Bill Overview
Title: 504 Loan Availability Act
Description: This bill temporarily combines the funding authorization for loans and refinancing loans under the Small Business Administration 504 loan program. The 504 loan program provides financing for major fixed assets through community-based Certified Development Companies (CDCs).
Sponsors: Sen. Coons, Christopher A. [D-DE]
Target Audience
Population: Small business owners needing financing for major fixed assets
Estimated Size: 6500000
- The 504 loan program is designed to benefit small businesses by providing long-term financing for major fixed assets.
- The primary recipients of the 504 loans are small business owners who need to finance assets like real estate or equipment.
- Certified Development Companies (CDCs) facilitate these loans, so changes in loan availability may affect their operations.
- Small businesses often play a crucial role in local economies by providing jobs and services.
- Temporary changes in funding authorization may also influence the timing and ease of access to necessary capital for these businesses.
Reasoning
- The key beneficiaries of the policy are small business owners who require financing for major fixed assets like real estate and equipment.
- The availability of 504 loans through CDCs can determine a small business's ability to scale, expand, or sustain operations through capital investment.
- The policy budget constraints, notably the substantial allocation over ten years, suggests significant capacity for impacting a large number of businesses, but not enough to impact all potentially eligible businesses.
- The range of impact on small business owners will vary based on their current debt, access to capital, and immediate need for infrastructure investment.
- Not all small business owners will be affected equally, as those not planning to expand or invest soon might see little to no change.
- Consideration of the location of these businesses is essential, as areas with better CDC networks might see faster and broader availability of loans.
- Beyond business owners, impacts may ripple to employees and local economies if businesses expand operations and workforce.
- Other businesses might face negligible impact if they don't require major asset purchases.
- It's important to simulate a diverse range of business types, scales, and contexts (urban vs rural, tech vs manufacturing).
Simulated Interviews
Restaurant Owner (Los Angeles, CA)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- The restaurant industry is tough, and owning my own space versus leasing could greatly reduce overhead over time.
- Access to a 504 loan would allow me to expand and invest in renovation, leading to more stable long-term operations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 5 |
| Year 20 | 8 | 5 |
Tech Startup Co-founder (Austin, TX)
Age: 32 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 14/20
Statement of Opinion:
- We have been growing and need a permanent office space, but commercial real estate is pricey in Austin.
- 504 loans could be instrumental in securing a stable office without diverting funds from R&D.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 6 |
CDCs Loan Officer (Chicago, IL)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 7/20
Statement of Opinion:
- We expect a rise in loan applications, which is great because it means we can facilitate more business growth.
- However, there is concern about the workload increase and meeting the demand within budget constraints.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 9 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 7 | 6 |
| Year 20 | 5 | 5 |
Retail Store Owner (Boulder, CO)
Age: 30 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- An expanded space means we can diversify our inventory and improve customer experience.
- If the policy makes this financially feasible, it could mean big growth for our business.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 4 |
Photography Studio Owner (New York, NY)
Age: 55 | Gender: other
Wellbeing Before Policy: 4
Duration of Impact: 7.0 years
Commonness: 8/20
Statement of Opinion:
- Right now, equipment rental is a significant cost. Owning my gear would allow for better financial management.
- The policy could open doors, but the high upfront costs in New York may still be a barrier without tailored support.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 7 | 4 |
| Year 5 | 7 | 4 |
| Year 10 | 7 | 4 |
| Year 20 | 6 | 3 |
Construction Company Owner (Miami, FL)
Age: 38 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 8.0 years
Commonness: 13/20
Statement of Opinion:
- With the real estate market so hot, delaying long-term expansion could be costly.
- Government-backed loans are safer to navigate amid uncertain economic conditions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 5 |
| Year 20 | 7 | 4 |
Transportation Business Owner (Atlanta, GA)
Age: 41 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 11/20
Statement of Opinion:
- The policy would be helpful in refinancing some of our fleet needs, allowing us to keep more capital liquid.
- Fuel efficiency upgrades could also help in reducing our environmental impact.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 4 |
Freelance Graphic Designer (San Francisco, CA)
Age: 28 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 6.0 years
Commonness: 5/20
Statement of Opinion:
- Owning a studio would give me more control over my workspace, which is crucial as my client base grows.
- I'm concerned about rising real estate prices, but a 504 loan could offset some of that challenge.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Bookstore Owner (Seattle, WA)
Age: 60 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 9/20
Statement of Opinion:
- The transition to online sales is necessary to keep up with consumer trends, but warehouse costs are high.
- The 504 loans could help us expand online operations notably.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 5 |
Owner of Café and Bakery (Rural Alabama)
Age: 36 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 6/20
Statement of Opinion:
- Enhancing our bakery with better equipment would improve quality and reduce breakdowns.
- Access to government-backed loans could make this investment possible, supporting local job growth.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 5 |
| Year 10 | 9 | 5 |
| Year 20 | 8 | 4 |
Cost Estimates
Year 1: $150000000 (Low: $125000000, High: $180000000)
Year 2: $150000000 (Low: $125000000, High: $180000000)
Year 3: $150000000 (Low: $125000000, High: $180000000)
Year 5: $150000000 (Low: $125000000, High: $180000000)
Year 10: $150000000 (Low: $125000000, High: $180000000)
Year 100: $150000000 (Low: $125000000, High: $180000000)
Key Considerations
- The program might create a crowding-out effect where other non-targeted financing options are sidelined due to more attractive 504 loan terms.
- The overall impact heavily depends on economic conditions and the ability of small businesses to leverage these loans effectively.
- A major financial downturn could increase default rates, affecting the overall cost of the program.