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Certified Development Company How is a Certified How Does a Certified Development Company Development Company Organized? Provide Assistance to Small Business Concerns? A certified development company may operate on a local, Certified development companies will be authorized to regional or statewide basis. It may be organized as a pti- sell debentures pertaining to an identifiable small can- vote non-profit corporation or a for-profit stock corpora- cern with SBA's 100% guarantee. The proceeds from the rich. The following requirements must be met: sale of each debenture will be used for plant acquisition, construction, conversion or expansion for each identifi- The company must have a m~imum of 25 members, or able small business concern. stockholders, and a defined area of operation which may be statewide or smaller. The amount of each debenture guaranteed by SBA may not exceed one half the cost of each project. The remain- Membership in the company must include representation lng one half will have to be provided from non federal from at least two of the following groups: sources. -local government The certified development company can provide assist- -private lending institution ance to small business concerns under two basic plans: -community organization -business organization Re-lend Plan Under this plan the small business buys the property being financed, and the certified develop- The development company must have a professional staff ment company is a conduit through which SBA guaran- with the capacity to package, process, close and service its teed debentures and the non-federal financing flew to loans. Furthermore, the development company must be the small business concern. able to provide professional accounting and legal services to small business concerns. These functions may be pro- Under the re-lend plan, the business has title to the vided either by the development company's membership property, and under the first mortgage formula, the bank or on contractual basis, subject to SBA approval, by a is entitled to make a direct loan to the business in ex- qualified firm or qualified individuals who live or do change for a first mortgage. Proceeds from the SBA guar- business in the company's area of operation. If staff capa- anteed debenture are sent to the certified development bilities are provided on a contractual basis, persons company which re-lands to the small business in ex- providing these services must be available to the devel- change for a second mortgage, that is then assigned to the opment company when .~hei? services are required. SBA. The development company must contain a five-person Lease Plan Under this plan. the development company board of directors which meets at least bi-monthly and owns the property and leases it to the small business. The represents the groups stated above. No member of the arrangement can be a lease, lease-purchase or a lease development company's board may be a o~ficer or director with an option to purchase. The development company or owner of a small business concern receiving assistance, uses the proceeds from the sale of the debenture along with the funds borrowed from the non-federal sources to No member, shareholder or group of shareholders or purchase property, or it constrncts/renovatas the property members of the development company owning a direct for the identifiable small business. financial interest in the project may have an individual or combined voting control in the development company Example of more than 10% of the total outstanding stock or membership. Percentage Amount Source Security 50% S50,000 bank first mortgage It must have wording in its incorporation papers indicat- 40% 40,000 SBA second mortgage ing that its chief purpose is to "promote and assist the guaranteed growth and development of business concerns including Debenture small businesses," and "any monetary profit or other 10% 10,000 certified third mortgage benefits which flow to shareholders (members} shall be development incidental to the corporation and shareholders." company