These programs allow smaller lenders to make larger loans in their communities. Allowing these lenders to maintain or build relationship with larger borrowers in their communities eliminates the need to go to the big bank in the metropolitan area.
There are a number of these USDA backed lending programs a few are listed below:
USDA Guaranteed Lending Programs
Business & Industry (B&I) Guaranteed Loan Program
This program provides the lender an 80% guarantee up to $5.0 million, 70% guarantee for loans over $5.0 million up to $10.0 million and 60% guarantee for loans from $10.0 million to $25.0 million for loans in communities of under 50,000 population based on the last census data and not adjacent to a metropolitan area. These loans are for any kind of business in rural America including investment property with no restrictions to the size of the business, occupancy or net worth.
Rural Development, Business and Cooperative Programs (BCP), Business Programs (BP)
Promoting a dynamic business environment in rural America is the goal of Rural Development, Business and Cooperative Programs (BCP), Business Programs (BP). BP works in partnership with the private sector and the community-based organizations to provide financial assistance and business planning. BP helps fund projects that create or preserve quality jobs and/or promote a clean rural environment. The financial resources of BP are often leveraged with those of other public and private credit source lenders to meet business and credit needs in rural areas. Recipients of these programs may include individuals, corporations, partnerships, cooperatives, public bodies, nonprofit corporations, Indian tribes, and private companies.
Business and Industry Guaranteed Loan Program (B&I)
The Business and Industry Guaranteed Loan Program usually offers the lending institution a guarantee of the United States Government against loan losses of up to 90% of the loan amount, depending on the size of the loan, ranging up to $25,000,000. Businesses benefit from the program in the following ways:
- Higher loan amounts that otherwise might not be available.
- Less equity injection required than conventional loan programs.
- Typically longer repayment terms are allowed.
- Money is available for land, buildings, equipment, and working capital (lines of credit are not eligible).
Loan funds can be used for almost any business purpose, including the following:
- Business acquisitions
- Purchase and improvement of real estate
- Business expansion
- Repair and plant modernization
- Development costs
- Purchase of equipment, machinery and supplies
- Startup costs and working capital
- Pollution control and abatement
- Refinancing of existing projects
- Alternative Energy Projects
Business and Industry (B&I) loans can be guaranteed for borrowers located in rural cities up to 50,000 in population.
Community Guaranteed Lending Programs
Community Facilities (CF) Guaranteed Loan Program
This program provides credit enhancement to assist lenders finance community facilities in rural areas with a populations of up to 20,000. This program provides up to 90% of loss of principal and interest on loans made to develop or improve essential community facilities, including healthcare, public safety, and public services.
Community Programs, a division of the Housing and Community Facilities Programs, is part of the United States Department of Agriculture's Rural Development mission area. Community Programs administers programs designed to develop essential community facilities for public use in rural areas. These facilities include schools, libraries, childcare, hospitals, medical clinics, assisted living facilities, fire and rescue stations, police stations, community centers, public buildings and transportation. Through its Community Programs, the Department of Agriculture is striving to ensure that such facilities are readily available to all rural communities. Community Programs utilizes three flexible financial tools to achieve this goal: theCommunity Facilities Guaranteed Loan Program, the Community Facilities Direct Loan Program, and the Community Facilities Grant Program.
Farm Guaranteed Lending Programs
The USDA Farm Service Agency (FSA) makes direct and guaranteed farm ownership (FO) and operating loans (OL) to family-size farmers and ranchers who cannot obtain commercial credit from a bank, Farm Credit System institution, or other lender. FSA loans can be used to purchase land, livestock, equipment, feed, seed, and supplies. Loans can also be used to construct buildings or make farm improvements. Operating lines of credit are also eligible for guarantee under this program.
SA loans are often provided to beginning farmers who cannot qualify for conventional loans because they have insufficient financial resources. FSA also helps established farmers who have suffered financial setbacks from natural disasters, or whose resources are too limited to maintain profitable farming operations with traditional rates and terms afforded by lenders without the benefit of a loan guarantee.
FSA guaranteed loans provide lenders (e.g., banks, Farm Credit System institutions, credit unions) with a guarantee of up to 95 percent of the loss of principal and interest on a loan. Farmers and ranchers apply to an agricultural lender, which then arranges for the guarantee. The FSA guarantee permits lenders to make agricultural credit available to farmers who do not meet the lender's normal underwriting criteria.
FSA can guarantee OLs or FO loans up to $1,355,000 (amount adjusted annually based on inflation).