Our Bank is a Large Bank for CRA purposes and it is my understanding that SBA504 loans exceeding $1MM are considered community development loans. The question is for reporting purposes do I report the combined (bank & SBA) transaction amount or just the bank's portion? We do initially fund 90% of the loan and then 40% is assigned to SBA upon the debenture sale. Example - total transaction is $1,800,000. Bank - 50% - $900,000; SBA - 40% -$720,000; Client - 10% - $180,000. Report $1,620,000 as Community Development or $900,000 as Small Business?

Technically you could potentially report any funds you advanced which would include the temporary financing of the CDC portion before the closing of the permanent financing. One of the complications is the fact that loans for $1 million or less for a business purpose must be reported as small business loans. In the case of a 504 loan, if you advance temporary financing in the form of a construction loan you could report all of the loan as community development and then when the permanent financing closes you could report your part as community development too.

In your example, if you advance $1,620,000 for the purchase and improvement of real property in the form of a construction loan you could report the entire amount as community development (because the loan would exceed $1 million and therefore not considered as a small business loan). Ironically, when you close the permanent financing you could not report your $900,000 portion because it would be considered as a small business loan. If you were being examined as an ISB however, you would have an elective to have each loan that is qualified as community development but disqualified from reporting because of the priority rule (that mandates you must report such loan as a small business loan) considered as community development for CRA examination purposes.

This is another example of the convoluted technicalities of the Regulation. Every time the Agencies issue Q&A's to "clarify" matters it gets even more convoluted.