59–010 

Calendar No. 107 

114TH CONGRESS REPORT " ! SENATE 2d Session 114–266 

THE COMMERCIAL REAL ESTATE AND ECONOMIC 

DEVELOPMENT ACT OF 2015 

MAY 26, 2016.—Ordered to be printed 

Mr. VITTER, from the Committee on Small Business and 

Entrepreneurship, submitted the following 

R E P O R T 

[To accompany S. 966] 

The Committee on Small Business and Entrepreneurship, to 

which was referred the bill (S. 966) to extend the low-interest refinancing provisions under the Local Development Business Loan 

Program of the Small Business Administration, having considered 

the same, reports favorably thereon with an amendment and recommends that the bill, as amended, do pass. 

I. INTRODUCTION 

The CREED Act (S. 966) was introduced by the Committee’s 

Ranking Member, Senator Jeanne Shaheen, for herself and Senator 

Johnny Isakson, on April 15, 2015. The bill’s other co-sponsors as 

include: Senators Ayotte, Cantwell, Casey, Coons, Fischer, Franken 

and Hirono. 

The bipartisan bill extends a provision allowing small business 

owners to refinance existing commercial debt using the Small Business Administration’s (SBA) 504 loan program for any fiscal year 

during which the 504 base program is operating at zero subsidy. 

By doing so, the program lowers small businesses’ monthly mortgage payments at no cost to taxpayers, thus putting more capital 

in the hands of America’s job creators. 

S. 966 as introduced would have extended the 504 Loan Refinance (504 Refi) program for five years. During markup of the bill, 

Chairman Vitter put forward a substitute amendment to the bill 

which made two changes. The first change eliminated the five-year 

sunset and made the refinance authority available permanently. 

The second change allows the program to operate only during fiscal 


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years in which the regular 504 loan program is operating at zero 

subsidy. The bill, as amended, was approved unanimously by voice 

vote. 

The provisions of this bill later became law as part of the Fiscal 

Year 2016 Consolidated Appropriations Act, H.R. 2029 (Public Law 

No. 114–113). 

II. HISTORY (PURPOSE & NEED FOR LEGISLATION) 

The purpose of the CREED Act is to permanently re-instate a 

version of the Small Business Administration’s 504 Refi, a two-year 

initiative that permitted refinancing of existing qualified commercial real estate debt through the SBA’s local economic development 

business loan guaranty program, also known as the 504 loan program. When the 504 Refi program was active, more than 2,300 

small firms refinanced more than $5 billion. 

The 504 Refi program expired on September 27, 2012, but small 

businesses continued to desire access to the capital invested in 

their businesses. On the last day of the trial period, more than 400 

businesses applied. While the economy is better today than when 

the program ended, and lending to small businesses is starting to 

recover, many banks today cannot or will not finance additional 

commercial real estate. Those that do often will not refinance small 

business equipment or commercial real estate with a long-term or 

low fixed-rate. 

The Committee believes that extending the availability of low-interest refinancing will lower small businesses’ monthly mortgage 

payments, putting more working capital in the hands of America’s 

job creators. 

The Small Business Administration’s 504 Refi program is a longterm financing tool for economic development that provides small 

businesses with long-term, fixed-rate loans to help them acquire 

fixed assets and real estate for expansion or modernization. The 

loans are intended to foster local economic development and to create or preserve jobs. A 504 loan project consists of three elements: 

a loan from a private sector lender covering 50 percent of the principal; a second mortgage from an SBA Certified Development Company backed by a 100 percent government guaranteed debenture, 

covering 40 percent of the principal; and an equity contribution 

from the small business owner to cover the remaining 10 percent. 

The ability to refinance owner-occupied commercial real estate 

debt through the 504 loan program was first created as part of the 

American Recovery and Reinvestment Act of 2009 (P.L. 111–5) on 

February 17, 2009. Congress added additional refinance authority 

in the Small Business Jobs Act of 2010 (P.L. 111–240), which was 

signed into law by President Barack Obama on September 27, 

2010. Section 1122 of the law allowed small businesses to use 504 

loans to refinance eligible fixed assets not involving expansions for 

two years after enactment, with program authorization capped at 

$7.5 billion each year. The refinance authority, paid for entirely by 

program fees, was a zero-cost way to help small businesses access 

their own equity that they had built up over the years in order to 

hire additional employees or retain those currently employed. 

It took some time for the SBA to create a regulation implementing the 504 refinance authority, and the initial regulation, finalized on February 17, 2011, was not fully consistent with legislaVerDate Sep 11 2014 00:26 Jun 01, 2016 Jkt 059010 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\SR266.XXX SR266

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tive intent. The SBA revised its regulations on October 12, 2011. 

The revised rule was more in line with legislative intent and allowed more businesses with a commercial mortgage to refinance. 

