USDA Mortgage Loans
Commercial Loan Direct offers USDA loans. The Business and Industry Guaranteed Loan Program (B&I) helps create jobs and stimulates rural economies by providing financial backing for businesses. This program provides guarantees up to 80 percent of a USDA loan made by a commercial lender. USDA Loan proceeds may be used for working capital, machinery and equipment, buildings and real estate, and certain types of debt refinancing. The primary purpose of USDA Loans is to create and maintain employment and improve the economic climate in rural communities. This is achieved by expanding the lending capability of private lenders in rural areas and helping them make and service quality loans that provide lasting community benefits. This program represents a true private-public partnership. CLD offers USDA business loans nationwide.
USDA BUSINESS AND INDUSTRY GUARANTEED LOANS (B&I)
The purpose of the USDA B&I Guaranteed Loan Program is to improve, develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities. This purpose is achieved by bolstering the existing private credit structure through the guarantee of quality USDA loans which will provide lasting community benefits. It is not intended that the guarantee authority will be used for marginal or substandard loans or for relief of lenders having such USDA loans.
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Who May Borrow?
A borrower may be a cooperative organization, corporation, partnership, or other legal entity organized and operated on a profit or nonprofit basis; an Indian tribe on a Federal or State reservation or other Federally recognized tribal group; a public body; or an individual. A borrower must be engaged in or proposing to engage in a business that will:
- Provide employment;
- Improve the economic or environmental climate;
- Promote the conservation, development, and use of water for aquaculture; or
- Reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems and other renewable energy systems.
Individual borrowers must be citizens of the United States (U.S.) or reside in the U.S. after being legally admitted for permanent residence. Corporations or other nonpublic body organization-type borrowers must be at least 51 percent owned by persons who are either citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence. B&I USDA loans are normally available in rural areas, which include all areas other than cities or towns of more than 50,000 people and the contiguous and adjacent urbanized area of such cities or towns.
How May Funds be Used?
Mortgage purposes must be consistent with the general purpose contained in the regulation. They include but are not limited to the following:
- Business and industrial acquisitions when the loan will keep the business from closing, prevent the loss of employment opportunities, or provide expanded job opportunities.
- Business conversion, enlargement, repair, modernization, or development.
- Purchase and development of land, easements, rights-of-way, buildings, or facilities.
- Purchase of equipment, leasehold improvements, machinery, supplies, or inventory.
What are the USDA Loan Amounts?
The total amount of USDA loans to one borrower must not exceed $10 million. The Administrator may, at the Administrator’s discretion, grant an exception to the $10 million limit for loans of $25 million under certain circumstances. The Secretary may approve USDA loans in excess of $25 million, up to $40 million, for rural cooperative organizations that process value-added agricultural commodities.
What are the Loan Terms?
The USDA maximum repayment for loans on real estate will not exceed 30 years; machinery and equipment repayment will not exceed the useful life of the machinery and equipment purchased with loan funds or 15 years, whichever is less; and USDA working capital repayment will not exceed 7 years.
What are the Interest Rates?
The interest rate for the USDA loans will be negotiated between the USDA lender and the applicant and may be either fixed or variable as long as it is a legal rate. Interest rates are subject to USDA Agency review and approval. The variable interest rate may be adjusted at different intervals during the term of the mortgage, but the adjustments may not be more often than quarterly.
Is Collateral Required?
Yes.
Annual Renewal Fee?
The USDA loan annual renewal fee is paid once a year and is required to maintain the enforceability of the guarantee as to the lender. The mortgage rate is the rate in effect at the time the loan is obligated, and will remain in effect for the life of the loan.