[House Report 119-404]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 119-404
======================================================================
504 PROGRAM RISK OVERSIGHT ACT
_______
December 12, 2025.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Williams of Texas, from the Committee on Small Business, submitted
the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 5788]
The Committee on Small Business, to whom was referred the
bill (H.R. 5788) to amend title V of the Small Business
Investment Act of 1958 to require an annual portfolio risk
analysis of loans guaranteed under such title, and for other
purposes, having considered the same, reports favorably thereon
without amendment and recommends that the bill do pass.
CONTENTS
Page
I. Purpose and Bill Summary........................................ 2
II. Need for Legislation............................................ 2
III. Hearings........................................................ 2
IV. Committee Consideration......................................... 2
V. Committee Votes................................................. 2
VI. Section-by-Section of H.R. 5788................................. 4
VII. Congressional Budget Office Cost Estimate....................... 4
VIII. New Budget Authority, Entitlement Authority, and Tax Expenditure 4
IX. Oversight Findings & Recommendations............................ 4
X. Performance Goals and Objectives................................ 5
XI. Statement of Duplication of Federal Programs.................... 5
XII. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits........................................................ 5
XIII. Federal Mandates Statement...................................... 5
XIV. Federal Advisory Committee Statement............................ 5
XV. Applicability to Legislative Branch............................. 5
XVI. Statement of Constitutional Authority........................... 5
XVII. Changes in Existing Law Made by the Bill, as Reported........... 5
XVIII.Minority Views.................................................. 8
I. Purpose and Bill Summary
On October 17, 2025, Representative Tran, along with
Representative Patronis, introduced H.R. 5788, the 504 Program
Risk Oversight Act. H.R. 5788 requires the U.S. Small Business
Administration (SBA) to conduct annual risk assessments of the
504 loan portfolio and provide comprehensive reports to
Congress.
II. Need for Legislation
The SBA's Office of Capital Access (OCA) administers SBA's
guaranteed lending programs, including the 7(a) loan, the 504
loan, and the Microloan programs.
The 504 loan program provides long-term, fixed-rate
financing of up to $5.5 million for the acquisition of fixed
assets such as land, buildings, and heavy machinery.\1\ The
SBA's 504 loans are available through Certified Development
Companies (CDCs), community-based nonprofit partners who
promote economic development within their communities.\2\ This
bill would require the SBA to conduct annual risk assessments
of the 504 loan portfolio and provide comprehensive reports to
Congress. These reports would be made available to the public
within seven days of submission to Congress.
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\1\504 Loans, U.S. Small Bus. Admin., https://www.sba.gov/funding-
programs/loans/504-loans (last visited Nov. 14, 2025).
\2\Id.
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While the SBA already provides Congress with a program risk
analysis of the 7(a) lending program, extending this
requirement to the 504 program would enhance transparency and
offer valuable insight into the health and risks of the
program. Greater visibility into the program helps mitigate
risks, support informed policymaking, and strengthen the long-
term sustainability of the program.
III. Hearings
On September 16, 2025, the Committee on Small Business held
a hearing examining matters related to H.R. 5788 entitled
``Pathway to Capital: The Role of SBA Lending in Supporting
Main Street America.''
IV. Committee Consideration
The Committee on Small Business met in open session, with a
quorum being present, on November 18, 2025, and ordered H.R.
5788, to be reported favorably to the House of Representatives
by a roll call vote of 27 ayes to 0 nos.
V. Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the recorded
votes on the motion to report legislation and amendments
thereto. The Committee voted to favorably report H.R. 5788 to
the House of Representatives at 11:42 AM.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
VI. Section-by-Section of H.R. 5788
Section 1--Short title
This bill may be cited as the ``504 Program Risk Oversight
Act.''
Section 2--Portfolio risk analysis of loan guaranteed under the 504
program
This section requires the SBA Administrator to submit an
annual report to Congress providing a risk analysis of the
SBA's 504 loan program. The report must be made publicly
available no later than 7 days after it is submitted to
Congress.
The report must include: an overall program risk analysis;
risk analysis by industry concentration; risk analysis of CDCs
responsible for greater than one percent of the total 504
loans; risk analysis of loans for limited or special purpose
properties; steps taken by the SBA to mitigate identified
risks; statistics on the number of development companies and
loan amounts; purchase and charge-off statistics; and a
description of the number and type of enforcement actions taken
against a CDC by the SBA, including civil penalties, if any.
