News Alerts from

April 2, 2024

USDA PROGRAM — UPDATE AND HIGHLIGHTS

USDA Business & Industry Loans (B&I) are a viable alternative to the SBA 7(a) program. Let us know if we can help your institution get started or expand your footprint in USDA lending.

Here are a few highlights of the program:
  • For FY ’24, USDA B&I program was funded at $1,548,359,126.
  • Through March 1, 2024, they’ve obligated $847,814,568, and still have $700,544,558 available.
  • B&I loans are up to $25,000,000 with an 80% guarantee (much larger loan limit than SBA 7(a)).
  • The guarantee fee is 3% of the guaranteed amount.
 Who may qualify for these guaranteed loans?
  • For-profit or non-profit businesses
  • Cooperatives
  • Federally-recognized Tribes
  • Public bodies
  • Individuals engaged or proposing to engage in a business
 What is considered an eligible area?
  • Rural areas not in a city or town with a population of more than 50,000 inhabitants.
  • The borrower’s headquarters may be based within a larger city, as long as the project is located in an eligible rural area.
  • Projects may be funded in either rural or urban areas under the Local and Regional Food System Initiative. 
How may guaranteed loan funds be used?
Eligible uses include (but are not limited to):
  • Business conversion, enlargement, repair, modernization, or development.
  • The purchase and development of land, buildings, and associated infrastructure for commercial or industrial properties.
  • The purchase and installation of machinery and equipment, supplies or inventory.
  • Debt refinancing when such refinancing improves cash flow and creates jobs.
  • Business and industrial acquisitions when the loan will maintain business operations and create or save jobs.
Guaranteed loan funds may NOT be used for:
  • Lines of credit
  • Owner-occupied and rental housing
  • Golf courses or golf course infrastructure
  • Racetracks or gambling facilities
  • Churches or church-controlled organizations
  • Fraternal organizations
  • Lending, investment, and insurance companies
  • Agricultural production, with certain exceptions
  • Distribution or payment to a beneficiary of the borrower or an individual or entity that will retain an ownership interest in the borrower

What collateral Is required? 
Loans must be fully collateralized on a discounted basis in order to protect the interest of the lender and the Agency. Lenders will discount collateral consistent with sound loan-to-value policy with the discounted collateral value at least equal to the loan amount.

What is the maximum amount of a loan guarantee?
B&I loans approved in Fiscal Year 2024 will receive an 80 percent guarantee.

What are the loan terms?
The lender, with Agency concurrence, will establish and justify the guaranteed loan term based on the use of guaranteed loan funds, the useful economic life of the assets being financed and those used as collateral, and the borrower’s repayment ability. The loan term will not exceed 40 years.

What are the interest rates?
  • Interest rates are negotiated between the lender and borrower.
  • Rates may be fixed or variable.
  • Variable interest rates may not be adjusted more often than quarterly.
What are the applicable fees?
  • Initial guarantee fee, currently 3 percent of the guaranteed amount
  • Guarantee retention fee, currently 0.5 percent of the guaranteed portion of the outstanding principal balance, paid annually
  • Unlike SBA, USDA allows for a loan origination fee
  • Qualifying projects may receive a reduced fee of 1 percent

Please reach out to us with your questions at 800.340.7304 or info@holtandmon.com. We look forward to helping you take advantage of USDA lending.

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