USDA B&I Loan Program
Table of Contents
History of the USDA
Objective
Benefits
Program Highlights
 Differences Between USDA B&I and SBA Financing
 Loan Eligibility
 Borrowing Eligibility
 Loan Limits
 Loan Terms
 Interest Rate
 Program Fee
 In Case of Default
 Application Process
 Application Requirements
 Contact Us
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History
How did the USDA come about?
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In 1862, President Abraham Lincoln signed into law an act of Congress establishing the
United States Department of Agriculture (USDA). The USDA’s mission is to provide
leadership on food, agriculture, natural resources, rural development, nutrition, and related
issues based on sound public policy, the best available science, and efficient management.
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The Rural Development Program of the USDA was designed to provide financial assistance
and business planning in rural areas to create or preserve quality jobs and promote a
clean rural environment in under-served areas. With this objective, the USDA introduced
the Business and Industry (B&I) Guaranteed Loan Program.
Objective and Benefits
Why Business and Industry Guaranteed Loans?
Objective of the B&I Program:
To improve, develop, or finance business, industry, and employment, aiming to improve the economic
and environmental climate in rural communities. The B&I Guaranteed Loan Program guarantees
loans for businesses activities that will:
• provide employment;
• improve the economic or environmental climate;
• promote the conservation, development, and use of water for aquaculture; or
• reduce reliance on nonrenewable energy resources by encouraging renewable energy systems (e.g.,
wind energy systems, geothermal energy systems, etc.).
Benefits for the borrowers:
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Lesser equity requirements leading to more working capital
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High loan amounts, lower interests rate than conventional loans
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Longer repayment terms
Program Highlights
Differences Between USDA B&I and SBA
Financing
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Subject commercial real estate property does not have to be 51% owner-occupied like
SBA loans, and can also include investment properties
Individual USDA B&I loan sizes can be much higher than SBA loan size limits
No size restriction on borrowing entity
Program Highlights
Loan Eligibility
Eligible Loan Purposes:
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Commercial real estate and business acquisitions when the loan will keep the business from
closing, prevent the loss of employment, or provide expanded job opportunities.
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Purchase of land, machinery, and equipment,
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Construction, enlargement, expansion or modernization
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Educational or training facilities, tourist facilities
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Pollution control equipment, start up costs, working capital
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Refinancing to improve cash flow & create new or save jobs
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Eligible fees and costs
Ineligible Loan Purposes:
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Residential housing projects, including owner occupied and rental properties. However, housing
site development may be eligible
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Golf courses, gambling facilities, or racetracks
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Lines of credit
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Lease payments
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Payment of delinquent obligations like taxes
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Distribution or payment to an owner, beneficiary, or a close relative
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Projects larger than $1,000,000 & relocation of 50 or more jobs
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Agriculture production that is not integrated with processing
Program Highlights
Borrowing Eligibility
Eligible:
• Any corporation, partnership, individuals, Co-op, LLC, Indian Tribe, etc. organized either
on a for profit or nonprofit basis. There are no size restrictions.
• Based in a rural area - not within the boundaries of a city of 50,000 or more, or adjacent
urbanized areas.
• 51% owned by U.S. Citizens or persons admitted for permanent residence.
Ineligible:
• Charitable institutions. Churches or church-controlled or fraternal organizations.
• Lending and investment institutions, insurance companies
• Businesses with government employees or military personnel as directors, officers, or
owners (20 percent or more control).
Program Highlights
Limits
Maximum limit of the Loan:
• The total amount of loans limited to $10 million per borrower.
• The Administrator of the Program may, at the its discretion, grant loans up to $25 million
under certain circumstances.
• The USDA Secretary may approve guaranteed loan up to $40 million, for rural cooperative
organizations that process value-added agricultural commodities
Loan Guarantee Limits:
• $0 - $5 Million:
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$5 Million - $10 Million:
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Excess of $10 Million:
80% Guarantee
70% Guarantee
60% Guarantee
Program Highlights
Maximum Loan Terms
Maximum repayment terms for:
• Real estate - 30 years.
• Machinery and equipment - the lesser of 15 years or its useful life.
• Working capital - 7 years
• No balloon payments allowed
Interest Rate:
Negotiated between the lender and the applicant
• May be either fixed or variable or fixed converting into variable and vice-versa. Variable
rate may be adjusted at interervals not more often than quarterly
• Interest rates are subject to agency review and approval.
Program Fee:
• Guarantee Fee – 2% of the guaranteed portion of the original loan amount, due at loan
closing.
• Annual renewal fee will be applicable
Program Highlights
In Case of Default
The lender has to notify the USDA when a borrower is 30 days past due, and if the default
exceeds 60 days, the lender must arrange a meeting with the USDA.
Corrective actions may include :
• Deferment of principal
• Additional unguaranteed temporary loan
• Re-amortization of the loan.
• Transfer and assumption of the loan.
• Reorganization.
• Liquidation.
• Changes in interest rates with the USDA’s, the lender’s, and the holder’s approval, with the
requirement that the interest rate is adjusted proportionately between the guaranteed and
unguaranteed portions of the loan and the type of rate remains the same .
The Application Process
Lender and business submits a joint pre-application.
If the project warrants, the USDA will then arrange a meeting with all
parties, usually at the project site (usually within 15 days).
If the project appears viable, the parties are encouraged to submit a
complete application.
Within 60 days of receiving a complete application, the USDA will make a
final approval decision and will issue a commitment, subject to conditions.
Note: Loans up to $ 5 million are approved locally, larger ones
are approved in Washington D.C.
Application Requirements
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Lender analysis needs to address borrower’s management ability, repayment ability, credit
history, etc.
Financial statements required - Past 3 years historic and 2 years of projections supported
by a feasible business plan.
Life insurance on key primaries.
Personal guarantee required for owners with 20% or more ownership .
Feasibility studies are required on all new motel & hotel projects.
Minimum 10% equity for existing & 20% for start ups excluding intangible assets like
goodwill, loans fees, etc.
Collateral needs to be sound and sufficient to protect interests of the lender and agency
(same for guaranteed and unguaranteed portion) and needs to be appropriately discounted
to reflect recovery values.
Contact Us
If you’d like to know more about the USDA B&I product, or any other
products or services AVANA Capital offers, please contact us and
we’ll be happy to assist.
Toll Free:
877.850.5130
Fax:
623.321.6171
Email:
avanateam@avanacapital.com