SBA Hot Topic Tuesday — CDC Leaders to Congress: Increase Loan Limits and Modernize the SBA 504 Program

by Bob Coleman

Founder & Publisher

Last week, the Senate Committee on Small Business & Entrepreneurship convened a hearing on the SBA’s 504 Loan Program — one of the agency’s most powerful tools for fostering small business growth, job creation, and community investment.

A common theme echoed throughout the testimonies: the 504 program is working, but its outdated loan caps and rigid requirements are holding small businesses back. Witnesses urged Congress to increase loan limits, reduce burdensome equity requirements, and eliminate arbitrary restrictions that block creditworthy borrowers from accessing capital.

Testimony of Hilda Kennedy (AmPac Tri-State CDC, CA)

Hilda Kennedy, Founder and President of AmPac Tri-State CDC, emphasized how the 504 program has empowered small businesses in California and beyond, but warned that outdated limits are restricting growth. She offered five recommendations to Congress:

1. Raise Loan Limits for Manufacturers and Standard 504 Loans – Increase the cap for manufacturers from $5.5M to $10M, and raise the regular 504 limit from $5M to $7.5M.
2. Eliminate the $16.5M Cap on Energy 504 Loans – Remove the ceiling on energy-related projects to better support clean energy and manufacturing growth.
3. Pilot a 5% Down Payment Program – Create a pilot program allowing first-generation entrepreneurs and first-time commercial real estate buyers to qualify with a 5% equity injection.
4. Remove Extra Equity for Special Purpose Properties – Eliminate the additional 5% down payment required for certain property types, such as urgent care and dental practices.
5. Restore Flexible Citizenship Rules – Return to the prior SBA policy allowing majority U.S.-owned businesses with minority non-citizen partners to access financing.

Testimony of Jean Wojtowicz (Indiana Statewide CDC)

Jean Wojtowicz, Executive Director of Indiana Statewide CDC, highlighted how the 504 program’s financing structure fuels job creation but stressed that rising costs have outpaced statutory loan caps. Her five recommendations to Congress included:

1. Increase Manufacturing Loan Size to $10M – Support MAMFA to allow project costs up to $25M.
2. Lower Borrower Equity Injection for Manufacturers – Reduce the equity requirement from 10% to 5% to preserve critical working capital.
3. Raise Regular 504 Loan Limit to $7.5M and Index for Inflation – Update the standard cap (unchanged since 2010) and tie future increases to inflation.
4. Eliminate Special Purpose Property Penalty – Remove the 5% equity penalty on “special purpose” properties, while keeping higher requirements only for startups under two years old.
5. Decouple 504 from the 7(a) Program – Remove the “credit elsewhere” test and personal resource review, which can penalize 504 borrowers and reduce liquidity.

Testimony of David Raccio (CDC New England)

David Raccio, Senior Vice President and Director of SBA Lending at CDC New England, underscored how the 504 program supports local economies but argued that modernization is urgently needed to keep pace with demand. He presented five priority reforms:

1. Lift $16.5M Energy Loan Cap & Raise Loan Limits – Eliminate the ceiling on renewable energy projects and increase caps to $7.5M for standard 504 loans and $10M for manufacturing and energy.
2. Reduce Equity Requirement for Manufacturers – Lower the borrower contribution from 10% to 5% to ease expansion for capital-intensive firms.
3. Restore Citizenship Eligibility Rules – Revert to the prior SBA approach that allowed majority U.S.-owned firms with minority non-citizen ownership to qualify.
4. Remove Extra Equity for Special Purpose Properties – Strike the outdated 5% down payment requirement for industries like farms, urgent care, and auto repair.
5. Modernize Occupancy, Refinance, and Closing Processes – Lower occupancy thresholds to 50%, simplify refinance eligibility, and delegate minor closing corrections to CDCs to streamline approvals.

Takeaway

Increasing loan limits was the top priority across all testimonies, alongside lowering equity requirements, eliminating outdated restrictions, and restoring practical eligibility rules.

A Review, Evaluation, and Interpretation of the SBA Life Insurance Requirements Across The Three Most Recent SBA Standard Operating Procedures (including SOP 50 10 8 5/29/25)

Executive Summary

The Small Business Administration’s life insurance requirements for 7(a) and 504 loans have undergone significant changes across the three most recent SOPs. This white paper analyzes the evolution from structured requirements (SOP 50 10 6), through a period of lender discretion (SOP 50 10 7.1), to the current return to structured, collateral-focused requirements (SOP 50 10 8).

Introduction

Life insurance requirements serve as a critical risk mitigation tool for SBA loans, particularly when business operations depend heavily on key individuals. The requirements have evolved significantly, reflecting changing philosophies about risk management, lender discretion, and program integrity. This analysis examines how these requirements have changed across three major SOP revisions and their implications for borrowers and lenders.