Participation in the 504 Refi program took off shortly thereafter, 

and as a result, the 504 refinance program supported $5.5 billion 

in total lending to small businesses. However, on September 27, 

2012 just as the program was accelerating and the lending community began to utilize it to its full capacity, the program expired. 

The Senate has considered an extension of the 504 Refi program 

many times since 2012, as free-standing bills and amendments. 

The following information describes the various efforts. 

During the 112th Congress, on April 25, 2012, Small Business 

Committee Ranking Member Olympia Snowe introduced, S. 2364, 

a bill to extend the 504 refi program for an additional year. Senator Snowe introduced S. 2364 on behalf of herself, Chair Mary 

Landrieu and Senator Jeanne Shaheen, along with Senators Isakson, Thune, Klobuchar, Tim Johnson, and Pryor. The bill was referred to the Committee but not acted upon further during the 

112th Congress. 

Senate Amendment 1833 (S. Amdt. 1833), an amendment in the 

nature of a substitute to the Jumpstart Our Business Startups 

(JOBS) Act of 2012 (H.R. 3606), contained a provision to extend the 

504 loan refinance program for an additional year past September 

27, 2012. S. Amdt. 1833, the Invigorate New Ventures and Entrepreneurs to Succeed Today (INVEST) in America Act of 2012, was 

introduced on March 15, 2012, by Senator Jack Reed along with 

Chair Landrieu and Senators Levin, Scott Brown, Merkley, Akaka, 

Whitehouse, Franken, Harkin, and Durbin. S. Amdt. 1833 was ultimately not included in the final version of H.R. 3606. 

Additionally, Senator Landrieu included a 504 refinance provision in Senate Amendment 2521 (S. Amdt. 2521), which she filed 

to S. 2237, the Small Business Jobs and Tax Relief Act of 2012 on 

July 11, 2012. Division B of S. Amdt. 2521, entitled the Success Ultimately Comes from Capital, Contracting, Education, Strategic 

Partnerships, and Smart Regulations (SUCCESS) Act of 2012, contained language to extend the 504 refinance program for an additional year and a half past its scheduled expiration. Although it 

came up short of the 60 votes needed to end debate, the amendment received a strong 57 bi-partisan vote, including five Republicans, when it received a vote on the Senate floor on July 12, 2012. 

Shortly thereafter, Chair Landrieu filed the SUCCESS Act as a 

standalone bill. On July 25, 2012, Chair Landrieu introduced S. 

3442, the SUCCESS Act of 2012, with eight co-sponsors including 

Committee members Senator Cardin and Senator Shaheen, as well 

as Senators Blumenthal, Boxer, Gillibrand, Lieberman, Merkley, 

and Whitehouse. 

Chair Landrieu also offered 504 refinance language as an amendment to S. 3457, the Veterans Jobs Corps Act of 2012. Senate 

Amendment 2837, offered by Chair Landrieu, Ranking Member 

Snowe, and Senator Shaheen on September 13, 2012, would have 

extended the 504 refinance program for an additional year and a 

half past its scheduled expiration. Ultimately, however, none of the 

bills or amendments made it to the President’s desk during the 

112th Congress. 


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During the 113th Congress, the Administration requested authority to reinstate the 504 Loan Guaranty Refinance program as 

part of its FY2015 Budget Request. 

On February 12, 2013, Chair Landrieu introduced S. 289, the 

Commercial Real Estate and Economic Development (CREED) Act 

of 2013, which was identical to S. 966 that is the subject of this 

report. Specifically, S. 289 sought to restore for five years the 504 

Refi program that was enacted by Section 1122 of the Small Business Jobs Act of 2010 and had expired on September 27, 2012. The 

bill was marked up on September 10, 2013, with a Risch-Landrieu 

amendment that would have allowed the program to operate only 

during fiscal years in which the SBA’s base 504 program operated 

at zero subsidy. The bill, as amended, was approved unanimously 

by voice vote. 

Also during the 113th Congress, language to extend the 504 Refi 

program was voted on favorably two times during the appropriations process. On July 25, 2013, the Senate Appropriations Subcommittee on Financial Services and General Government reported 

S. 1371, its Fiscal Year 2014 appropriations bill, with a provision 

to reinstate the 504 Refi program under the Business Loans Program Account. On July 24, 2014, the Senate Appropriations Subcommittee on Financial Services and General Government reported 

its Fiscal Year 2015 appropriations bill with a provision to reinstate the 504 Refi program under the Business Loans Program Account. No bill number exists. The bill as reported is only available 

on the Appropriations website. 

During the 114th Congress, the Administration requested authority to reinstate the 504 Loan Guaranty Refinance program as 

part of its FY2016 Budget Request. The budget justification reflects 

that the cost of this program has a zero subsidy, and that is because it is covered entirely through fees paid by the borrowers and 

lenders. Further, the budget tables, on Page 1197 of the Budget for 

Fiscal Year 2016, provided information that the loans from the 

Commercial Real Estate Refinance Program are performing better 

than budget analysts estimated. The budget projects a negative reestimate for the 504 Loan Guaranty Refinance program of $101 

million in FY15. 

