HOW TO GET A USDA RURAL DEVELOPMENT LOAN

SUBSIDIZED USDA RURAL DEVELOPMENT LOANS ARE BOON FOR SMALL BUSINESS PROJECTS

Also known as BUSINESS AND INDUSTRY GUARANTEED LOANS (B&I), USDA Loans help boost employment in smaller towns.

For more information about USDA Loans and USDA Loan Rates visit http://thesbaloan.com/USDA.php

The USDA guarantees loans in conjunction with private banks and lenders. To be clear, the guarantee is not for marginal or substandard loans , but it does help lower interest rates, lower monthly mortgage payments and lower the amount of interest paid throughout the life of the loan.

If your project will be located in a town of less than 50,000 people, consider a USDA loan. Venture Funding Group brokers these USDA Rural Development loans with the B&I Guaranteed Loan Program.

Use this loan to improve, develop, or finance business, industry, and employment. Its design is to improve the economic and environmental climate in rural communities.

Business and industrial acquisitions Purchase of land, machinery and equipment Construction, enlargement or modernization Eligible fees and costs Educational or training facilities Tourist facilities Hotels/motels Pollution control or abatement Recreation facilities Working capital Refinancing when it is determined that refinancing is necessary to improve cash flow and create new or save existing jobs.

USDA Loan Eligibility
You may be a cooperative organization, corporation, partnership, or other legal entity that operates as a profit or nonprofit. This includes a company, an Indian tribe on a Federal or State reservation, a public body; or an individual. A borrower must be engaged in or proposing to engage in a business that will:

1. Provide employment;
2. Improve the economic or environmental climate;
3. Promote the conservation, development, and use of water for aquaculture; or
4. Reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems and other renewable energy systems.

A) Individual borrowers must be citizens of the United States (U.S.) or reside in the U.S. after being legally admitted for permanent residence.

B) Corporations or other nonpublic body organization-type borrowers must be at least 51 percent owned by persons who are either citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence.

C) B&I loans are normally available in rural areas, which include all areas other than cities or towns of more than 50,000 people and the contiguous and adjacent urbanized area of such cities or towns.

Loan Use
The Loan must be consistent with the regulations which may include:

1. Business and industrial acquisitions to keep the business from closing, prevent the loss of employment opportunities, or provide expanded job opportunities.
2. Business conversion, enlargement, repair, modernization, or development.
3. Purchase and development of land, easements, rights-of-way, buildings, or facilities.
4. Purchase of equipment, leasehold improvements, machinery, supplies, or inventory.

Loan Amounts
The total amount of Agency loans to one borrower must not exceed $10 million. The Administrator may, at the Administrator’s discretion, grant an exception to the $10 million limit for loans of $25 million under certain circumstances. The Secretary may approve guaranteed loans in excess of $25 million, up to $40 million, for rural cooperative organizations that process value-added agricultural commodities.

Loan Terms
The maximum repayment for loans on real estate will not exceed 30 years; machinery and equipment repayment will not exceed the useful life of the machinery and equipment purchased with loan funds or 15 years, whichever is less; and working capital repayment will not exceed 7 years.

Loan Guarantee
The percentage of guarantee, up to the maximum allowed, is negotiated between the lender and the Agency. The maximum percentage of guarantee is 80 percent for loans of $5 million or less, 70 percent for loans between $5 and $10 million, and 60 percent for loans exceeding $10 million

USDA Rural Loan Interest Rates
The interest rate for the guaranteed loan is negotiated between the lender and the applicant. It may be fixed or variable as long as it is a legal rate. Presently we are seeing about 4.5% to 6% interest rates for these types of loans.

Collateral Requirement
Collateral is required and must have a documented value sufficient to protect the interest of the lender. Lenders will discount collateral consistent with sound loan-to-value policy. The discounted collateral value will normally be at least equal to the loan amount.

Annual Renewal Fee
There is an annual renewal fee paid once a year and is required to maintain the enforceability of the guarantee as to the lender.

About the Author:

Frank Pournelle is the spokesperson for TheSBALoan.com and Venture Funding Group. His 8 year old direct response ad agency is located in Madison, WI and he writes regularly on how to grow entrepreneurial, home based and franchise businesses. He specializes in leveraging the growth of professional practices for lawyers, accountants, physicians and property owners using performance based media and finances. An SBA Loan Quote can be submitted at http://www.TheSBALoan.com.