Business & Industry Guaranteed Loan:
PURPOSE
The Business & Industry Guaranteed Loan Program is “lender-driven,” loans are made by eligible local lenders to businesses to benefit rural communities. This program gives lenders the flexibility to maintain a loan with a percentage guarantee or sell the loan on the secondary market. The USDA guarantees the loan rather than lending money directly to a loan applicant. A commercial lender requests the B&I Guarantee, and if approved, the lender issues and services the loan.
ELIGIBILITY (BORROWERS)
Individuals
Corporations
Cooperatives
Public
Bodies
Non-Profit Corporations
Limited Liability Companies
Proprietorships & Partnerships
Federally Recognized Indian Tribes
INELIGIBLE (LOAN PURCHASES)
Golf Courses
Lines of Credit
Owner occupied & Rural Housing Projects
Lending, Investment, & Insurance Companies
Projects larger than $1,000,000 & relocation of 50 or more jobs
Charitable organizations, church or church-controlled organizations, or fraternal organizations
Race Tracks (where individual prizes exceed $500) &Gambling Facilities (that derive more than 10% of financial gross revenue from facilities)
ELIGIBILITY (LENDER)
Credit Union
Farm Credit System
Bank of Cooperatives
Savings
& Loan Associations
Any Federal or State chartered bank
Bank-holding Company’s Mortgage Company
Insurance Company subject to government credit examination & in good standing
Other lenders with commercial lending experience &
financial strength may also be approved. Lender’s officers/directors/ owners
may not have a substantial financial
interest in the borrower.
FUND USE
Working Capital
Equipment & Inventory
Professional Services & Feasibility Study Costs
Loan fees & Costs (including B&I guarantee fee)
Real Estate, Buildings, & Leasehold Improvements
RATES
Calculated by published base rate
Fixed or Variable (but cannot charge more often than quarterly)
Lender’s customary commercial interest rate – negotiated by lender & business
TERMS
Equipment – 15 years maximum
Real
Estate – 30 years maximum
Working Capital – 7 years maximum
RESTRICTIONS
Balloon loans are not permitted.
Reduced payments may be scheduled in the first 3 years
FEES
Lender’s reasonable & customary fees – negotiated by lender & business
USDA charges a guarantee fee equal to 2 percent of the guaranteed amount
MAXIMUM AMOUNTS
Federal guarantees to lenders for rural business loans:
80% (maximum) guarantee on loans up to $5 million
70% (maximum) guarantee on loans from 5-10 million
LIMITATIONS (LOAN)
Lines of credit cannot be guaranteed
Construction
Projects
A B&I Guarantee may be issued before construction if the lender certifies that the development work will be completed in accordance with the plans & specifications for each individual construction project.
The percentage of guarantee may be reduced if the guarantee is issued before project completion.
Construction loan funds should not be advanced until USDA has approved the project.
Debt
Refinancing
The refinancing must create new jobs or secure existing jobs
(Improving cash flow)
Lenders may only refinance a loan already in their portfolio if:
The loan is used for a secondary purpose (less than 50%) and
The loan being refinanced has been current for at least 12 months.
Transfers
of Ownership
Acquisitions are only eligible if they create new jobs or prevent job loss
Commercial
Lease Projects (
Community Facilities
Community Facilities projects may be guaranteed provided the financing is not tax-exempt & entity is structured in a manner that makes the entity eligible for assistance
COLLATERAL/SECURITY REQUIREMENTS
Repayment Ability
The proposed
project/operation must have realistic Repayment Ability
New Enterprises
New Enterprises will be required to obtain a Feasibility Study by a recognized independent consultant
Credit History
The Business and its owners must have a good Credit History
Business
Equity
The business must have Tangible Balance Sheet Equity at the time of loan closing/project completion in amounts of:
New Businesses – 20% or more Tangible Balance Sheet Equity
Existing Businesses – 10% or more Tangible Balance Sheet Equity
Collateral
Inventory – Using 60% or less of the value
Accounts Receivable (< 90 days) – Using 60% or less
Real Estate – Using 80% or less of the appraised value
Chattels – Using 60-80% or less of the appraised value
Hazard
Insurance
Hazard Insurance on collateral (greater of loan or balance or replacement value)
Key Person Life Insurance
Key Person Life Insurance will be required (decreasing term life insurance is OK; amount negotiated)
Personal & Corporate Guarantees
Inability to get credit elsewhere is not a requirement
Personal and Corporate Guarantees typically from all proprietors, partners (except limited partners), or major (20% or more interest) shareholders
APPLY TODAY
Apply today by contacting