VII. Congressional Budget Office Cost Estimate
Pursuant to 3(c)(3) of rule XIII of the Rules of the House
of Representatives, the Committee adopts as its own the cost
estimate prepared by the Director of the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act
of 1974. At the time this report was filed, the Committee has
requested but not received a cost estimate from the Director of
the Congressional Budget Office.
VIII. New Budget Authority, Entitlement Authority,
and Tax Expenditures
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives and section 308(a)(I) of the
Congressional Budget Act of 1974, the Committee provides the
following opinion and estimate with respect to new budget
authority, entitlement authority, and tax expenditures. While
the Committee has not received an estimate of new budget
authority contained in the cost estimate prepared by the
Director of the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974, the Committee does
not believe that there will be any new or increased costs
attributable to this legislation.
IX. Oversight Findings & Recommendations
In accordance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the oversight findings and recommendations of the Committee on
Small Business with respect to the subject matter contained in
H.R. 5788 are incorporated into the descriptive portions of
this report.
X. Performance Goals and Objectives
With respect to the requirements of clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives, the goal of
H.R. 5788 is to improve transparency of the 504 loan program.
XI. Statement of Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, no provision of H.R. 5788 is known to
be duplicative of another Federal program, including any
program that was included in a report to Congress pursuant to
section 21 of Public Law 111-139 or the most recent Catalog of
Federal Domestic Assistance.
XII. Congressional Earmarks, Limited Tax Benefits,
and Limited Tariff Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee finds that the bill
does not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits as defined in clause 9(e),
9(f), or 9(g) of rule XXI of the Rules of the House of
Representatives.
XIII. Federal Mandates Statement
The Committee will adopt as its own the estimate of the
Federal mandates prepared by the Director of the Congressional
Budget Office pursuant to section 423 of the Unfunded Mandates
Reform Act.
XIV. Federal Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
XV. Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
XVI. Statement of Constitutional Authority
Pursuant to clause 7 of Rule XII of the Rules of the House,
the Committee finds that the authority for this legislation in
Art. I, Sec. 8, cl.1 of the Constitution of the United States.
XVII. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italics and existing law in which no change is
proposed is shown in roman):
SMALL BUSINESS INVESTMENT ACT OF 1958
* * * * * * *
TITLE V--LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES
* * * * * * *
SEC. 511. PORTFOLIO RISK ANALYSIS.
(a) In General.--The Administrator shall annually conduct a
risk analysis of the portfolio of the Administration with
respect to all loans guaranteed under this title.
(b) Report to Congress.--Not later than December 1, 2025, and
annually thereafter, the Administrator shall submit to Congress
a report containing the results of each portfolio risk analysis
conducted under subsection (a) during the fiscal year preceding
the submission of the report, which shall include--
(1) an analysis of the overall program risk of loans
guaranteed under this title;
(2) an analysis of the program risk, set forth
separately by industry concentration;
(3) without identifying individual development
companies by name, a consolidated analysis of the risk
created by development companies making loans under
this title that are responsible for not less than 1
percent of gross loan approvals under this title, set
forth separately by--
(A) the dollar value of the loans made by
such development companies;
(B) the number of loans made by such
development companies; and
(C) an analysis of the program risk for such
loans with a dollar value--
(i) less than or equal to $500,000;
(ii) greater than $500,000 and less
than or equal to $1,000,000;
(iii) greater than $1,000,000 and
less than or equal to $2,000,000; and
(iv) greater than $2,000,000 and less
than or equal to $5,500,000;
(4) an analysis of the program risk for loan
guarantees made under this title for loans that were
originated--
(A) less than one year before the date of
submission of the report;
(B) at least one year, but not more than two
years before such date; and
(C) more than two years before such date;
(5) an analysis of the program risk for loan
guarantees made under this title for loans that were
originated--
(A) to a borrower that uses such loan to open
a business;
(B) to a borrower not described in
subparagraph (A) that is a business concern
that has been in operation for less than or
equal to two years before the date of
origination; and
(C) to a borrower that is a business concern
that has been in operation for more than two
years on the date of origination;
(6) an analysis of the program risk for loan
guarantees made under this title for loans that were
originated for limited or special purpose properties;
(7) steps taken by the Administrator to mitigate the
risks identified in paragraphs (1), (2), (3), (4), (5),
and (6);
(8) the number of development companies, the number
of loans made, and the gross dollar amount of the loans
made under this title;
(9) the number and total dollar amount of purchases
by the Administrator of the principal and interest of
loans guaranteed under this title that are in default,
the total dollar amount of collections recovered on
such purchases, and the number and total dollar amount
of charge-offs for such purchases;
(10) the number and type of enforcement actions with
respect to a loan made by a development company under
this title recommended by the Administrator; and
(11) the number and dollar amount of any civil
monetary penalty assessed pursuant to an enforcement
action described in paragraph (10).
