504 Modernization and Small Manufacturer Enhancement Act of 2026
- Sponsor
- Rep. Velázquez, Nydia M. [D-NY-7]
- Committees
- Small Business Committee (primary)
- Last action
- Oct 9, 2026
Bottom line
The bill aims to enhance access to affordable capital for small businesses, particularly manufacturers and those in specific economic development categories, by expanding eligibility and streamlining administrative processes within the SBA's 504 loan program.
What it actually does
This bill significantly amends the Small Business Investment Act of 1958, primarily focusing on the 504 loan guaranty program. It expands the program's policy goals to include workforce development, disaster area revitalization, and support for micro-businesses. The bill also streamlines loan closing procedures, provides greater flexibility for small businesses, especially manufacturers, in leasing portions of properties financed by 504 loans, and exempts 504 loans from the 'credit elsewhere' test.
Proponents argue
Supporters argue that the bill will make the 504 loan program more accessible and efficient, directly supporting job creation, economic growth, and recovery efforts in disaster-stricken areas. They contend that easing administrative burdens and providing greater flexibility, especially for small manufacturers, will enable more small businesses to invest in their future and contribute to local economies.
Opponents contend
No explicit opposition to this specific bill is currently documented. However, potential critics might raise concerns that expanding eligibility and streamlining processes, particularly by removing the 'credit elsewhere' test, could increase the federal government's risk exposure or potentially lead to the program subsidizing businesses that could otherwise obtain conventional financing.
The bill is relatively short and its provisions are clearly laid out, making it accessible for an informed reader to understand its core changes within a reasonable timeframe.
Section 2, amending Section 501(d)(3) of the Small Business Investment Act of 1958
Expansion of 504 Loan Program Eligibility Criteria
This provision expands the policy goals for projects eligible for the 504 loan program. New criteria include supporting workforce development through documented training programs, aiding the revitalization of areas declared disasters within a five-year period (with possible extensions), and facilitating the expansion of small business concerns with 10 or fewer employees. This broadens the types of projects that can qualify for federal loan guarantees.
Supporters argue
Supporters argue that expanding the 504 program's policy goals to include workforce development, disaster recovery, and support for micro-businesses addresses critical economic needs and ensures the program remains relevant to current challenges faced by small businesses.
Critics contend
No specific opposition is typically raised against expanding eligibility for targeted groups, though some might argue for broader program reforms or question the effectiveness of these specific additions.
Tradeoffs
The provision balances the desire to provide targeted support for specific economic development objectives with the need to maintain the overall focus and financial integrity of the 504 loan program.
Section 3, amending Section 502 and adding Section 511 to Title V of the Small Business Investment Act of 1958
Streamlined 504 Loan Closing and Oversight
This provision streamlines the 504 loan closing process by granting 'accredited lender certified companies' the authority to make minor adjustments to loan details, such as reallocating project costs, correcting typographical errors, and modifying borrower/guarantor roles. It also shifts the responsibility for file reviews from SBA District Counsels to the Office of Credit Risk Management and allows approved 'designated attorneys' of 'Priority certified development companies' to certify closing documents, provided they meet specific licensing, insurance, and training requirements.
Section 5, amending Section 502 of the Small Business Investment Act of 1958
Revised Leasing Rules for 504-Financed Properties
This provision modifies the rules governing how much of a property financed by a 504 loan a small business can lease to other tenants. For new facilities, a business can permanently lease up to 20% if it occupies 60% initially and 80% within 10 years; for small manufacturers, the initial occupancy requirement is reduced to 50%. For existing buildings, permanent leasing up to 50% is allowed if the business occupies 50%. An exception permits leasing up to 66% for existing buildings under strict conditions, including prior occupancy, an agreement to lease more than 50% after assistance, and ongoing 'anti-investor certifications' from the development company. Residential leases are capped at 1 year, commercial at 5 years.
Section 6, amending Section 7(a)(1)(A) of the Small Business Act
Exemption from 'Credit Elsewhere' Test for 504 Loans
This provision exempts loans made under the 504 program (and other financings under the Small Business Investment Act of 1958) from the 'credit elsewhere' test. This test typically requires small businesses to demonstrate that they cannot obtain financing on reasonable terms from other sources before qualifying for federal loan programs. By removing this requirement, the bill simplifies the application process for 504 loans.
The bill provides specific, more flexible leasing rules for 'small manufacturers' under the 504 program, allowing them to occupy a smaller percentage of a new facility (50% instead of 60%). However, the definition of 'small manufacturer' itself is not provided within the bill text, requiring a reference to an existing section of the Small Business Investment Act of 1958.
Section 5(a)(4)(B) references 'small manufacturer (as defined in section 501(e)(6))'
Why it matters:This is standard legislative practice to avoid redundancy by referencing existing definitions in law rather than re-stating them within new legislation. It is not necessarily intended to be evasive but can make comprehensive understanding more challenging for a reader without legal research tools.
Case for: Supporters argue that referencing existing definitions maintains consistency across federal law and avoids unnecessary bulk in new legislation, assuming readers or practitioners can easily access the referenced statute.
Case against: Critics might contend that relying on external definitions can make the bill less self-contained and harder for a layperson or even a small business owner to fully understand the scope of eligibility without additional legal research.
Estimated impact: The impact is significant for a specific subset of small businesses, as the definition determines which manufacturers can benefit from the more flexible leasing rules. The precise number of affected businesses depends on the existing definition.
For existing buildings where an assisted small business concern leases more than 50% but not more than 66% of the project, the development company assisting the project is required to conduct annual examinations for the first 5 years of the loan, and once every two years thereafter, to ensure the concern is not a real estate development business. The development company must also file an 'anti-investor certification' with the Administrator.
Section 5(a)(5)(B)(ii)
Why it matters:This is a necessary safeguard to prevent potential misuse of the expanded leasing flexibility, ensuring the 504 program remains focused on supporting active small businesses rather than passive real estate investment. Its detailed nature makes it fine print, but it serves a critical programmatic integrity function.
Case for: Proponents argue that these ongoing oversight requirements are crucial to prevent abuse of the 66% leasing exception, maintaining the program's integrity and ensuring federal funds support genuine small business growth rather than real estate speculation.
Case against: Critics might contend that these detailed and recurring examination and certification requirements impose an additional administrative burden on CDCs, potentially increasing their operational costs or discouraging them from utilizing this specific leasing flexibility.
Estimated impact: This provision has a modest administrative impact on Certified Development Companies, requiring dedicated resources for compliance and reporting. However, its impact on program integrity for the specific leasing exception is significant, preventing potential misuse of federal guarantees.