S. 2662 — 504 Modernization and Small Manufacturer Enhancement Act of 2025

This section revises the policy goals that projects under the certified development company program (i.e., 504 loan program, which provides SBA-guaranteed debentures to certified development companies for long-term, fixed-rate financing of small business fixed assets that promote growth and job creation) must satisfy one or more of, as follows: (1) adding as new subparagraph (A) workforce development through work-based or work-integrated training of at least 12 weeks, via an in-house program or contract with a training entity; (2) revising redesignated subparagraph (D) to expand minority-owned or women-owned business development to also include employee-owned businesses; (3) adding new subparagraphs (N) enhanced ability to reduce costs via energy efficient products and renewable energy generation, (O) aid to revitalize areas with a disaster declaration under specified provisions of section 7(b)(2) of the Small Business Act, and (P) expansion of small businesses with 10 or fewer employees; and (4) making clerical changes to punctuation, wording, and cross-references.

This section increases the maximum loan amount, in the Small Business Administration's (SBA) development company loan program (i.e., 504 loans), for each project of a small manufacturer to $10 million (from $5.5 million). (A small manufacturer is a small business concern primarily classified in NAICS sectors 31, 32, or 33 with all production facilities in the United States; the program authorizes SBA loans to certified development companies to finance small business plant acquisition, construction, or expansion.)

This section authorizes accredited lender certified companies—defined as certified development companies meeting requirements under section 507(b), including those designated as accredited lenders—to take 10 specified actions to facilitate closing of 504 loans (i.e., SBA loans to certified development companies for small business fixed assets such as plant acquisition or expansion), including (1) reallocating project costs up to 10% of overall project cost; (2) correcting borrower, guarantor, or lender names or property addresses; (3) adding compliant eligible passive or operating companies; (4) changing to regulated financial institution lenders; (5) converting guarantors to co-borrowers or vice versa or adding guarantors without ownership changes; and (6) reducing standby debt via scheduled payments or project costs. (Thus, these actions occur without prior SBA approval.) The section further— (1) effective 180 days after enactment, assigns responsibility for 504 loan file reviews to the Office of Credit Risk Management and relieves SBA district counsels of reviewing closing packages while retaining their prior authorities; and (2) requires certified development companies to use designated attorneys—who must satisfy Administrator-determined continuing education requirements—to certify closing documents, with CDCs lacking such attorneys granted 180 days to identify and obtain approval for one.

This section establishes preferential terms in the Certified Development Company (504) loan program for small manufacturers (i.e., small businesses primarily classified in NAICS sectors 31-33 with all production facilities in the United States) by (1) reducing minimum equity injection requirements to at least 5% of total project cost if the small manufacturer has been in operation for two years or less, involves a limited- or single-purpose building or structure, or at the development company's discretion in other cases, or to 10% if both the two-year operation limit and limited-/single-purpose building apply; (2) eliminating the additional collateral requirement; (3) authorizing debt refinancing for expansions where the refinanced debt does not exceed 100% of the project cost; and (4) permitting guaranteed debentures in amounts up to 50% of the project cost without a showing of good cause.

This section requires the Small Business Administration (SBA) Administrator to ensure that each SBA district office partners with at least one resource partner—defined as a small business development center (15 U.S.C. 632), women's business center (15 U.S.C. 656), Service Corps of Retired Executives (SCORE) chapter (15 U.S.C. 637(b)(1)(B)), or Veteran Business Outreach Center (15 U.S.C. 657b)—to provide training to small manufacturers (i.e., small business concerns with North American Industry Classification System manufacturing codes) on obtaining assistance under the Small Business Investment Company (SBIC) program, including the application process and partnering with SBICs. (The SBIC program licenses private investment funds to provide equity capital, long-term loans, and debt to small businesses lacking access to conventional financing.)

This section revises leasing rules under the Certified Development Company (504) loan program (15 U.S.C. 696(a)) for projects to construct new facilities or acquire, renovate, or reconstruct existing buildings. (As background, the 504 program provides SBA-guaranteed loans through certified development companies to small businesses for fixed assets that promote growth and job creation, with prior rules generally limiting tenant leasing to prevent speculative real estate development.) For new facilities, it permits an assisted small business concern to permanently lease up to 20% of the project to commercial or residential tenants if the concern (1) permanently occupies and uses at least 60% of the project (50% if a small manufacturer, as defined in section 501(e)(7)); (2) plans to occupy and use an additional unleased portion within 3 years of assistance; and (3) plans to permanently occupy and use 80% within 10 years. For existing buildings, it permits permanent leasing of up to 50% of the project if the concern permanently occupies and uses at least 50%, or more than 50% if the concern has occupied the building for 12 consecutive months prior to applying, agrees to permanently use less than 50% and lease more than 50% for 12 consecutive months post-assistance, affirms the building suits its needs, and the development company provides closing notice to SBA plus annual examinations (first 5 years) or biennial thereafter with anti-investor certifications; residential leases are limited to 1 year and commercial leases to 5 years. (Thus, these rules expand allowable leasing while adding occupancy plans, prior use verification, and ongoing oversight to ensure small business use.) This section also directs the Small Business Administration to submit to Congress, not later than 5 years after enactment, a report analyzing the amendments' impact on small business capital access and recommending whether similar requirements should apply to the 7(a) loan program (15 U.S.C. 636(a)).