The CREED Act of 2015 received letters of support from the National Association of Development Companies; Small Business Majority; U.S. Chamber of Commerce; National Small Business Association; Smaller Business Association of New England; Women Impacting Public Policy; Association of Women Business Centers; 

Consumer Bankers Association; American Bankers Association; 

Independent Community Bankers of America; National Association 

of Development Companies; Granite State Development Corporation in New Hampshire; Northeast Economic Development Company in Pennsylvania; The Pennsylvania Community Development 

and Finance Corporation; DelVal Business Finance Corp in Pennsylvania; SEDA–COG Local Development Corporation in Pennsylvania; Regional Development Funding Corporation in Pennsylvania; Bridgeway Capital CDC in Pennsylvania; EDC Finance Corporation CDC in Pennsylvania; California Association for Micro Enterprise Opportunity; Tulsa Economic Development Corporation in 

Oklahoma; Small Business Capital Corporation in Oklahoma; REI 

Oklahoma; CSRA Business Lending in Georgia; Small Business AcVerDate Sep 11 2014 00:26 Jun 01, 2016 Jkt 059010 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\SR266.XXX SR266

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cess Partners in Georgia; Capital Partners in Georgia; Georgia 

Small Business Capital; Small Business Assistance Corporation in 

Georgia; Southern Georgia Area Development Corporation; Georgia 

Small Business Lender; Coastal Area District Development Authority in Georgia; Georgia Certified Development Corporation; and 

North Georgia Certified Development Corporation. 

Previous efforts to reinstate the 504 Refi program were supported by a number of groups, including the: U.S. Chamber of Commerce, International Franchise Association, Consumer Bankers Association, Independent Community Bankers of America, National 

Small Business Association, Association for Corporate Growth and 

the National Association of Women Business Owners. 

The CREED Act provisions were enacted as part of the Fiscal 

Year 2016 Consolidated Appropriations Act, H.R. 2029 (Public Law 

No. 114–113). 

III. HEARINGS & ROUNDTABLES 

In preparing to draft and introduce the CREED Act, the Committee held a number of hearings and roundtables analyzing the 

SBA’s 504 Refi program and heard from small businesses, lenders, 

and government officials on the effectiveness of the program and 

the need for extension. 

In the 112th Congress: 

On November 29, 2012, the Committee held a hearing entitled, 

‘‘Creating Jobs and Growing the Economy: Legislative Proposals to 

Strengthen the Entrepreneurial Ecosystem.’’ The purpose of the 

hearing was to discuss the legislative proposals included in the 

‘‘Success Ultimately Comes from Capital, Contracting, Education, 

Strategic Partnerships, and Smart Regulation (SUCCESS) Act of 

2012’’ (S. 3442), which was the result of recommendations gathered 

during a series of three Committee roundtables examining the entrepreneurial ecosystem during the 112th Congress. Among the 

provisions in the SUCCESS Act that the Committee examined during the hearing was the extension of the 504 loan refinancing program. The Committee heard testimony from a variety of small businesses, stakeholders, and Administration officials including the 

SBA’s Associate Administrator for Investment & Special Advisor of 

Innovation and the Executive Vice President of a regional Certified 

Development Company (CDC). Witnesses testified on the effectiveness of the 504 loan refinancing program and the need for its extension, given the continued tight market for conventional real estate mortgages. 

In the 113th Congress: 

On March 14, 2013, the Committee held a roundtable entitled 

‘‘Helping Small Businesses Weather Economic Challenges & Natural Disasters: Review of Legislative Proposals on Access to Capital 

and Disaster Recovery.’’ The purpose of the roundtable was to discuss four legislative proposals on small business access to capital 

and disaster recover on which the Committee would focus during 

the beginning of the 113th Congress, including the CREED Act. 

Participants included a wide range of small business owners, investors, and stakeholders, and SBA representatives, including the Associate Administrator for the SBA’s Office of Capital Access, which 

oversees the 504 loan program. The roundtable followed up on previous Committee roundtables and legislative hearings held during 


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the 112th Congress and provided an opportunity for Committee 

members to highlight their relevant priorities ahead of an upcoming markup on access to capital and disaster recovery legislation. 

On April 17, 2013, the Committee held a hearing entitled ‘‘The 

FY2014 Budget Request for the Small Business Administration.’’ 

The purpose of the hearing was to review the President’s Fiscal 

Year 2014 Budget Request for the SBA. Testifying on behalf of the 

Administration were SBA Administrator Karen Mills, SBA Inspector General Peggy Gustafson, and Dr. Winslow Sargeant, Chief 

Counsel of the SBA’s Office of Advocacy. In its budget request, the 

SBA requested the ability to extend the 504 loan refinance program, to which there is zero subsidy cost attached. 

