USDA Guidelines | North Avenue Capital

USDA Regulations


Project must be in a location defined as “rural” by 2010 census data. This is generally in surrounding populations (Census tracks) of 50,000 of fewer. 97% of the geographic USA qualifies, and you can check your address here in seconds.


Loan size may not exceed the discounted value of collateral based on current appraisals, or, in some cases, book value. Generally, real estate is discounted 20%, equipment is discounted 30-50%, and inventory and receivables are discounted 40-60%. Specialty collateral is considered on a case-by-case basis. Most NAC loans are anchored by real estate, but may include equipment and/or working capital as collateral.

Equity & Net Worth

The USDA requires Tangible Net Worth to be greater than 10% of Tangible Net Assets for established businesses and 20% of Tangible Net Assets for newly or recently formed companies. This is a more conservative requirement than typical debt vs equity ratios because it reduces assets by any intangible items.

Personal Guarantees

The USDA requires that any owner with 20% or more of the equity of a borrower personally guarantee the loan. Unlike a standard bank guarantee, USDA loan guarantees are considered a Federal Debt subject to the Federal Debt Collection Act, which the government may enforce to recovery on any loan deficiency.

Originator Loan Ownership

NAC is required to service any loan it originates for the life of the loan. Additionally, the USDA requires that NAC hold a minimum of 5% of the value of any loan it originates for the life of the loan.

USDA Approval Process

All USDA loans must be underwritten and approved by USDA state offices. Loans whose size exceed the authority level of their local oces are subjected to an additional level of review and approval by the USDA national office. This underwriting, which comes in addition to NAC’s underwriting and approval, provides additional protection and oversight.