RURAL DEVELOPMENT Creating New Opportunities for Rural America Visit us at .

RURAL DEVELOPMENTCreating New Opportunities

for Rural America

Visit us at www.rurdev.usda.gov/ca

USDA RURAL DEVELOPMENT

• RBS - Rural Business-Cooperative Service

• RHS - Rural Housing Service

• RUS - Rural Utilities Service

Business and Industry Guaranteed Loan Program

A Private-Public partnership

RBS

Objective

• Improve and develop Rural Businesses by financing business needs that result in greater employment

• Improve economic and environmental climate in rural communities

Who are we?

• Rural Development is a branch of the United States Department of Agriculture.

What do we do?

• Guarantee loans by eligible local lenders to rural businesses

What we don’t do?

• Inspect Meat

• Commodity Payments

• Farm Loans

Why do we do it ?• To create and save jobs in rural America

• Thus, improving the economy in rural America.

Why should a business want a Business and Industry (B&I) Guaranteed Loan?

1. Higher Loan Amounts

Why should a business want a B & I Guaranteed Loan?

2. Lower Interest Rates


3. Longer repayment terms


4. Assists in providing:

a. Stability

b. Growth

c. Expansion

d. Rural

Employment

Why would a lender want to do a Business and Industry

Guaranteed Loan?

1. Provides another tool to expand their loan portfolio

Why would a lender want to do a B & I Guaranteed Loan?

2. Reduce the risk of loss on rural business loans

2. Reduce the risk of loss on rural business loans


3. Improves the economy and quality of life in rural California , while satisfying CRA requirements


4. Reduces concerns about collateral /appraisal issues often found in rural California


5. Allows loans to be made above their legal lending limits


6. Increases their return when guarantee is sold in the active secondary market


7. Uses their forms, loan documents, and security instruments

What is a Rural area?

• All areas except for cities of more than 50,000 people and their urbanized areas

Who can borrow?

1. Any legal entity:

a. Individuals

b. Public organizations

c. Private organizations

d. Federally recognized tribal groups

Who can borrow?

2. Majority ownership by

US. citizens or permanent residents.

3. Less than 20% ownership by government or military employees

What businesses are excluded from the B & I Guaranteed Loan

Program?

• Owner-occupied and rental housing projects


Program?

• Golf courses, racetracks, and gambling facilities


Program?

• Lending, investments, insurance companies


Program?

• Production agriculture

What can you do with the B& I loan funds?

• Business and industrial acquisitions

• Construction• Conversion• Expansion• Repair• Modernization• Reasonable Fees

Business Expansion

New Retail Center

New Theater

Purchase Manufacturing Building

What can you do with the loan funds?

• Purchase of equipment, machinery, or supplies


• Start-up costs and working capital


• Processing and marketing facilities


• Pollution control and abatement

What Can You Do With the Loan Funds?

• Recreational type projects


• Refinancing for viable projects, under certain conditions

What CAN’T you do with Loan Funds?

• Lines of Credit

How much can be guaranteed?

• Loan guarantees typically range from $750,000 to a maximum of $10 million. Exceptions to $25 million

What are Loan Guarantee Limits? (maximum % applies to the

entire loan)• 80% for $5 million

or less

• 70% for over $5 million to $10 million

• 60% for over $10 million to $25 million

What are the Terms?• Working Capital - 7

years maximum• Equipment - 15 years

maximum• Real Estate - 30 year

maximum• Blended Terms OK

What are the Equity Requirements?

• New Business - 20% Tangible Equity

• Existing Business - 10% Tangible Equity

• Recreation and energy businesses may be higher

• Book Value Basis with intangibles deducted.

FEASIBILITY STUDIES

• A feasibility study is generally required:– a new business (start-up) eg. Ethanol Plant– an existing Company lacking profitable history– significant expansion.

• The feasibility study should be prepared by an independent consultant with expertise in that type of operation.

What type of collateral is required?

• Collateral secures the entire loan. 100%

• Personal and corporate guarantees are required.

• A qualified appraisal report is required on property that will serve as collateral.

What is Adequate Collateral?• Sufficient Value,

established by appraisal, to secure the loan. The values are discounted depending on the type of security offered.

B&I vs. SBA GUARANTEES

• B&I can do Tenant Occupied Buildings (No 51% occupancy rule)

• B&I can do Non-Profit Corporations

• B&I Guarantee Fee at 2%

• B&I limited to Rural Areas (<50,000 population)

How do I apply?

• Lender contacts the local B&I Loan Officer - or - Larry Strong / Davis

• Contact Davis Office with any questions

• (530) 792-5805

Lender submits Preapplication

• Simple Format with basic information

• Local B&I Loan Officer reviews it and schedules field visit

Loan Process

Lender submits Complete Application

• Form 4279-1• Lender Credit Memo,

Appraisals, Credit reports, etc.

ALL LENDER FORMS !

Loan Process

Rural Development Reviews Application

• B&I Loan Officer processes the application and presents it to the State Loan Review Board.

Loan Process

Approval• SLRB Approves

Guarantee• Request allocation NO

fund• 6 day wait minimum

for funding• Local Office issues the

Conditional Commitment to lender

Loan Process

Issuing the Guarantee• Lender closes loan,

provides documentation meeting conditions to Rural Development

• Rural Development issues the Loan Note Guarantee

Loan Process

Thank You!

John Jebian

Area Director

USDA Rural Development

(760) 342- 4624 ext. 4 fax: (760) 347-4074

QUESTIONS?

RURAL DEVELOPMENT Creating New Opportunities for Rural America Visit us at .

Documents

loan portfolio slide

rural employment slide

rural california slide

rural business loans

rural businesses

loan documents

rural america

production agriculture