Knowing the steps to get a business loan can help reduce frustration and increase your chances of approval.
A business loan can help you start or grow your company, but navigating the process and lending standards can be intimidating if you don’t know how to get a business loan.
What is Business and Industrial Loans?
The purpose of the Business & Industrial (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 loans that will provide lasting community benefits.
Who is eligible for Business and Industrial Loans?
A borrower may be:
- An individual
- 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 another Federally recognized tribal group, or
- A public body.
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 renewable energy systems.
Individual borrowers must be citizens of the United States or reside in the U.S. after being legally admitted for permanent residence. Corporations or other non-public 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 loans are normally available in rural areas.
What are the loan terms for Business and Industrial Loans?
The interest rate on a guaranteed loan is negotiable between the creditor and the applicant and can be fixed or variable in terms of the statutory rate. Interest rates are subject to review and approval by the Agency. The variable interest rate may be adjusted at various intervals during the credit period, but adjustments may not be more frequent than quarterly.
The annual conversion fee is paid once a year and is necessary to continue maintaining the guarantor’s guarantee.
There is also a 3% guarantee fee in advance. A limited amount of loans can be guaranteed with a 2% down payment, provided that regulatory requirements are met.
The maximum repayment for real estate loans does not exceed 30 years; Payment for machinery and equipment shall not exceed the useful life of the machinery and equipment purchased with credit or 15 years, whichever is shorter; and the payment of working capital shall not exceed seven years.
The total amount of the agency’s loans to creditors should not exceed $ 10 million. The trustee may, at the discretion of the trustee, in certain circumstances grant an exemption from the $ 10 million limit for loans of $ 25 million.
The Secretary may approve guaranteed loans of more than $ 25 million, up to $ 40 million, for rural development organizations that process value-added agricultural products.
|Max Loan Length||Depends on what loan is used for|
|Max Loan Amount||Average: $10 million|
|Payment Frequency||Determined by lender with approval by USDA as the loan guaranteer|
|Prepayment Penalties||Determined by lender with approval by USDA as the loan guaranteer|
|Max Loan Length||No more than two percent|
How do I apply for Business and Industrial Loans?
Complete loan applications should be sent to the USDA Rural Development State Office for the project location.
How can I contact someone?