Getting a USDA-backed business loan to secure working capital for your rural business may be easier than you’ve imagined. The U.S. Department of Agriculture supports commercial lending to rural businesses through its OneRD Guaranteed Loan Initiative. The program offers loan guarantees to lenders, so they are encouraged to provide commercial funding to a wider range of rural entrepreneurs, business owners, corporations, individuals, public bodies, nonprofits, and more. USDA business loans provide many exceptional benefits including broad eligibility for a wide range of business types and funding uses, and attractive interest rates and terms. Applying for a USDA business loan is a bit different than applying for some other commercial loans but not much. By following three simple steps, you can save yourself some time and energy and quickly get on your way to securing a USDA-backed commercial loan.
Step 1: Find a USDA-Approved Lender and Talk to a USDA Business Loan Specialist
Only USDA-approved lenders can offer business loans through the OneRD Guaranteed Loan Initiative. To be approved, lenders must be able to demonstrate that they have the legal authority, financial strength, and experience to operate a successful lending program. This includes lenders that are regulated and subject to supervision and credit examination by applicable federal and state agencies:
- Federal and state-chartered banks
- Savings and loans
- Farm credit banks with direct lending authority
- Credit unions
Some other non-regulated lending institutions also may be approved by the USDA but in these, and every other case, when choosing a lender, it is borrower beware. It is always best to choose an approved, experienced lender, ideally one that specializes in USDA loans like North Avenue Capital. We are a direct lender serving all 50 states that focuses exclusively on USDA business loans.
We understand all elements of the USDA’s OneRD Guaranteed Initiative and the multiple lending options available under its umbrella, including the Business & Industry Guaranteed Loan Program (B&I), Rural Energy for America Guaranteed Loan Program (REAP), and the Community Facilities Guaranteed Loan Program (CF).
What does this mean for you? It means we can quickly and efficiently help you understand all your options; direct you to the right lending vehicle depending on your business type, needs and goals; verify your eligibility, and assist you with your application. We regularly work with all kinds of businesses and borrowers and lend more than traditional sources focused on rural communities. We understand the nuances of USDA business loans and our team members have deep experience starting, building, and operating successful businesses across multiple industries. We are committed to helping meet the business and credit needs of borrowers and economic opportunity in all the areas we serve.
Step 2: Work with Your Lender to Check Your Eligibility
USDA Business Loans under the OneRD program are intended to advance economic development in rural areas, thus there is a geographic eligibility factor associated with most of the USDA’s lending programs. The USDA defines “rural area” as any community, city, or town with 50,000 or fewer residents. The good news is that this represents approximately 97% of America’s geographical territory! You can do a quick check of your eligibility using this interactive map.
This said it is still always best to speak directly with an experienced lender as there is important information you may need to consider. For instance, eligible borrowers also may include businesses headquartered in larger metro areas with populations of more than 50,000 if the division, branch, or franchise being funded is in a qualifying community. In short, there are variables you may not be aware of.
Next, you will want to work with a USDA OneRD Guaranteed Loan Program specialist to verify your financial eligibility. USDA Rural Development Loans are collateral-backed loans for credit-worthy borrowers. All borrowers must have a good credit history with a credit score of at least 680, along with a good payment history and low credit utilization. In some cases, a personal guarantor may be needed. Borrowers also must be able to securitize the loans with fixed assets valued at an amount equivalent to the loan amount requested. Collateral can include any fixed assets such as cash, real estate, and equipment, discounted and valued consistent with sound loan-to-value policy. These are things an experienced USDA loan specialist can help you assess.
At North Avenue Capital, we have perfected the USDA loan qualification process and can see if you qualify in five minutes using our rapid intake form. All information is stored safely and securely on our internal NAC server.
Step 3: Submit Your Loan Application
Once you have been pre-qualified as eligible to apply for a USDA business loan, you can begin the application process. The USDA requires certain documentation to complete the loan application. Understanding what this includes can help expedite the loan approval process. Most loans require:
- Resumes of all owners
- Credit reports of all owners
- Business credit report, if applicable
- Current balance sheet
- Profit & loss statement less than 90 days old, if applicable
- Business plan
- Planned number of jobs created or saved
- Average wages of jobs
- Cash-flow projections for two years
- Pro forma balance sheet for projected loan closing
- Real estate and/or environmental appraisal, if applicable
- A feasibility study by an independent consultant for new businesses
- Relevant insurance (hazard, flood, life, workers’ compensation, etc.) may also be required
In this area, applying for a USDA Rural Development Business Loan is not unlike applying for any commercial loan through the SBA or other lending institution. In any case, a good lender will be at your side to help walk you through every step of the loan application process.
USDA OneRD Loan amounts range from $2 million to $25 million, and up to $100 million for some community facilities loans. Terms range from seven to 40 years depending upon loan use, and interest rates are highly competitive, tied to the Wall Street Journal Prime Rate. Getting one of these incredibly appealing business loans can be a game-changing event for any business, and the process can be incredibly efficient with the right lending partner.
If you are interested in a USDA OneRD Guaranteed Loan, contact North Avenue Capital. We have offices in Florida, Georgia, Tennessee, Arkansas, and Texas, and partners in all 50 states. One of our USDA loan specialists can assess your needs, confirm your eligibility, and help you apply for the right kind of loan for your business. Contact us, today!
