THE USDA…Not Just for Farmers Anymore!
97% of the United States Land Mass is USDA Eligible!
Hotels/RV Parks
Movie Theaters
Bowling Alleys
Go-Kart Tracks
Waterparks
Amusement Parks
Oil & Gas (Non-Exploratory)
Waste Removal/Landfills
Commercial Real Estate (Occupied)
Wineries, Vineyards, Distilleries
Bars/Restaurants
Dentists/Healthcare
Hydroponic Farms
Manufacturing Facilities
Industrial Facilities
Grocery Stores
Textile Manufacturing
Event/Wedding Venues
Landscaping/Nurseries
Timber/Lumber Yards
Fabrication Companies
Bio Testing Facilities/Labs
Pharmaceuticals
And More
The USDA to the Rescue
The USDA has long been known for its regulation and support of agriculture, but a number of years ago they enacted a plan to strengthen rural communities and bolster quality of life in rural areas. What they did was become a guarantor for lenders and banks and back the loans they would provide specifically to these communities. It eases the anxiety of lenders to make these loans so that more are made. This has grown to over a $234 billion portfolio of loans currently. The sad fact is that the program is largely unknown and has operated under the radar for years.
The USDA to the Rescue
3 Types of USDA Rural Development Loans
01.
USDA Business & Industry (B&I) Loans
Designed to incentivize financial backing for the creation of businesses and jobs. They are available for for-profit, non-profit, tribes, and public bodies in need of funds for qualifying projects in rural communities.
Funds can be used for enlargement, repair, or development of a business, the purchase of land, buildings, facilities, equipment, supplies, or inventory, or the refinancing of debt that improves cashflow or creates jobs.
What doesn’t qualify? Lines of credit, rental housing, golf courses, churches, and agricultural production.
02.
USDA Community Facilities Loans (CF)
This is not designed for commercial projects, but to create facilities that provide essential services to rural communities. This can include healthcare, childcare, education, public gatherings, utilities, and food distribution, and many others that can improve a community’s quality of life.
03.
USDA Renewable Energy for America Program (REAP)
The REAP program was designed recently to provide rural small businesses and agricultural producers with funds for renewable energy systems and energy efficient improvements. These include biomass, geothermal, hydropower, hydrogen, or wind power systems. Improvements include high efficiency heating and cooling, insulation, lighting, window and doors, and others. This program is offered to both business and agricultural producers as well.
How Do I Know If My Project Is Eligible?
How Do I Know If My Project Is Eligible?
Why USDA and Not SBA?
If this were a popularity contest the SBA would definitely win hands down when it comes to notoriety in the government guaranteed lending arena compared to USDA. Just a few facts to understand when comparing the two.
| SBA Loan | USDA Loan |
|---|---|
| Must be owner-occupied | Owner-occupied not required |
| Max 25-year amortization | Up to 30 years on real estate |
| Max 10-year amortization on machinery and equipment | Up to 15 years amortization on machinery and equipment |
| Max $5M in borrowing power | Max $25M in borrowing power |
| Max 100-1500 employees (depending on industry) | Unlimited number of employees |
How Do I Get Started & What Should I Expect?
USDA B&I Loans
These loans must be serviced through private lenders but definitely do your research to identify a reputable lender who has the specialized knowledge required to fund these loans.
Loan Rates
You can expect rates between 1-3% above Prime Rate and they can be variable or fixed. They are set by the lender and not the USDA.
Collateral
Borrowers are required to provide collateral in the form of real estate, equipment, or other hard assets with a value equal to or greater than the loan amount.
Application Process
Every USDA B&I loan application is submitted to the USDA by the lender, after which the USDA typically approves or denies applications within 45 to 60 days. Typically, the application and approval process takes between 2 and 3 months from beginning to end.
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