USDA is for rural communitys that needs commercial funding. The USDA Business & Industry (B&I) helps provide business loans in rural areas with populations under 50,000 for owner-occupied and investment properties. USDA business loans are partially guaranteed by the USDA.
USDA Business Loan Purposes
- Purchase or refinance commercial real estate
- Purchase, remodel, or expand your business
- Purchase or refinance equipment debt
How Much Can Be Borrowed?
- With a USDA B&I loan, businesses may borrow a total maximum amount of up to $25 million (under certain conditions when scoring guidelines are met and approved by the USDA National Office) with a maximum Loan-To-Value (LTV) based on available collateral:
- Max LTV for Commercial Real Estate is 80%
- Max LTV for Equipment & Machinery is 70%
- Max LTV for Inventory is 60%
What Are Terms for a USDA B&I Loan?
- The maximum term on commercial real estate is up to 30 years. For machinery and equipment, it’s either 15 years or for its useful life, whichever is less. For working capital, it’s up to 7 years.
- Interest rates can be fixed or variable (or in some cases a combination of both) and are set by the Lender. The percentage of the gross loan amount that the USDA will guaranty the Lender in the event the Borrower defaults is based on a range of the loan amount:
- Loans of 0-$5 million are 80% guaranteed
- Loans of $5-10 million are 70% guaranteed
- Loans greater than $10 million are 60% guaranteed
- There is an initial guarantee fee the USDA requires borrowers to pay, currently 3% of the guaranteed amount, as well as an annual renewal fee, currently 0.50% of the outstanding principal balance. Reasonable and customary fees are negotiated between the Borrower and Lender.
- Existing businesses must have a tangible balance sheet equity position of at least 10%. The position jumps to 20% for new businesses or start-ups.
Want to see if your property qualifies? Check Eligibility here
