Tim Smith's USDA-RD Presentation

USDA Rural Development

ASU Small Business And Technology Development Center

May 20, 2014

Tim Smith Business and Cooperative Programs Director



• 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


Loans Grants Loan Guarantees

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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.


• Benefits to Businesses– Higher loan amounts– Lower interest rates– Longer terms– Makes capital available


• Benefits to Lenders– Reduces risk– Lending limit restrictions– Access to secondary market


• Guarantee percentages (maximum)– 80% for $5 million or less– 70% between $5 million and $10 million– 60% from $10 million to $25 million


Eligible areas include all rural areas except cities with a population larger than 50,000 and the urbanized areas contiguous with them.


• Eligible Borrowers– Individuals– Partnerships– Corporations and Cooperatives– Indian Tribes– Public Bodies


• Eligible Loan Purposes– Working Capital– Machinery and Equipment– Buildings and Real Estate– Debt Refinancing


• Ineligible Loan Purposes– Line of Credit– Agricultural Production– Projects that transfer employment– Golf Courses, Gambling Establishments, and

Race Tracks


• Maximum Repayment Terms– Working Capital – 7 Years– Machinery and Equipment – 15 years (or useful

life)– Real Estate – 30 Years


• Collateral– Value established by certified appraisal– Discounted collateral value sufficient to support

the loan


• Equity Requirements– 20% minimum for new business– 10% minimum for existing business– Equity calculated in accordance with Generally

Accepted Accounting Principals (GAAP)


• Credit Quality– Lender credit analysis must address adequacy

of equity, cash flow, collateral, history, management, and current status of industry


• Interest Rate– Fixed or Variable– Negotiated between lender and borrower– Must be similar to customary rates– Variable rates adjusted no more than quarterly


• Fees and Costs– One time guarantee fee– Annual renewal fee – Paid by lender– Passed on to borrower– Other typical lender fees


• Contact Information– 700 West Capitol, Rm 3416– Little Rock, AR 72201– (501) 301-3280

– www.rurdev.usda.gov

http://www.rurdev.usda.gov/

Small Business & Entrepreneurship

Tim Smith's USDA-RD Presentation