SBA Sets Overhaul of 504 Loan Program Certified development companies that handle SBA’s Section 504 loans would be allowed to expand their service areas and compete with each other for borrowers’ business under new regulations proposed by SBA. SBA said the changes would encourage expansion of existing development companies and creation of new ones, to serve parts of the country that do not now have access to the program. The 504 program provides long-term fixed-rate financing for plant and major equipment purchases through federally guaranteed loans. By law, the loans are supposed to promote economic development and create or preserve jobs. Current regulations limit most development companies to local or regional markets and prohibit them from expanding into a geographical area served by another company. The proposed amendments would allow virtually unlimited expansion of the companies’ operations, including liberalizing rules for expansion across state lines. “SBA is proposing to allow the marketplace to determine the maximum number of CDCs that can co-exist within a State,” the agency’s announcement said. Most of the 270 CDCs are operated by local or regional government agencies and, in many cases, their service areas are restricted by the parent organization, a spokesman for the National Association of Development Companies said. But the association’s membership also includes some companies that are eager to expand. SBA says the 504 program has created or retained more than 1.5 million jobs since 1986. But the program usually has money left over at the end of each year. The 504 program’s authorization for fiscal 2002 was $4.5 billion in loans, but only $2.5 billion worth were approved. SBA said restrictions on expansion have left many parts of the country, especially rural areas, without access to the loans. The proposed regulations would also expand development companies’ authority to make loans without prior SBA approval under the Accredited Lender Program and the Premier Certified Lender Program. SBA issued an advance notice of proposed rulemaking in December. It received nearly 1,200 comments from lenders and borrowers. Several banks said the 504 program allows them to fund projects that are too large for their lending limits. The commenters overwhelmingly opposed allowing development companies to offer loans under SBA’s 7(a) program. One wrote, “7a lenders, due to their for-profit structure, have significantly different goals and objectives that are often in conflict with the economic development goals of the non-profit CDC industry. The independence of CDCs is critical to the maintenance of their unique economic and community development mission.” The proposed amendments are in FR Doc 03-16862 in the July 8 Federal Register. Comments are due by Aug. 7.