(c) Availability of Report.--The Administrator shall make
available to the public on a website of the Administration the
report required under subsection (b) not later than 7 days
after the Administrator submits such report to Congress.
(d) Limited or Special Purpose Property Defined.--In this
section, the term ``limited or special purpose property'' has
the meaning given by the Administrator in the guidance titled
``Lender and Development Company Loan Programs'' (SOP 50 10 8;
as in effect on June 1, 2025).
* * * * * * *
XVIII. MINORITY VIEWS
The Small Business Administration (SBA) administers
multiple loan guarantee programs that provide affordable
financing to America's small businesses, including the flagship
7(a) program and the 504/Certified Development Company (CDC)
program. The 7(a) program provides loans to small businesses
that cannot obtain financing on reasonable terms and conditions
in the conventional markets; 7(a) loans can be used for working
capital, refinancing, business debt, or purchasing equipment
and supplies. In Fiscal Year 2024 (FY2024), the 7(a) program
supported $31.1 billion in lending across 70,242 individual
loans.\1\ The 504/CDC program is administered through nonprofit
CDCs and provides long-term fixed rate financing for major
fixed assets. In FY2024, the 504/CDC program supported $6.6
billion in lending across approximately 6,000 loans.\2\ Both
the 7(a) and 504/CDC programs are intended to be zero-subsidy,
meaning that the cost of administering the programs should be
covered by the fees that the SBA receives for processing
guarantees.
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\1\U.S. Small Business Administration. 7(a) & 504 Lender Report,
Fiscal Year 2025. (Last Accessed: September 2, 2025).
\2\Id.
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Federal law requires SBA's Office of Credit Risk Management
(OCRM) to conduct an annual portfolio risk analysis of the 7(a)
program and provide Congress with a detailed report containing
the results.\3\ The report provides detailed information on the
7(a) program's overall risk, the program's risk set forth by
industry concentration, the risk created by individual lenders
responsible for not less than 1 percent of the gross loan
approvals, the steps taken by OCRM to mitigate risk, statistics
on the loans made, the number and dollar amount of losses, the
enforcement actions recommended by OCRM, the enforcement
actions approved by the Lender Oversight Committee, and the
number and amount of civil penalties assessed.\4\ The most
recent 7(a) Risk Analysis Report, provided by the SBA under the
Biden-Harris Administration in December 2024, has given the
Committee valuable insights into the operation and function of
the 7(a) program and the risk posed by rising defaults,
particularly in the manufacturing sector.\5\
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\3\15 U.S.C. Sec. 657t(h).
\4\Id.
\5\U.S. Small Bus. Admin., FY 2024 7(a) Program Risk Analysis.
(Dec. 1, 2024).
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Unfortunately, a similar statutory requirement does not
exist for the 504/CDC program. While a rising level of loan
defaults in the 504/CDC program does not currently seem to be a
concern, and publicly available information does seem to
demonstrate responsible operation of the program,\6\ without
requiring the SBA to conduct an annual portfolio risk analysis
and providing the results of that analysis in a detailed
report, Congress lacks important information about the
operation of the 504/CDC program.
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\6\U.S. Small Bus. Admin. Small Business Administration Loan
Program Performance. (Last Updated: September 15, 2025). (Last
Accessed: September 18, 2025).
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The 504 Program Risk Oversight Act would provide Congress
with the information it needs in order to fulfill its oversight
responsibility by creating a federal statutory requirement for
the SBA to conduct an annual risk analysis of the 504/CDC
program and provide the results of that analysis to Congress,
similar to that required of the 7(a) program. In addition, this
bill would require that the 504/CDC risk analysis and report
assess loans originated under the program for limited or
special use properties, as defined by the SBA in guidance
titled ``Lender and Development Company Loan Programs''.\7\ The
National Association of Development Companies (NADCO) supports
the bill.
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\7\U.S. Small Business Administration SOP 50.10.8: Lender and
Development Company Loan Programs. (June 1, 2025), (Pg. 140).
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Nydia M. Velazquez,
Ranking Member.
[all]