USDA Commercial Loans
Published 12-19-2018

USDA Commercial Loans

USDA stands for United States Department of Agriculture. The USDA helps create jobs and stimulates rural economies by providing financial backing for rural businesses and properties. Its primary purpose is to create and maintain employment and improve the economic climate in rural communities.

USDA Loan proceeds may be used for working capital, machinery, and equipment, real estate, and certain types of debt refinancing. This is achieved by expanding the lending capability of lenders in rural areas and helping them service quality loans that provide lasting community benefits.

Properties that fall under USDA loans are as follows: apartments, hotels, industrial, medical, mixed use, office, retail, as well as self-storage.

There are two different programs under USDA that the borrower can chose from.

The first program is called “Business Loans and Grants.” The Business Program works in partnership with the private sector and community-based organizations to provide financial assistance and business planning. It’s primary purpose is to fund projects that create or preserve quality jobs and/or promote a clean environment with a rural area (under 50,000 population).

There are two loan products under the Business and loans and grants program:

The first product is the Business and Industry Guaranteed Loan (B&I) Program.-The purpose of this program is to improve, develop, or finance business, industry, and equipment and improve economic and environmental climate in rural communities.

The second product is the Rural Business Investment Program-The purpose of this program is similar to the B&I program.

The second program under USDA is the multifamily platform. Products that fall under this platform are as follows:

-Rural Rental Housing-This program is made to individuals, trusts, associates, partnerships, limited partnerships, state or local public agencies.-Guaranteed Rental Housing-This program guarantees the construction, acquisition, or rehabilitation of rural multi-family housing.-Housing Preservation Grants-This program provides grants to sponsoring organizations for the repair or rehabilitation of very low-to-low income housing.-Rental assistance program-this program provides an additional source of support for households with incomes too low to pay the HCFP subsidized rent from their own resources.-Multi-family housing preservation and revitalization-the goal of the MPR program is to restructure rural rental housing loans and off-farm labor housing loans, revitalizing projects in order to extend the affordable use of these projects without displacing tenants due to increased rents.

USDA term length and amortization depends on the product as well as the underwriting guidelines of the conventional partner. Terms and amortizations can go up to 40 years in some limited circumstances, but are typically between 5 and 30 years.USDA loans are almost always recourse. Prepayment structures can vary greatly, depending on how the conventional partner structures the loan and what USDA program is guarantying the loan. Lending area are only available in rural areas less than 50,000 population.

For more information on USDA loans please visit our USDA Loans page.

About the Author

Leanne is a JD/MBA and works as a Managing Director for Commercial Loan Direct, specializing in large balance transactions, portfolio loans, and complex financing structures. When not negotiating the best deals for her clients, you can find Leanne in the yoga studio or snowboarding up in the Rockies.