IV. DESCRIPTION OF BILL 

S. 966, the Commercial Real Estate and Economic Development 

Act of 2015, extends the availability of a low-interest commercial 

real estate refinance program through the Small Business Administration’s 504/CDC loan guaranty program. The bill restores the program enacted by Section 1122 of the Small Business Jobs Act of 

2010, which expired on September 27, 2012. As amended by the 

Vitter substitute amendment, the bill allows small businesses to refinance eligible existing commercial debt only during fiscal years in 

which the SBA’s base 504 program operates at zero subsidy. 

V. COMMITTEE VOTE 

In compliance with rule XXVI (7)(b) of the Standing Rules of the 

Senate, the following vote was recorded on April 23, 2015. 

A motion to report the Commercial Real Estate and Economic 

Development Act of 2015, to extend the availability of low-interest 

refinancing provisions under the Local Development Business Loan 

Program of the Small Business Administration, as amended, was 

agreed to by voice vote as part of a manager’s package that included seven additional bills. The following Senators were present: 

Vitter, Risch, Fischer, Gardner, Ernst, Ayotte, Enzi, Shaheen, 

Cantwell, Cardin, Heitkamp, Booker, Coons, Hirono, and Peters. 

Senator Paul requested that he be recorded in opposition to the 

bill. 

VI. COST ESTIMATE 

In compliance with rule XXVI (11)(a)(1) of the Standing Rules of 

the Senate, the Committee estimates the cost of the legislation will 

be equal to the amounts discussed in the following letter from the 

Congressional Budget Office: 

JUNE 3, 2015. 

Hon. DAVID VITTER, 

Chairman, Committee on Small Business and Entrepreneurship, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 966, the Commercial Real 

Estate and Economic Development Act of 2015. 


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If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susan Willie. 

Sincerely, 

KEITH HALL. 

Enclosure. 

S. 966—Commercial Real Estate and Economic Development Act of 

2015 

In 2010, the Small Business Jobs Act (Public Law 111–240) authorized the Small Business Administration (SBA), through the 

Certified Development Company (CDC) Loan Program, to temporarily guarantee loans issued to refinance existing debt without requiring an expansion of the business by the borrower. (The CDC 

loan program is designed to provide small businesses with longterm loans at fixed rates to purchase major assets, such as commercial real estate.) That temporary authority ended in 2012. S. 

966 would authorize the program to operate during any fiscal year 

that the CDC loan program operates at no cost to the federal government. If the zero-cost condition is not met, then the refinance 

option would not be authorized that year. 

In 2015, SBA received an appropriation of $45 million for the 

CDC program, allowing the agency to guarantee $7.5 billion in debt 

at an estimated subsidy rate of 0.6 percent; over the 2010–2014 period, the subsidy rate for the CDC loan guarantee program ranged 

from zero to 2.02 percent. (The subsidy cost is the estimated longterm cost to the government of a loan guarantee, calculated on a 

net-present-value basis.) 

Because those subsidy rates can fluctuate CBO cannot predict 

the years in which the refinance program would be authorized to 

operate. However, CBO estimates that implementing S. 966 would 

not affect discretionary spending, because in the years the agency 

would be authorized to operate the program, it also would be authorized to collect fees sufficient to offset the subsidy cost. Enacting 

S. 966 would not affect direct spending or revenues; therefore, payas-you-go procedures do not apply. 

S. 966 contains no intergovernmental or private-sector mandates 

as defined in the Unfunded Mandates Reform Act and would not 

affect the budgets of state, local, or tribal governments. 

The CBO staff contact for this estimate is Susan Willie. The estimate was approved by H. Samuel Papenfuss, Deputy Assistant Director for Budget Analysis. 

VII. EVALUATION OF REGULATORY IMPACT 

In compliance with rule XXVI(11)(b) of the Standing Rules of the 

Senate, it is the opinion of the Committee that no significant additional regulatory impact will be incurred in carrying out the provisions of this legislation. There will be no additional impact on the 

personal privacy of companies or individuals who utilize the services provided. 


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VIII. SECTION-BY-SECTION ANALYSIS 

Section 1. Title 

This section provides the title of the bill. This Act may be cited 

as the ‘‘Commercial Real Estate and Economic Development Act of 

2015’’ or the ‘‘CREED Act of 2015.’’ 

Section 2. Low-interest refinancing under the local development 

business loan program 

This section restores the low-interest commercial real estate refinance program through the SBA’s 504/CDC loan program during 

any fiscal year in which the base 504 program operates at zero subsidy. The program was originally established by the Small Business 

Jobs Act of 2010 and expired on September 27, 2012. 

Æ 


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