What is a USDA Business & Industry (B&I) Loan?

Please click on the highlighted text to submit your USDA business and industry loan to several dozen USDA lenders.  After entering your contact information, please be sure to check the checkbox on the main data entry page that reads, "Check here if you need a USDA Business and Industry Loan".

When you and I think of poor people, we usually think of the urban poor.  In reality, however, some of the poorest people in America live in the rural areas of the country.  It's hard for these people to pull themselves out of poverty because there are simply no jobs.  Few manufacturers open up new plants in the Boonies.  Therefore the Federal government, through the United States Department of Agriculture ("USDA"), has developed a special commercial loan program, quite similar to the SBA loan program, to encourage companies to open up plants and businesses in rural areas.

The USDA Business and Industries Loan Program (B & I Loan) is a Federal loan guarantee program that is designed to encourage the commercial financing of rural businesses.  The reason why the Federal government is involved is because it wants to create and save rural jobs and improve the economic and environmental climate of rural communities.

The Business & Industry Loan program is lender-driven. The USDA guarantees the loan rather than lending directly. A commercial lender requests the B & I guarantee, and, if it is approved, the commercial lender makes and services the loan.

The benefits of the B & I Guaranteed Loans Program for businesses is that the borrower gets a higher loan amount.  The reason why is because the guarantee strengthens the loan application, allowing the bank to feel comfortable with a smaller equity injection.

B&I loans also offer lower interest rates and longer repayment terms.  This greatly assists businesses that may not qualify for conventional commercial real estate financing, which provides the rural business greater stability and leads to greater growth, expansion and rural employment.

USDA Business and Industry Loans have terms very comparable to SBA loans.  The typical real estate loan will be fully-amortized over 20 years at a fixed rate for the first five years.  Typically the rate will be fixed at around 300 basis points over prime (6.25% as of 3/1/11), and the rate will be readjusted every five years.  The lender will charge you a fee of between 2 and 3 points, and there will be a declining prepayment penalty.  USDA lenders will regularly approve loans of up to 80% loan-to-value (and sometimes 90% LTV), which is much, much higher than conventional commercial mortgage lenders.

Clearly this is a very attractive program, but your project must face two hurdles.  (1) Is the property located in a rural area; and (2) Will it create or save jobs?

Please click on the highlighted text to submit your USDA business and industry loan to several dozen USDA lenders.  After entering your contact information, please be sure to check the checkbox on the main data entry page that reads, "Check here if you need a USDA Business and Industry Loan".