The USDA Business & Industry (B&I) Loan Program is a loan program designed by the USDA Rural Development Program to help credit-worthy rural businesses obtain funds to grow their business and create jobs in local communities. The program bolsters the availability of credit by guaranteeing loans for businesses in rural areas across the US.
For this article, our commercial loan experts at North Avenue Capital (NAC) wanted to share some things you should know about USDA small business loans. NAC is the only specialized commercial lender that exclusively lends USDA B&I Loans nationwide. It's all we do. We have built valued relationship with the USDA Rural Development Program to help develop and negotiate deals to the finish line. We offer competitive interest rates, flexible terms, and high Loan-to-Value (LTVs).
Some USDA Business Loan Facts:
- USDA Business Loans are designed to help Rural Business Owners.
- USDA Business Loans are a unique way for Rural Business to receive access to capital.
- To qualify for a USDA loan, your business/project needs to be in a geographic location with a population of 50,000 people or less.
- Lenders will select the interest rate of your USDA business loan and the interest rates based on specifications of each individual loan profile, risk, and historical, financials of the company. NAC can offer competitive rates negotiated between the borrower and the lender pegged to the Market Prime Rate upon loan close. Rates are generally variable with adjustments quarterly. Interest Rate = Prime at Close + 1-3%
- The type of businesses that qualify for a USDA business loan include for-profit businesses, non-profits, public bodies, cooperatives, individuals, and federally recognized tribes.
- You must be a U.S. citizen or live in the United States with a legal status to be eligible for this loan.
- For a private entity, you must prove that the money will stay in the United States and used to create or save jobs for Americans and U.S. residents to receive the loan.
- USDA B&I Loans from NAC range from $1MM to $25MM in amount, with a sweet spot $2MM -$10MM. At NAC, we do not fund loans under $$1MM.
- Loan terms are negotiated with your dedicated loan officer with consent and review from NAC Investment Committee.
- Some examples of business industries in our portfolio include:
- Industry/ Oil &Gas
- Family Entertainment
- Commercial Real Estate
- & more
- There are maximum term lengths and rates on the loan depending how you plan on spending it.
- Maximum Advance Rates:
- Real Estate: 80% Fair Market Value (FMV)
- Equipment: 70% Fair Market Value (FMV)
- Inventory: 60% of Book Value (Raw Inventory & Finished Goods Only)
- Accounts Receivable: 60% of Book Value (Less than 90 days)
- Maximum Loan Guarantee
- 80% = Loan amount < $5MM
- 70% = Loan amount: $5MM-$10MM
- 60% = Loan amount > $10MM
- Loan terms:
- Maximum term on machinery & equipment is its useful life or 15 years, whichever is less
- Maximum term for real estate is 30 years
- Maximum term on working capital not to exceed 7 years
- Loans must be fully amortized; balloon payments are not permitted
- Interest-only payments may be scheduled in the first 3 years
- Applicable Fees: Reasonable & Customary Fees are negotiated between the borrower and lender. Initial guarantee fee that is paid at the time the Loan Note Guarantee is issued. Annual renewal fee on the outstanding balance of the guaranteed portion of the loan that is set by Rural Development at a rate published annually in the Federal Register
- There is a limited supply of USDA loans, which means the process to get one is competitive.
- USDA business loans require collateral and personal guarantees. Collateral (e.g., land or equipment) should be equal to or greater than the loan amount. For example, if you are seeking to borrow $5 million then you should have at least $5 million in the land, equipment, or other fixed assets to securitize the loan against
- Collateral discount rates differ between Real Estate, Machinery/Equipment, Inventory/Receivables, etc.
Looking to Apply for a USDA Small Business Loan?
Our USDA Loan Officers at North Avenue Capital, LLC (NAC) will determine if a USDA loan is right for your financing needs. Our -Qualification Team will walk you through eligibility as mentioned above. We will let you know what you need to apply for a USDA small business loan, as well as what you are allowed and not allowed to use the funds for to be approved for a loan.
At NAC, our mission is to provide capital to empower American business growth. Because NAC is a non-bank entity, we can provide our borrowers with the terms that fit their financial needs. NAC possesses a genuine interest in partnering with you to enhance your business, create jobs in local communities and identify opportunities to improve environmental conditions for the next generation of entrepreneurs.
We have experience starting, building, and operating successful businesses across multiple industries, and we are committed to forming lasting partnerships, not just closing loans.
As one of the only non-bank lenders in the country exclusively focused on USDA Rural Development programs, NAC uses its expertise, capital, and relationships to build businesses, grow local economies, and create jobs in rural America. Ready to work with one of our USDA business loan officers?
Visit our USDA Business Loans page to learn more or call 866.526.4950 with any USDA business loan questions or to determine your USDA business loan eligibility.
We have office locations in Tennessee, Texas, Georgia, Nevada, and Florida, but we are not limited by geographic location. We can partner on projects in all 50 states.
Are you a broker looking for a USDA B&I Lender or are interested in more information?