One of the specific characteristics of the 504 program is its Economic Development Objective. It’s what gives CDCs their tax-exempt status under the IRS Code. At JRB, our clients often request our assistance in determining whether a project meets a Public Policy Goal, or one of the many community objectives.

While job creation or retention is certainly one of the recognized Economic Development Objectives, a project that meets Community Development or Public Policy Goals also meets the Economic Development Objective. (SOP 50 10 7.1 pg. 283) But while the SOP recognizes other initiatives, it doesn’t describe them further. That’s left to the Code of Federal Regulations and the U. S. Code.

An experienced 504 loan officer is familiar with these documents and is adept at multi-tasking, carrying the SOP under one arm, the CFR in the other hand and the U.S. Code tucked in a pocket. Come to think of it, a backpack would come in handy. Using all these references, we can discover some amazing things:

Determining “Socially Disadvantaged Groups.” Expansion of minority enterprise development is a Public Policy Goal. While there is no list of minority groups in

  • 120.862, qualifying “socially disadvantaged groups” are listed in 13 CFR § 124.103(b). So how does a person prove they’re a member of such a group? The CFR is helpful on this point:

An individual must demonstrate that he or she has held himself or herself out, and is currently identified by others, as a member of a designated group if SBA requires it.”

 Also, someone not a member of one of the groups listed may establish individual “social disadvantage” by a preponderance of the evidence. (13 CFR § 124.103(c))

Small Businesses Owned and Controlled by Women. Expansion of small businesses owned and controlled by women is another Public Policy Goal. And while both the SOP and CFR are silent on what constitutes businesses owned and controlled by women, the CFR refers us to 15 U.S.C. 656(a)(3) where we find the term:

‘’… a  small business concern owned and controlled by women, either startup or existing, includes any small business concern— (A) that is not less than 51 % owned by one or more women; and (B) the management and daily business operations of which are controlled by one or more women.”

None of this “the wife owns 50%” stuff. A woman must own at least 51% and manage the business operations.

Now, I don’t recommend carrying all these references around, backpack or no. But it’s good to know there are several resources available to check on whether a project meets an Economic Development Objective. Of course, we have everything handy here at JRB. Need assistance plowing through the weeds? Contact JRB.

Richard Jeffrey, Senior Associate
CDC/504 Program