CDC Small Business Finance isn’t a bank, but some of its best customers are. They are the more than 50 bank lenders who work with CDC to fund projects worth more than $445 million in the last SBA fiscal year. As chief executive of the CDC, Kurt Chilcott credits relationships with lenders as having propelled his nonprofit economic development engine to record levels in the third year of this no growth recovery.

Of the $152 million in loan guarantees the San Diego CDC helped secure in its three-county region, the San Diego office accounted for about half, Chilcott says. CDC typically comes in with a 40 percent share of the deal (the rest in bank loan and down payment) to a maximum contribution of $1.3 million. There is no minimum.

The average deal is a $1.2 million project, so CDC’s chunk is about $500,000.

Trouble In Risk-Spreading Paradise?

CDC participates through the SBA 504 program, which allows small business owners to purchase an industrial or commercial building at below-market interest rates with 10 percent down. Currently, the terms would be 20-year, fixed-rate, at 6.5 percent.

Coming off last year’s record-setting performance, CDC loan approvals are up 12 percent and dollar volume is up 30 percent for the first quarter. The local CDC accounts for about 7 percent of the national 504 loans, with about 2.5 percent of the population.

Although borrowers sometimes will go to CDC directly, more often it is one of the 56 banks listed on the CDC’s Web site, cdcloans.com, that initiates the conversation.

It is a risk spreading relationship for banks, Chilcott says. “Typically, banks are not going to provide 90 percent real estate financing and if they would, they wouldn’t do it at a fixed rate. Maybe just a 10-year term with a balloon.” CDC also mines its network of real estate brokers, CPAs, attorneys, economic development and small business development specialists. “So we very often do get referrals,” he says.

Chilcott has been at the helm of CDC for five years, and has served nine as a board member. He previously was the manager of community and economic development for the city of San Diego.

CDC stays in front of the SBA pack through what Chilcott calls a “critical mass of knowledge in the market.

“We’ve done a number of deals with a relatively new bank like Regents bank, and also Wells, BofA, Union, Cal Bank and Trust. Almost every bank doing small business, we’ve done business with.”

But there is trouble in 504 paradise. Chilcott says he buys into the current mantra that our diverse economy has withstood the national winds, but “when I see Brobeck trying to sublease 80,000 square feet of office space, I wonder how long it will last.”

He’s also upset by rumblings of change at the SBA. In December, the lending agency was taken to task by the General Accounting Office for not administering its loan portfolio to account for risk. One of the solutions under consideration is more centralized administration of SBA, but at the expense of the regional networks like CDC that know the territory.

But SBA is under Congressional pressure to shape up. “I’m concerned they’ll do something that is not good for small business, something political or not rational,” Chilcott says.