What Is The USDA B&I Loan Guarantee Program?
The Department of Agriculture Business & Industry (USDA B&I) Loan Guarantee Program is a U.S. government development financing mechanism similar to the SBA Loan programs. The government does not give the loan directly but offers guarantees that enable banks to provide the loan. However, the USDA B&I Loan program is only for businesses located in a rural area, because the purpose of the program is to save and create jobs in rural America.
What are the latest changes in the USDA B&I Program
As of October 1, 2020, USDA has implemented a unified platform for all its rural development guaranteed loan programs, called One Rural Development (OneRD). OneRD harmonizes the processing and administration of all rural development guaranteed loans, including USDA B&I. As a result, USDA can issue a loan guarantee approval within 48 hours of receiving all your application documents.
Who may qualify for the USDA B&I program?
Most types and sizes of businesses located in a USDA-eligible rural area may qualify, including those in our focus areas of Healthcare, Hospitality, and Life Sciences. Therefore, eligible businesses include rural hospitals, skilled nursing facilities, hotels, vineyards, restaurants, and manufacturing facilities.
What is a USDA eligible rural area?
These are rural areas outside of a city or town with a population of less than 50,000 people. Your business may be located in a larger city as long as the project itself is in a USDA eligible rural area.
What can USDA guaranteed loan funds be used for?
USDA B&I guaranteed loans may be used for a variety of business purposes. These include acquisition and development of land, purchase of equipment, machinery, supplies and inventory, business modernization etc.
How much can my business borrow?
We partner with lenders who finance from $1 million up to the USDA guaranteed maximum of $25 million.
You can borrow up to 80% of the amount you need. However, the loan amount depends on the type and value of your collateral, which must be at least equal to the loan amount.
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The USDA will guarantee 80% of your loan up to $25 million. Anyone with more than 20% of equity in your business is required to personally guarantee the rest.
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Government backed business loans tend to come with highly competitive rates. The interest rates may be fixed or variable and are negotiated with the lender but subject to USDA review.
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The terms of the loan vary depending on the use of the funds, and may go up to 40 Years if used to construct or acquire commercial real estate. USDA B&I guaranteed loans are fully amortized meaning that repayments are the same amount each month. USDA does not permit balloon payments, so you will not have to make a large payment at the end. You may schedule interest-only payments in the first 3 years.
What are the benefits of the USDA B&I Loan Program?
The following are some benefits:
U.S. Government guarantees the loans, lenders therefore assume lower risk and can offer competitive rates.
Because of eligibility requirements, there is less competition for USDA B&I than for SBA loans. Because of this, there is a smaller pool of applicants.
You can borrow up to $25 Million for up to 40 years.
A USDA B&I guaranteed loan can be used to start a new business.
Eligibility Checklist
1. Are you a United States citizen or lawful Permanent Resident?
2. Is your business located in a town with 50,000 or fewer residents? You can enter the property site address here to check: Check USDA Eligible Rural Area Address
3. Is your business entity a partnership, sole proprietorship, cooperative, for-profit or nonprofit corporation, publicly traded company or federally recognized tribal group?
4. Can you demonstrate that the loan funds will remain in the United States, positively impact the local economy, create new employment opportunities or save existing jobs.
5. Do you and your business have very good to excellent credit (min FICO 680)?
6. Can you provide collateral for the loan?
7. Can you show projections for consistent revenue to repay the loan?
8. Do you have a tangible balance sheet equity position of at least 20% for a new business or 10% for an existing business?
9. Are you willing to provide personal guarantees from all owners, individuals or entities, with at least a 20% ownership stake in the business?
If you answered ‘Yes’ to all or most of the questions, please contact us to get the process started. The USDA lending process, as with other government-backed loans, comes with more documentation and research than most other business loans.
This is where we, LaGray Finance, come in. We work with you right from the start to make an otherwise stringent process look smooth and easy. LaGray Finance partners with you to put together an application package that ensures success in the end.