USDA Lending: Not Just for Farmers Anymore
97% of the United States Land Mass is Eligible for an USDA Loan
USDA lending is not just for agriculture anymore. In fact, 97% of U.S. land mass is eligible for a loan from the USDA for $2 million to $25 million as long as you operate in a community of 50,000 or fewer! Here are just some of the industries we can service with this funding program:
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
It’s a sad fact that rural communities have been an afterthought for most lenders and Wall Street because they are thought of as more risky loans. Many lenders feel that the lack of population is a direct correlation to a lack of success when it comes to business projects. This is simply inaccurate and the USDA program became the solution.
USDA Financing to the Rescue
The USDA has long been known for its regulation and support of agriculture but a number of years ago it enacted a plan to fund and strengthen rural communities to bolster quality of life in these areas.
What the USDA did was become a guarantor for lenders and banks by backing the loans they would provide specifically to these communities. It eases the anxiety of lenders to make this type of lending more popular. It has grown to over a $234 billion portfolio of loans currently.
Unfortunately, this USDA lending program is largely unknown and has operated under the radar for years.
USDA Financing to the Rescue
3 Types of USDA Rural Development Loans
01.
USDA Business & Industry (B&I) Program
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.
Funding 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 cash flow or creates jobs.
What doesn’t qualify for this type of USDA lending? Lines of credit, rental housing, golf courses, churches, and agricultural production.
02.
USDA Community Facilities (CF) Program
This type of USDA lending 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 to provide rural small businesses and agricultural producers with funds for renewable energy systems and energy efficient improvements.
This type of USDA lending includes biomass, geothermal, hydropower, hydrogen, or wind power systems. Improvements include high efficiency heating and cooling, insulation, lighting, window and doors, and others.
Is My Project Eligible for USDA Lending?
The USDA uses the most recent Census bureau which spells out “rural” as the following: a city or town with a population of fewer than 50,000 inhabitants, excluding those adjacent to urbanized areas (sorry suburbs).
The easy way to find out is to type your address into the USDA’s verification tool to find out if it qualifies.
Is My Project Eligible for USDA Lending?
USDA Vs SBA - Side-By-Side Loan Comparison
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 the USDA. But here are a few side-by-side key points to understand when accurately comparing the two financing options.
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 |
SBA Loans
- Must be owner-occupied
- Max 25-year amortization
- Max 10-year amortization on machinery and equipment
- Max $5M in borrowing power
- Max 100-1500 employees (depending on industry)
USDA Loans
- Owner-occupied not required
- Up to 30 years on real estate
- Up to 15 years amortization on machinery and equipment
- Max $25M in borrowing power
- 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 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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