ELIGIBLE LOAN
PURPOSES:
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- Construction, renovation and development
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Purchase land and buildings
- Startup costs and working capital (not line of credit)
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Interest costs in some cases
- Debt restructuring in some cases
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- Purchase machinery and equipment
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Pollution control and abatement
- Processing and marketing facilities
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Feasibility studies prepared for the loan request
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Certain fees incurred as part of loan request
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INELIGIBLE LOAN
PURPOSES:
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- Any illegal business activity
- Race Tracks, Golf Courses
- Loans made by other Federal Agencies
- Loans involved in tax-exempt obligations
- Transfer of ownership of a business (except certain cases)
- Payment to owner, partner, stockholder or beneficiary of applicants who will retain equity in the business
- Guarantee of loans where there may be directly or indirectly a conflict of interest or an appearance of a conflict of interest
- Business establishments when more than 10% of annual gross revenue is from gambling activities.
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- Owner occupied housing
- Any line of credit
- Lease payments
- Pay off creditor in excess of value of collateral
- Lending/investment institutions or insurance companies
- Assistance to government employees and military personnel owning 20% or more of the business
- Charitable Institutions, Churches or church controlled or fraternal organizations
- Projects exceeding $1 Million and increase in direct employment of 50 or more which results in transfer of employment from one area to another or results in excess of production of goods or services in the area
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POPULATION
LIMIT: |
Loans will not be made in any city or town with a population of
greater than 50,000 and the urbanized are contiguous and adjacent to such city or town as defined by the U.S. Bureau of Census. |
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GUARANTEE FEE/
GUARANTEE LIMIT:
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- A guarantee fee of 2% of the guaranteed portion of the loan is required
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An annual renewal fee of 0.25% of the guaranteed portion of
the loan is required
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- The maximum guarantee will be as follows:
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80% for loans of $5 Million or less
- 70% for loans
greater than $5 Million up to $10 Million
- 60% for
loans greater than $10 Million up to $25 Million (subject to additional
criteria)
- A maximum of 10 percent of program
funding is available to value-added cooperative organizations for loans
above $25 million to a maximum aggregate of $40 million.
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LOAN TERMS:
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- 30 years on land, buildings and permanent fixtures (Average is 15 to 20 years)
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15 years or useful life on machinery and equipment (Average is 5 to 10 years)
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7 years for startup working capital loans (Average 3 to 5 years)
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INTEREST RATES:
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- May be fixed or variable
- Negotiated between lender and applicant
- Normally do not exceed 1 1/2% over Wall Street Prime
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EQUITY/CASH
REQUIREMENTS:
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- Minimum tangible balance sheet equity of 20% for all startup businesses, businesses where the borrower does not or cannot offer limited or full personal or corporate guarantee, and for energy-related businesses.
- Minimum tangible balance sheet equity of 10% on existing businesses with proven track record.
- Equity will be in the form of cash or tangible earning assets. Appraisal surplus and/or subordinated debt can not be used in the calculation of the equity requirement.
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COLLATERAL
REQUIRED:
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The lender obtains the best collateral available to secure the loan. Collateral must be adequate to protect the interest of the lender and the government. |
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PREAPPLICATION/
APPLICATION
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Preapplications are required in some instances. Preapplication or Application packets will be furnished to lender after the lender has contacted a USDA Rural Development office to discuss the proposal.
A Preapplication will normally be required for all projects, however, an Application only (no Preapplication) may be filed when you have discussed the proposal with the lender and are satisfied that: |
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- There is an existing business with a proven track record
- There are no significant changes in ownership or management of the business
- There is an expansion directly related to the existing operation
- A preapplication will be required for all loans of $5 million or more
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CERTIFIED LENDER
PROGRAM (CLP)
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- Objective is to expedite loan approval, making and servicing
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Must be eligible lender authorized to do business in the state in which CLP status is desired
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CLP status will not exceed 5 years, but may be renewed
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