Rural businesses, like all businesses, often need an infusion of capital to start or grow their operations. But obtaining funding from traditional lenders can sometimes prove difficult. Lenders may perceive default risks to be higher for rural borrowers or fear that there may not be sufficient foot traffic to support certain types of commercial businesses in these areas.
Fortunately, the USDA offers loan guarantees to lenders to encourage them to provide commercial funding to a broad range of rural businesses through its Rural Development Guaranteed Loan Program. The program was developed to help create and/or save jobs in rural areas across the country, defined as towns, cities, or areas with a population of fewer than 50,000. This represents more than 97% of the United States geographic territory, so qualifying as “rural” is easier than one might imagine.
USDA Guaranteed Loans are available for a wide range of commercial borrowers and uses. Generous loan limits can range from $2 million up to $40 million, and even $100 million for some community facilities loans. Loan terms can range from seven to 15 years and up to 40 years for certain types of loans, and interest rates are competitive, tied to the WSJ Prime Rate +1-3%. Similar to SBA 7a Commercial Loans, the USDA’s guaranteed loans are designed to help empower credit-worthy businesses while providing benefits that can outweigh those of SBA loans. Borrowers must have a good credit history (a score of 680 or higher with a good payment history and low credit utilization) and be able to provide collateral to securitize the loan on a 1:1 basis with the loan amount requested.
Once a borrower is determined as being eligible to apply for a USDA Guaranteed Loan, the USDA requires certain documentation to complete the loan application. Understanding what this includes before the application can help quicken the loan approval process. Most loans require:
- Business plan
- Resumes of all owners
- Credit reports of all owners
- Personal or corporate guarantees
- Personal or corporate financial statements of loan guarantors
- Business credit report, if applicable
- Current balance sheet
- Profit and loss statement less than 90 days old, if applicable
- Planned number of jobs created or saved
- Average wages of jobs created or saved
- 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, worker’s comp, etc.) may also be required
North Avenue Capital, America’s rural lender, is the only direct commercial lender in the country that exclusively lends USDA Business Loans nationwide through the USDA Rural Development Program. It is all we do. We have perfected the USDA loan application process and can help you see if you qualify in five minutes using our rapid intake form. All information is stored safely and securely on our internal NAC server.
Once we determine if you qualify for competitive financing through the USDA’s Guaranteed Loan Program, our loan specialists can answer any further questions and assist you through the rest of the loan application process with maximum efficiency. North Avenue Capital has offices in Florida, Arkansas, Georgia, Tennessee, and Texas, and partners in all 50 states to help facilitate loans. Contact us today for your commercial funding needs or any questions you may have about USDA-guaranteed loans.
