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Tim Smith's presentation at 2014 Lender's Meeting at Arkansas State University in Jonesboro, Arkansas.
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USDA Rural Development
ASU Small Business And Technology Development Center
May 20, 2014
Tim Smith Business and Cooperative Programs Director
USDA Rural Development
USDA Rural Development
• Rural Housing and Community Facilities Programs
• Rural Utilities Programs• Rural Business and
Cooperative Programs
We are essentially an investment bank for rural America with a combined portfolio of more than $100 billion in business, infrastructure, housing, and community facilities.
Rural Business and Cooperative Programs
• Mission:- Creating Jobs- Strengthening Communities- Diversifying the Rural Economy
Rural Business and Cooperative Programs
Loans Grants Loan Guarantees
Business and Industry Guaranteed Loan Program
Business and Industry Guaranteed Loan Program
• Purpose is to create and maintain employment and improve the economic climate in rural communities.
• Guarantee loans made by commercial and other authorized lenders.
Business and Industry Guaranteed Loan Program
• Benefits to Businesses– Higher loan amounts– Lower interest rates– Longer terms– Makes capital available
Business and Industry Guaranteed Loan Program
• Benefits to Lenders– Reduces risk– Lending limit restrictions– Access to secondary market
Business and Industry Guaranteed Loan Program
• Guarantee percentages (maximum)– 80% for $5 million or less– 70% between $5 million and $10 million– 60% from $10 million to $25 million
Business and Industry Guaranteed Loan Program
Eligible areas include all rural areas except cities with a population larger than 50,000 and the urbanized areas contiguous with them.
Business and Industry Guaranteed Loan Program
• Eligible Borrowers– Individuals– Partnerships– Corporations and Cooperatives– Indian Tribes– Public Bodies
Business and Industry Guaranteed Loan Program
• Eligible Loan Purposes– Working Capital– Machinery and Equipment– Buildings and Real Estate– Debt Refinancing
Business and Industry Guaranteed Loan Program
• Ineligible Loan Purposes– Line of Credit– Agricultural Production– Projects that transfer employment– Golf Courses, Gambling Establishments, and
Race Tracks
Business and Industry Guaranteed Loan Program
• Maximum Repayment Terms– Working Capital – 7 Years– Machinery and Equipment – 15 years (or useful
life)– Real Estate – 30 Years
Business and Industry Guaranteed Loan Program
• Collateral– Value established by certified appraisal– Discounted collateral value sufficient to support
the loan
Business and Industry Guaranteed Loan Program
• Equity Requirements– 20% minimum for new business– 10% minimum for existing business– Equity calculated in accordance with Generally
Accepted Accounting Principals (GAAP)
Business and Industry Guaranteed Loan Program
• Credit Quality– Lender credit analysis must address adequacy
of equity, cash flow, collateral, history, management, and current status of industry
Business and Industry Guaranteed Loan Program
• Interest Rate– Fixed or Variable– Negotiated between lender and borrower– Must be similar to customary rates– Variable rates adjusted no more than quarterly
Business and Industry Guaranteed Loan Program
• Fees and Costs– One time guarantee fee– Annual renewal fee – Paid by lender– Passed on to borrower– Other typical lender fees
Rural Business and Cooperative Programs
• Contact Information– 700 West Capitol, Rm 3416– Little Rock, AR 72201– (501) 301-3280
– www.rurdev.usda.gov
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