CREED Act Offers New Life for Popular SBA Loan Program

Small Business Finance Update
International Economic Development Council

The Small Business Jobs Act (Public Law 111-240), signed into law in 2010, helped to provide capital access programs for small businesses. One of the financing programs included authorizing a pilot program for the Small Business Administration (SBA) to guarantee loans issued to refinance existing debt without requiring them to be purposed specifically for business expansion. However, this program, known as temporary 504 loan refinancing for eligible small business assets under the Jobs Act, or the 504 loan refinance program, was only authorized through September 27th, 2012. The expiration of this program limited refinancing options for small businesses.

The 504 loan refinance program (a completely separate entity from the 504 loan program) allowed small businesses to obtain financing that stretched beyond business expansion in terms of the purchasing of real property and otherwise allowed financing of other eligible business expenses. According to a recent articlepublished by the National Association of Development Companies, within the 504 loan refinancing program’s one year of existence it had refinanced an estimated $5 billion of debt for small businesses at zero cost to taxpayers. More information on the expired program can be found here.

The Commercial Real Estate and Economic Development Act of 2015 (CREED) has been introduced in order to reinstate the loan refinancing program for 5 years. The program would be an extension of the original 504 loan refinancing program; pairing government backed loans made by certified development companies (CDCs) with conventional loans. This is seen as an economic development-specific financing tool and allows economic development organizations (EDOs) to work with SBA and private entities to help small businesses secure financing.  Bill sponsors and supporters believe that extending this program would allow qualified businesses to lock in long-term, stable financing and enable access to working capital to protect jobs and create new ones. Additionally, this would allow businesses to obtain more capital in a time when many commercial-backed mortgages are nearing maturation.

The bill has been introduced in both the House and Senate and the Congressional Budget Office (CBO) recently released a cost estimate as ordered by the Senate Committee on Small Business and Entrepreneurship. The estimate state that the implementation of the loan refinance program would be at zero cost to taxpayers given the current SBA appropriation and the authorization of fee collection to offset the subsidy cost. The bill may become more prominent in coming months following attention from the House Small Business Subcommittee on improving capital access within the SBA at a recent hearing on economic growth, tax and capital access.

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