This SBA 504 Loan video outlines important points to keep in mind when choosing a CDC for your SBA financing. For easy reference, see the full transcript below the video.
While the bank you choose to work with is critical to your success with the SBA 504 program, the Certified Development Company- or CDC- is also very important. Though your bank will generally lead the selection of the CDC, there are options, and you should discuss them with your bank.
Relationship with the bank. As is the case in most aspects of the business world, the relationship between the parties involved plays a role in how smooth or rough the SBA 504 loan program process plays out. It is best if there is a track record of successful partnership between the bank and CDC. The bank usually has a particular CDC that it prefers to work with on SBA 504 loans; working with the bank’s preferred CDC is normally the best scenario.
Flexibility. Flexibility of the CDC is another important consideration. Just as individuals and banks have conservative or aggressive tendencies, CDCs are no different. While one can get hung up on a certain principle or guideline, others are better at evaluating the big picture and working around under-writing difficulties when the overall risk is reasonable. When dealing in a highly regimented environment like the SBA 504 loan program, teaming with a flexible CDC can be a huge advantage and could very well be the difference between getting your project financed or not. This quality is best determined by your bank, but again, if you end up working with a bank with limited SBA 504 small business funding experience, you’ll want to make sure the bank does its due diligence in selecting the CDC via reference checks or whatever other means they may have to determine the suitability of the CDC. If the bank is not willing or capable of doing some basic research, you should seriously consider talking to some alternative banks.
Responsiveness. It goes without saying that everyone wants to work with people who respond to you in a timely fashion but this is especially important when it comes to the CDC you and your bank will be partnering with for a 504 SBA loan. It is common for either the approval or closing process, or both, to drag out. Working with a CDC that does not delay in getting back to you or the bank and is diligent in their dealings with the SBA can shorten the time frame considerably. Again, here you’ll want to lean on the bank’s experience but make sure it gets discussed. If the bank has had issues in the past with the CDC, ask them to find an alternative.