Refinancing to secure a lower interest rate on a commercial loan can be a smart and often critically important benefit for a business owner. Lower rates and/or more favorable terms can lower monthly payments for a commercial borrower, increasing cash flow and freeing up capital to help fund business improvements, expansion or to use for other purposes. For many business owners, the USDA Rural Development Business and Industry (B&I) Loan Program provides an excellent option for refinancing with a lower interest rate USDA commercial loan.

The Rural Development Commercial Loan Program, also known as the OneRD Guarantee Loan Initiative was launched by the U.S. government to create jobs and expand economic opportunities in America’s rural communities. It works by providing USDA-backed loan guarantees to lenders for making collateral-backed commercial loans available to credit-worthy rural borrowers.

The program has become popular for many kinds of business owners and commercial borrowers due to its appealing terms (loan amounts of $2 million – $25 million, with terms from 7-30 years and competitive rates tied to the WSJ Prime Rate +1-3%); broad-range of qualifying uses; and what the USDA defines as “rural” – any community, city or town with 50,000 or fewer residents. This makes up approximately 97% of America’s entire geographical area. Prospective borrowers with headquarters in larger metro areas may also be eligible provided that the branch, division, franchise, or facility they wish to open, or fund, is in a qualifying ‘rural location.’  To verify geographic eligibility, visit our online mapping platform.

Borrower must be possess a good credit history (credit score of at least 680 with good payment history and low utilization) and be able to securitize the loan with fixed assets equivalent to the amount of the loan request.

Non-profits, for-profits, cooperative, public bodies, and federally-recognized tribes can use USDA B&I Loans for all kinds of purposes, including business development, expansion, conversion, modernization, repair, land and business acquisition, development of land for commercial properties, equipment & supplies purchase, and yes – refinancing. In fact, since being launched, the program was expanded to further strengthen its debt refinancing offerings.

For instance, prior B&I loan program guidance stipulated that loans made for refinancing could only be used if the proceeds were being used to improve cash flow and create or save jobs in rural areas. Later, the refinancing of rural hospital debt to help preserve access to healthcare services in rural areas was added as a qualifying use.

In addition, whereas previously, direct lenders like North Avenue Capital, America’s #1 USDA Business & Industry Lender, were only able to refinance loans originated by other lenders, under the new guidelines, they became eligible to refinance up to 50% of a commercial loan they wrote themselves. In this situation, the loan being refinanced must also be closed and current for at least the past 12 months. If the debt is owed to another lender, is guaranteed by the Federal government or a direct loan from the Federal government, then the full amount can be refinanced.

If you are a rural business owner interested in refinancing debt with a lower-rate USDA commercial loan, then we encourage you to contact North Avenue Capital. We can help you estimate the costs for your loan and determine your break-even point. This will enable you to understand how long it will take to recoup your closing costs and begin saving money. We have offices in Northeast Florida, Nevada, Arkansas, Georgia, Tennessee and Texas and work with partners in all 50 states to assist our clients. Contact us at (904) 479-3489 for a consultation.