cdc small business finance corporation

cdc small business finance corporation

The Role of CDC Small Business Finance Corporation in Supporting Small Businesses

1. Introduction to CDC Small Business Finance Corporation

In 1978, CDC Small Business Finance was initially formed as the corporation’s conduit for smaller dollar loans for the SBA 7(a) program due to the limited ability of SBA to offer funds into CDC. Although the company initially offered only two loan products, 504 advances and 7(a) operations, it has risen and plays a major role in the nationwide sustainable development field. CDC is now an SBA Preferred Lending Provider, giving various bank-like services to small companies, such as processing requests 24 hours a day, lending extremely aggressively under both series of 7(a) operations, offering a wide variety of SBA loan forms, and collaborating with various nonprofits and CDCs nationwide on transactions and GST ProfitMax. This doesn’t finish; at the same time but not worse, CDC is a national leader in the development of CDC, the Next Generation, continued to develop the employee and management, constantly updating and staying on top of emerging risks and regulations in the SBA Loan Markets. The CDC PLP has restrictions on the amount of SBA loans it makes.

2. Financial Products and Services Offered by CDC Small Business Finance Corporation

The foregoing, appearing to emulate a usurpation of other functions customarily discharged by investment banking organizations which, in metric banking practice, engage in providing innovative financing mechanisms refined to suit time, place, and circumstance, is precisely what CDC Small Business Finance Corporation does and, emphatically, in the arena of providing, not a privatizing of a lucrative pipeline of market-inspired financing support, but that sorely needed push financing to startups, emerging and maturing businesses strategically located. This prescription also refines itself further as CDC Small Business Finance Corporation is also widely recognized as an ideal partner with community-based organizations and governmental units in effecting urban renewal initiatives.

To assist in meeting the capital needs of small business enterprises, CDC Small Business Finance Corporation, through its Small Business Loan Program (CSBFLP), administers a series of financial products as well as aftercare services. The products offered are generally for the purpose of providing a financing mechanism not appropriately met by the sources of private investment capital most commonly made available by banks, particularly on favorable terms to the borrower. As non-owner-occupied real property financed by a commercial loan is generally excluded under state enabling legislation for Certified Development Companies, CDC Small Business Finance Corporation, in its many decades-long involvement in serving small businesses, sought to meet the non-conventional or more specialized financing needs of such business enterprises which banks and most other investment entities would either not touch or, if they did, generally on a short-term basis, at interest rates which, while not usurious, were relatively steep.

3. Impact of CDC Small Business Finance Corporation on Small Business Growth

“Everybody I work with at CDCSBF is fantastic. I really feel like they’re part of my team.” “We have a lot of ideas on business growth, and they’ve been really supportive. Some loan officers just lend money, but this was a true decision based on the financial health of our business.” “I couldn’t have done it without help of this nature. It was really important. You don’t get this type of help from just anywhere—trust me, I’ve tried. You’ve helped write the history of this company.” “Financial products are commodities. It’s CDC customer service that makes them shine.” “The loan helped us stay alive because it got us through a rough spot. There is no way I could have done it through conventional financing.” “The financing always comes at a critical period in our growth cycle and has helped us to move the business into the various levels of business development we have set for ourselves.” “I think the loan is one of the most important aspects of my business. I feel very comfortable and confident with CDC. I have no problems coming back next year and borrowing more money.”

As an organization, we strive to support small businesses and help them gain access to capital. But you don’t need to hear it from us. Here’s what our small business borrowers are saying about their experience working with us:

4. Challenges and Opportunities for CDC Small Business Finance Corporation in the Future

Congress’s approach has been to guarantee a large share of the principal amount of these loans to lower the lender’s loss given default, which is the expected loss on the loan if the borrower stops making payments. Although the SBA does not charge an upfront guarantee fee, it does, in effect, charge a fee to the lender in the form of interest on the portion of the loan that is SBA-guaranteed. The rationale is Congress’s banking principle, which is that, to the extent possible, the SBA should act as much like a bank as possible, so that the SBA helps make loans available by taking on some of the risk facing the lender, instead of freezing risk into the market. This means that SBA-guaranteed loans should have a very high likelihood of being repaid in full, unless there are serious problems with the borrower’s business or management, or reduced confidence in upper-level management means that financing the firm is no longer consistent with the government’s mission.

There is a strong case for the federal government and the federal Small Business Administration to be actively involved in working with for-profit lenders to ensure the wide availability of responsible, affordable, longer-term loans to all creditworthy small businesses. These include loans to finance the purchase or improvement of owner-occupied commercial real estate, other capital expenditures, and working capital; and loans to purchase a business. Congress established the SBA in 1953 “to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters.” The SBA’s leading role in the 7(a) loan guarantee program reflects Congress’s judgment that, for credit market failures to be addressed effectively, the government needs an important role in reducing lender risk. When lenders face heightened risks of borrower default and foreclosure — as is often the case with longer-term loans to creditworthy small business borrowers for those purposes — getting credit to borrowers depends on bringing in a third party to share these risks.