USDA Business & Industry Loans
USDA is for rural communities that need 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:
| Collateral | Maximum LTV |
|---|---|
| Commercial Real Estate | 80% |
| Equipment & Machinery | 70% |
| Inventory | 60% |
Terms for a USDA B&I loan
- Commercial real estate: up to 30 years.
- Machinery and equipment: either 15 years or its useful life, whichever is less.
- Working capital: up to 7 years.
Interest rates and USDA guarantee
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:
| Loan amount | USDA guarantee |
|---|---|
| $0 to $5 million | 80% |
| $5 to $10 million | 70% |
| Greater than $10 million | 60% |
Fees
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.
Equity requirement
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?