USDA » Guaranteed Business & Industry Loan Program
- Loan guarantees maximum $10 million, although RBS Administrator – with concurrence of the Under Secretary for Rural Development – may approve up to $25 million
- Loan guarantee limits:
- 80% for loans of $5 million or less
- 70% for loans over $5 million and up to $10 million
- 60% for loans exceeding $10 million and up to $25 million
- All collateral must secure entire loan. Personal and corporate guarantees required. Appraisal reports required on property serving as collateral
- Lender will discount collateral consistent with sound loan-to-value policy
- Maximum repayment terms:
- Working capital – 7 years
- Machinery & equipment – 15 years or useful life
- Real estate – 30 years
- Fees & costs:
- 2% one-time guarantee fee of guaranteed principal amount
- paid by lender and may be passed on to borrower
- 1% fee maybe allowed if loan is for high-impact business
- or is located in economically distressed community
- Other typical lender costs may be incurred
- Interest rate:
- May be fixed or variable
- Negotiated between lender and borrower
- Variable rates cannot be adjusted more than quarterly
- Minimum 10% tangible balance sheet equity required at time of issuance of Loan Note Guarantee. 20% tangible balance sheet equity required for new businesses. Feasibility studies may be required
- Lender will service and, if necessary, liquidate loan (with USDARural Development concurrence)
- Lender addresses business adequacy of equity, cash flow, collateral, history, management, and current status of applicable industry in written credit analysis
- Loans made by commercial or other authorized lenders in rural areas including all areas other than cities or towns of more than 50,000 population and contiguous and adjacent urbanized area of such cities or towns. Priority given to loan applications in rural communities of 25,000 population or less
Lender Benefits
- Increased earnings through participation in secondary market
- Provides additional tool to expand loan portfolio
- Allows making loans above legal lending limits
- Reduces collateral/appraisal concerns often found in smaller communities
Businesses Benefits
- Higher loan amounts, lower interest rates, and longer repayment terms
- Assists in providing stability, growth, expansion, and rural employment
Eligible Loan Purposes
- Business and industrial acquisition, construction, conversion, expansion, repair, modernization, or development costs
- Purchase of equipment, machinery, or supplies
- Start-up costs and working capital
- Processing and marketing facilities
- Pollution control and abatement
- Refinancing for viable projects under certain conditions
Eligible Borrowers
- Individuals
- Corporations
- Cooperatives
- Partnerships, and other legal entities, public and private, organized and operated on aprofit or non-profit basis
- Federally recognized Indian tribal groups
"Serving Pennsylvania's Business, Industry, and Agriculture, Today and Tomorrow"