an expert. According to the Small Business Administration (SBA), only 48% of small business owners can meet their financing needs. Fortunately, CDC loans can be a solution. Here is what you need to know.
1. What Is a CDC Loan?
Certified Development Company (CDC) loans are financing offered through the Small Business Administration’s community partners. The loan falls under the 504 Loan Program. These loans are designed to provide small companies with long-term, fixed-rate financing for major assets. It can be a solution for any small business owner on the path to growing their company.
They can be used to purchase real estate or equipment, which promotes growth and job creation. This government loan program is ideal for small business owners who need capital to purchase major assets. CDCs are certified and regulated by the Small Business Administration.
2. Who Is Eligible?
To qualify for a CDC loan, your company must have a net worth of less than $15 million, per the Small Business Administration. It must be a for-profit business and have a net income of less than $5 million after taxes.
Other eligibility requirements include having good character and being able to pay the loan. It would be best to have a qualifying management plan in place. Your business must also fall within the size guidelines published by the SBA.
3. What Are the Caveats?
While this is a great loan program for small businesses, there are a few caveats. You can’t use the loan for working capital. Your company income can’t be passive, and you cannot use this consolidation loan to pay off debt.
This loan can’t be used for speculation in real estate or other investments. However, you can use this loan for a long list of ventures. You can use it to improve commercial property, purchase property for the business, construct new facilities, purchase long-term equipment, and more.
CDC loans are not talked about enough as a potential option for small companies to grow. A CDC partner can help you raise the capital you need. Learn more about your options and how to qualify for a CDC loan by contacting our team at MCDC today.