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Democrats on the House Small Business Committee jumped at the opportunity to reevaluate one of the most popular lending programs to help small businesses access capital, 504 loans. In a hearing today before the panel’s Subcommittee on Economic Growth, Tax, and Capital Access, Ranking Member Dwight Evans (D-PA) led Democrats in calling for an increase in lending to minority-owned businesses and ensuring that small business needs are at the forefront of the program. 

“In many ways, the 504 loan program has succeeded in helping entrepreneurs secure the resources necessary to start their dream venture,” said Evans. “It is due to this program that many small businesses have been able to borrow money to purchase a storefront for their business, whether it be a local dentist office or corner store.” 

An innovative approach, the 504 program requires loan recipients to create jobs, in turn spurring local economies. Producing positive results, since its inception, the program has supported over 2 million jobs. 

The backbone of the program rests on local Certified Development Companies (CDCs) who are private, nonprofit corporations that work in conjunction with the Small Business Administration (SBA) and private lenders to help small businesses secure loans. 504 loans are intended to give the businesses that encounter difficulties with conventional loans greater access to capital and opportunity. Unlike other SBA lending programs, 504 loans are specifically designed to help small businesses acquire real estate or heavy equipment and machinery. Typically, 504 loans do not exceed $5 million. 

Representing Seedcopa, a CDC located in Mr. Evans’ district, Sherwood P. Robbins, the Managing Director spoke firsthand about his experience managing and granting loans. 

“I have witnessed dozens of examples of small businesses that received high leverage funding through the 504 program that either saved the small business or allowed the small business to expand and create additional employment,” said Robbins. “Even in today’s stable economic climate, the 504 program continues to do the same, sponsoring growth in business revenue, economic stability, and living wage employment.”

In 2016, the 504 loan program grew by nearly 7 percent with $4.74 billion in loans approved. This marks the third consecutive year of growth for the program. Despite previous successes, the 504 program has faced a number of challenges, including: uneven marketing across geographical locations, burdensome paperwork and lender oversight issues. 

“As we get word of these shortcomings, it is imperative that we work with SBA and CDCs to make the program operate more efficiently for our small businesses,” said Evans. “While 504 loans are made throughout the United States and U.S. territories, they tend to be concentrated in very specific areas of the country. This only fuels the divide and we must work to level the playing field for small ventures regardless of their location.” 

Additionally, Democrats called for greater access to loans for minority and women-owned businesses. 

In 2016, nearly thirty percent of the total amount of approved 504 loans went to minority-owned businesses, while 13 percent went to women-owned businesses. 

“I applaud the great effort made by lenders making these loans,” said Evans. “Yet, I am disappointed that just over a quarter of 504 loans are going to minority-owned businesses and that many lenders remain somewhat hesitant to approve more than a few of them each year.” 

As the hearing concluded, Democrats pledged to focus on what can be done in the future to improve the program. 

“We are seeking to ensure that the 504 program works for CDCs and banking partners, who in turn must make it work for their small business borrowers,” said Evans. “Small businesses and entrepreneurs must always be front and center in this discussion.” 

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