USDA Loan Programs


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

Guaranteed Community Facility Loan Program

Lender Benefits

  • May be used towards Community Reinvestment Act requirements
  • Guarantee rate usually 80% of loan amount; 90% under special circumstances
  • Lender may charge different rates on guaranteed and non-guaranteed portions of loan
  • Lender’s risk of loss reduced by percent of loan guarantee
  • Loan stimulates related banking services such as checking and savings accounts
  • Guaranteed portion of loan secured by full faith and credit of U.S. Government
  • Guaranteed loans may be sold on secondary market – lender retains interest rate margin for servicing; increases yield on loan amount retained
  • Guaranteed portion of loan does not count against legal lending limits
  • Provides portfolio protection from:
  • Temporary financial problems such as natural disasters, adverse economic trends, reduced use of facilities, etc.
  • Major reorganizations due to enlargements, bankruptcy, death of principals operating and managing facility, etc.
    • Decline in collateral value due to adverse economic trends
    • Accelerated depreciation and inherent risk associated with highly specialized facilities
    • Excellent public relations in local communities by demonstrating interest in funding projects

Customer Benefits

  • Ability to obtain more timely financing, thereby reducing inflationary increases in construction costs
  • Establishes loan history with commercial lender – not the Government
  • Better terms offered by lender, especially when loan is sold on secondary market
  • May combine guarantee funds with other Federal, State and local funds

Community Benefits

  • Adequate local services attract residential and commercial development, increasing tax base
  • Decreased insurance rates with better fire protection
  • Improved quality of life

Loan Processing Assistance

  • Lender uses their own documents to make and service loans
  • Agencystaff available to assist lenders to prepare required documents for guaranteed loan processing
  • Agencytechnical staff available to review construction plan and environmental impact statements for benefit of the Government

Typical Projects Financed

  • Health Care Facilities – hospitals, clinics, nursing homes, etc.
  • Public Safety – police & fire stations, jails, fire & rescue vehicles, communication centers, etc.
  • Telecommunications – medical & educational telecommunications links
  • Public Services – adult & child care centers, courthouses. airports, schools, fairgrounds, etc.

Eligibility

  • Public entities
  • Federally recognized Indian Tribes
  • Nonprofit organizations
  • Lender unwilling to make loan without obtaining loan guarantee
  • Limited to unincorporated rural areas and incorporated towns of 20,000 or less