Did you know North Avenue Capital (NAC) provides lending in rural areas nationwide? NAC works to save and create jobs in rural America by exclusively lending government-guaranteed loans to manufacturing and production companies, industrial companies, family entertainment centers, and more. The USDA Rural Development Program consists of five individual loan programs. These are the USDA Community Facilities Loan, USDA Business & Industry Loan, the USDA Rural Energy for America Loan, the USDA Water & Waste Loan, and the USDA Food Supply Chain Loan, which was added to the Rural Development Program in late 2021. Below are the differences between specifically the USDA Business & Industry Loan and the SBA 7a Commercial Loan.
The USDA Business & Industry Loan Program was developed to help foster employment in rural areas. The federal government is encouraging economic development and supporting companies to build factories in these underdeveloped small towns and rural areas. The program is not limited to agriculture development, and the funds may be used to develop resorts or manufacturing facilities so long as the property is located in a town or city of fewer than 50,000 people.
The USDA Business & Industry Loan Program is similar to the SBA 7a Loan Program and can be an excellent vehicle for many of your funding needs, as it brings more benefits to the table than SBA loans, in regard to loan amounts, rates, and terms. The table below highlights the key differences between the USDA B&I loan and SBA 7a loan programs.
|Loan Attribute||USDA Business and Industry Loans||SBA (Small Business Administration Loans)|
|Maximum Loan Size||$25 Million||$5 Million|
|Minimum Loan Size||$2 Million*||No Minimum, but commonly no less than $30,000|
|Geographic Requirements||Rural America & US Territories||No Restricted Geographic Area|
|Interest Rate Estimates||Wall Street Journal Prime + (1-3%)||SBA Prime Rate based Rate|
|Interest Rates||Lender Determined||Lender Determined|
|Origination Fees||2%||Not Allowed|
|Guaranteed Portion||80% on loans up to $5MM. 70% on loans from $5 MM - $10MM. 60% on loans from $10MM - $25MM.||85% on loans up to $150,000. 75% on loans over $150,000. 90% for international trade-export working capital loans. Up to 90% for export express.|
|Guarantors||Guarantees from any person or entity owning 20% or more of the borrower entity.||Guarantees from any person or entity owning 20%or more of the borrower entity, and any others deemed critical by lenders/SBA.|
|Security of Gurantee||Strong||Often Negotiated|
|Speed of Government Processing||45-90 Days||Immediate to 2 Weeks|
|Collateral||1:1 Discounted||No Regulatory Requirement|
|Equity||10%, 20%, 25% Tangible Net Worth||No Regulatory Requirement|
|Average Default Rate||3%||17%|
|Prepayment Penalty||Negotiated||Fixed at 5/3/1|
|Repayment Terms||Maximum of 30 Years||Maximum of 25 Years|
|Owner Occupancy||No Restrictions||Owner Required to Occupy the Property|
|Eligible Borrowers||For-profit business, cooperatives, individuals & Tribal entities, and non-profit entities with an operating business.||For-profit businesses that meet SBA size standards as 'small'|
Commonly Asked Questions
What is the difference between USDA-guaranteed loans and direct loans?
The principal difference between USDA direct loans and USDA-guaranteed loans is who actually funds the loan itself. With a USDA direct loan, the USDA acts as a lender. These are commonly residential loans. With a USDA-guaranteed loan, private lenders, such as North Avenue Capital, fund the loan while the USDA backs each loan against default.
Does North Avenue Capital provide USDA Home Loans?
No, North Avenue Capital exclusively provides financing for commercial business entities only.
What is the minimum credit score needed to receive a loan from North Avenue Capital?
How do I find out if my business qualifies for a USDA Business Loan?
USDA Business Loans have certain requirements that must be met in order to qualify for the government-guaranteed program. The first and most important eligibility requirement for a USDA Business & Industry Loan, specifically, is the location must be in a USDA-deemed 'rural' location in the United States. A USDA-deemed 'rural' area is a city or town with a population of 50,000 people or less. To quickly check if your business qualifies for a USDA Business Loan, visit our Online Geographic Map.
What is the lending maximum for the USDA B&I Program?
The USDA Business & Industry Loan Program, or USDA B&I, has a lending maximum of $25 million. The minimum lending amount sits at $2 million. North Avenue Capital does not lend lower than the $2 million threshold. This is one of the major positives of the USDA Rural Development Program, as the SBA maximum loan amount is $5 million.