Life Insurance Requirements by Loan Type – 7(a) Loan Requirements

SOP 50 10 6 (October 2020) – Baseline Standards

• Requirement: Life insurance required for loans not fully secured

• Coverage: Principals of sole proprietorships, single member LLCs, or businesses dependent on one

owner’s active participation

• Amount: Consistent with size and term of loan

• Assignment: Collateral assignment required, acknowledged by insurer home office

• Exceptions: May be reduced based on collateral; existing policies acceptable; waived if uninsurable

SOP 50 10 7.1 (November 2023) – “Do What You Do” Era

• Requirement: Based on lender’s internal policy for similarly-sized non-SBA loans

• Coverage: Determined by individual lender policies

• Amount: Based on lender’s internal policies

• Assignment: Per lender’s internal policies

• Exceptions: Lender discretion based on commercial lending practices; significantly relaxed

requirements

SOP 50 10 8 (June 2025) – Return to Structure

• Requirement: Required for loans above $350,000 to single-owner businesses if not fully secured

• Coverage: Principals of sole proprietorships, single member LLCs, or businesses dependent on one

owner’s active participation

• Amount: Consistent with size and term of loan

• Assignment: Collateral assignment required, acknowledged by insurer home office

• Exceptions: Not required if fully

Read full LifeEase white paper here.

Learn about LifeEase here.

Leverage ChatGPT & Microsoft Co-Pilot to Craft SBA 7(a) Credit Memos — Onsite Workshop in Ontario, CA on 9/25

Bob Coleman will lead a full-day workshop teaching how to use AI tools like ChatGPT and Microsoft Co-Pilot to streamline SBA 7(a) credit memo preparation. Attendees will receive hands-on training, work through real loan examples, and get ready-to-use templates to improve their underwriting process.

The event takes place on September 25 from 9AM to 4PM PT at AmPac Business Capital near Ontario International Airport, with a networking dinner the evening before. It is designed for SBA underwriters, credit analysts, lending managers, and bank executives looking to boost efficiency and accuracy. Registration is $795 per attendee, and seats are limited.

Read more and register here

Spotting Borrower Fraud and Reporting to SBA’s OIG, as Required by Law — Webinar 10/1

SBA has made fraud prevention a top priority for 2025 under the new administration. Fraud enforcement is now front and center, and lenders are expected to take swift and decisive action when they see suspicious activity. The SBA has been very clear that fraud reporting is no longer just a compliance measure; it’s a federal mandate.

Coleman award-winning webinar instructor Lance Sexton will walk you through every borrower action that triggers a mandatory fraud referral. He will explain exactly what information you must collect, where to send it, and what your follow-up responsibilities include.

Read more and register here

Avoid the Top Ten Equity Injection Mistakes That Put Your SBA Guaranty at Risk — Webinar 10/22

Equity injection documentation continues to be one of the most heavily scrutinized areas in SBA lending. Examiners, reviewers, and auditors consistently flag the same issues, and lenders who fail to meet the SBA’s exact requirements risk repairs or denials of their guaranty.

In this webinar, former SBA Little Rock Servicing Center Deputy Director Lance Sexton provides an industry-level presentation on equity injection compliance. Lance will cover exactly what reviewers look for, where lenders often go wrong, and how to document equity injection so your files pass SBA and third-party audits without exception.

Read more and register here

SBA Secondary Market Summit — December 4, 2025

Coleman’s SBA Secondary Market Summit is back for 2025! For our 18th year, we’re excited to partner with the National Rural Lenders Roundtable (NRLR) to bring you two premier events under one roof in Washington, DC. Bob Judge will bring his decades of industry knowledge and expert insight to give us a glimpse of what to expect in 2026. Bob Coleman will moderate and put together the only program that brings together the Big Four of the SBA secondary market: Brokers, Investors, Sellers and SBA.

Early registration for the Summit is now open with a special early bird offer — one seat for just $995 if purchased by August 15. Don’t miss this opportunity to save!

Read more and register here

PREVIOUS REPORTING

Small Business Lending Increases, Bank of America Reports

AI-Generated Fraud Creates New Challenges for SBA Lenders

Joe Reynolds, Bill King, Neal Kyber, & Noel Ferrufino

UPCOMING COLEMAN WEBINARS

Spotting Borrower Fraud and Reporting to SBA’s OIG, as Required by Law — 10/1

Avoid the Top Ten Equity Injection Mistakes That Put Your SBA Guaranty at Risk — 10/22

Lending Conference Schedule 2025

Leverage AI to Craft SBA 7(a) Credit Memos – September 25 (Ontario, CA)

NADCO Now – October 14-17 (Ft. Lauderdale, FL)

B2B Finance Expo – October 28-29 (Las Vegas, NV)

Leverage AI to Craft SBA Loan Credit Memos – November 18 (Oakland, CA)

National Rural Lenders Roundtable – December 3 (Washington DC)

SBA Secondary Market Summit – December 4 (Washington DC)