SBA Hot Topic Tuesday: House Bill Would Expand 504 Occupancy and CDC Closing Authority

September 22, 2026

Bob Coleman
Founder & Publisher

SBA Hot Topic Tuesday: House Bill Would Expand 504 Occupancy and CDC Closing Authority

Small Manufacturers Could Occupy Only 50% of New Construction; Existing-Building Borrowers Could Lease Up to 66%

A bipartisan House bill would lower the initial SBA 504 occupancy requirement for small manufacturers, allow qualifying borrowers to lease as much as 66% of an existing building and give accredited CDCs more authority to make changes at closing.

The House Small Business Committee approved H.R. 10375, the 504 Modernization and Small Manufacturer Enhancement Act of 2026, on a 23-0 bipartisan vote September 16. 

For small manufacturers constructing a new facility, the bill would reduce the initial occupancy requirement from 60% to 50%. The manufacturer would still have to plan to occupy additional space within three years and permanently occupy 80% within 10 years.

For existing buildings, the bill would create another major exception. The normal requirement would remain at least 50% borrower occupancy. But a business that has occupied and used the building for at least 12 consecutive months before applying could lease more than 50% — up to 66% — if it meets the bill’s conditions. The CDC would notify SBA at closing and conduct continuing reviews to confirm the borrower is not operating as a real estate development business.

The provision could bring more partially leased, owner-occupied properties into the 504 program.

The bill would also give accredited CDCs more authority to resolve changes at closing without sending the file back through SBA. An accredited CDC could reallocate up to 10% of total project costs, correct specified names and property addresses, add an eligible passive company and operating company, change a guarantor to a co-borrower, add certain guarantors and reduce project costs or debt before closing.

H.R. 10375 also would create an expedited closing process for qualifying Priority CDCs using SBA-approved designated attorneys, with SBA’s Office of Credit Risk Management handling file reviews for those loans.

 The legislation would also make it law that the Credit Elsewhere requirement does not apply to 504 loans.

A second 504 bill, H.R. 10352, also cleared the Committee 23-0. Beginning in FY2027, it would allow SBA to increase 504 commitments to as much as 115% of the congressionally authorized program level when SBA determines commitments could exceed the annual limit.

Both bills now await further action in the House.