July 6, 2021

Young, Klobuchar Introduce Legislation to Improve the Small Business Administration’s 504 Loan Program

WASHINGTON – U.S. Senators Todd Young (R-Ind.) and Amy Klobuchar (D-Minn.) introduced two bills to improve the Small Business Administration’s (SBA) 504 loan program. The SBA’s 504 loan program provides long-term, fixed-rate loans for financing fixed assets. 504 loans are most often used for expansion and cannot be used for working capital, inventory, or repaying debt.


The 504 Credit Risk Management Improvement Act will increase and streamline oversight of the loan program, allowing small businesses to grow, modernize, and recover from the coronavirus pandemic. This bill is cosponsored by Senator Cory Booker (D-N.J.). 


The 504 Modernization and Small Manufacturer Enhancement Act will update the loan guarantee program and enhance small manufacturers’ ability to access affordable capital. The SBA’s 504 loan guaranty program provides small businesses long-term fixed rate financing for major fixed assets like land equipment and machinery. This bill is cosponsored by Senators Marco Rubio (R-Fla.) and Cory Booker (D-N.J.).


“Small businesses are the backbone of our economy, creating about two-thirds of new American jobs and generating nearly half of U.S. economic activity. In Indiana, the SBA’s 504 loan program has led to more than $1.8 billion in expansion financing and has saved or created tens of thousands of Hoosier jobs,” said Senator Todd Young. “I am proud to support this legislation, which will help small businesses expand or begin new projects to grow the local Hoosier economy.”


“Small businesses are key to a strong economy, and as we round the corner of the pandemic, the SBA’s 504 Loan Program can provide crucial support as they create the jobs of tomorrow,” said Senator Amy Klobuchar. “This legislation will bolster oversight and increase efficiency of the 504 loan program, which in turn will help small businesses access the capital they need to grow and succeed.”


The 504 Credit Risk Management Improvement Act will:


  • Direct the SBA’s Office of Credit Risk Management (the Office) to supervise Certified Development Companies (CDCs) participating in the 504 program;
  • Direct the Office to review a random selection of loan closings to ensure program integrity, consolidate findings into a report, and send the report to the relevant parties;
  • Allow the Office to take informal and formal enforcement actions against CDCs if it finds they violated the 504 program requirements;
  • Allow the Office to fine CDCs and implement a suspension if they don’t submit required reports 30 days after they’re due;
  • Instruct the SBA to issue rules to clarify procedures for CDCs to comply with the National Environmental Policy Act; and
  • Allow the Office to collect fees from CDCs starting one year after enactment.


Specifically, the 504 Modernization and Small Manufacturer Enhancement Act will:


  • Increase the maximum loan amount for small manufacturers to $6.5 million from $5.5 million;
  • Decrease project costs for small manufacturers and adjust job creation and retention requirements;
  • Require SBA District Offices to partner with SBA Resource Partners to provide entrepreneurial development assistance to loan recipients;
  • Adjust building occupancy standards, collateral requirements, and debt refinance parameters; and
  • Streamline numerous administrative processes associated with the 504 loan closing process by allowing accredited CDCs to perform closing-related tasks.


Click the respective links to view bill text for S. 2245, the 504 Credit Risk Management Improvement Act and S. 2231, the 504 Modernization and Small Manufacturer Enhancement Act.