USDA Loans

A USDA loan is administered by the Rural Business Cooperative Service (RBCS), an agency within the USDA’s Rural Development mission area. The purpose of the B&I program is to develop businesses and industries that will grow employment and improve the economic and environmental climate of rural communities*. This purpose is achieved by bolstering the existing private credit structure through the guarantee of quality loans that will provide lasting community benefits.

There are very few lenders that can approve and administer USDA loans. We have access to those selected few.

*Rural communities are defined as having a population of < 50k or any urbanized area contiguous and adjacent to
a city or town with a population > 50k

Will your project or investment “grow employment and improve the economic and environmental climate of rural communities”? The key words are “grow employment and improve the economic and environmental climate“, not “rural communities“. Why? The actual USDA definition of “rural” is “(1) a city or town that has a population of less than 50,000 inhabitants or (2) any urbanized area contiguous and adjacent to a city or town with greater than 50,000 inhabitants”. This equates to 97% of available territory in the United States!

Once the above requirement has been met, working with our lender we will have to ensure:

Credit Quality, Collateral, Character:

Your credit quality is sufficient and all of the elements of credit quality are met in a comprehensive, well-written credit analysis, including capacity (sufficient cash flow to service the debt), collateral (assets to secure the loan), conditions (borrower, economy, and industry), capital (equity/net worth), and character (integrity of management).

Environmental Impact:

The USDA B&I program is subject to the National Environmental Policy Act and other federal guidelines designed to ensure that federally supported projects do not harm the environment. As such, we will have to understand, through consultation with our lender, the potential environmental impacts of the project being financed and developing proposals that minimize the potential to adversely affect the environment. The level and complexity of environmental review will depend on the scope of the project.

Terms:

A loan’s maturity is determined by the use of the proceeds, the useful life of the assets being financed and those used as collateral, and the borrower’s ability to repay the loan. Loan terms are also subject to program maximums that vary with the purpose of the loan.

Rates:

WSJ Prime + 1.25% – 3%

Your financing must be for eligible business purposes which are defined as:

• Purchase and development of land, buildings, and associated infrastructure for commercial or industrial properties.
• Business acquisitions, provided that jobs will be created or saved.
• Leasehold improvements.
• Constructing or equipping facilities for lease to private businesses engaged in commercial or industrial operations.
• Purchase of machinery and equipment.
• Startup costs, working capital, inventory, and supplies in the form of a permanent working capital term loan.
• Debt refinancing, when it is determined that the project is viable and that refinancing is necessary to improve cash flow and create or save jobs.

You must have a FICO score of 680+. You will have to invest between 10% – 25% of the total project costs and have at least 100% of the loan as collateral.

To get a soft quote we’ll need:

• Project Address
• Personal Financial Statement (PSF)
• Business Plan

If the soft quote is favorable, we’ll need the following items to get a term sheet:

1. Project Address
2. Borrowing Entity Name
3. PFS on Guarantors (>20% Ownership)
4. Ownership Structure
5. Business Plan (or Executive Summary if full Biz Plan not complete)
6. $USD amount of Loan
7. Detailed List of Use of Funds
8. Schedule of Debt
9. Accounts Receivable Aging Report
10. Organizational Documents
11. Financial Statements
    1. 3 years Historical BS, IS, CF
    2. YTD Financial Statements (<90 days)
    3. At least 2 Yrs of Proforma BS, IS, CF Statements & Assumptions

• Only one loan for multiple purposes such as real estate acquisition, equipment refinance, etc. and loan fees are eligible project costs.

• Higher loan amounts available up to $10 million, and up to $25 million for high priority businesses.

• No minimum owner occupancy requirement for borrowers acquiring or refinancing real estate. Investment properties such as retail or office lease facilities are eligible.

• No size standard criteria for applicants means eligible applicants can vary from individual proprietorship to a publicly traded company.

• Easy to understand guarantee fee calculation is 3% of guaranteed portion for regular guarantee, or 1% of guaranteed portion for high impact business loans up to $5 million. Also, the fee may be included as an eligible use of loan proceeds.

• Longer loan terms help lower your monthly paymentss. Terms are up to 30 years for real estate, 15 years for equipment and 7 years for working capital.

• This is a full recourse loan. As such all owners/guarantors must personally guarantee the  loan.
• Prepayment penalties

To start, give us a call, or fill out the Contact Us form, describe your project and provide the following:

• Project Address
• Personal Financial Statement (PSF)
• Business Plan

We have several other programs that can meet your needs including SBA loans. We will work with you and our lenders to ensure your project is financed.