USDA RURAL DEVELOPMENT. Objective. RBS Business and Industry Guaranteed Loan Program. What do we do? Who are we? RURAL DEVELOPMENT

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1 RURAL DEVELOPMENT Creating New Opportunities for Rural America USDA RURAL DEVELOPMENT RBS - Rural Business-Cooperative Service RHS - Rural Housing Service RUS - Rural Utilities Service Visit us at RBS Business and Industry Guaranteed Loan Program A Private-Public partnership Objective Improve and develop Rural Businesses by financing business needs that result in greater employment Improve economic and environmental climate in rural communities Rural Development is a branch of the United States Department of Agriculture. Who are we? Guarantee loans by eligible local lenders to rural businesses What do we do? 1

2 Inspect Meat Commodity Payments Farm Loans What we don t do? To create and save jobs in rural America Thus, improving the economy in rural America. Why do we do it? Why should a business want a Business and Industry (B&I) Guaranteed Loan? Why should a business want a 2. Lower Interest Rates 1. Higher Loan Amounts Why should a business want a 3. Longer repayment terms Why should a business want a 4. Assists in providing: a Stability a. Stability b. Growth c. Expansion d. Rural Employment 2

3 Business and Industry Guaranteed Loan? 1. Provides another tool to expand their loan portfolio 2Rd 2. Reduce the risk ik 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 3

4 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 p and their urbanized areas 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. Who can borrow? 3. Less than 20% ownership by government or military employees What businesses are excluded from the B & I Guaranteed Loan Program? What businesses are excluded from the B & I Guaranteed Loan Program? Owner-occupied and rental housing projects Golf courses, racetracks, and gambling facilities 4

5 What businesses are excluded from the B & I Guaranteed Loan Program? Lending, investments, insurance companies What businesses are excluded from the B & I Guaranteed Loan Program? Production agriculture What can you do with the B& I loan Business Expansion Business and industrial acquisitions Construction Conversion Expansion Repair Modernization Reasonable Fees New Retail Center New Theater 5

6 Purchase Manufacturing Building What can you do with the loan Purchase of equipment, machinery, or supplies What can you do with the loan What can you do with the loan Start-up costs and working capital Processing and marketing facilities What can you do with the loan What Can You Do With the Loan Funds? Pollution control and abatement Recreational type Recreational type projects 6

7 What can you do with the loan What CAN T you do with Loan Funds? Refinancing for viable projects, under certain conditions Lines of Credit How much can be guaranteed? Loan guarantees typically range from $750, 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. 7

8 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 fitcorporations B&I Guarantee Fee at 2% B&I limited to Rural Areas (<50,000 population) How do I apply? Lender submits Preapplication Lender contacts the local B&I Loan Officer - or - Larry Strong / Davis Contact Davis Office with any questions (530) Simple Format with basic information Local B&I Loan Officer reviews it and schedules field visit 8

9 Lender submits Complete Application Form Lender Credit Memo, Appraisals, Credit reports, etc. ALL LENDER FORMS! Rural Development Reviews Application B&I Loan Officer processes the application and presents it to the State Loan Review Board. SLRB Approves Guarantee Request allocation NO fund 6 day wait minimum for funding Local Office issues the Conditional Commitment to lender Approval Issuing the Guarantee Lender closes loan, provides documentation meeting conditions i to Rural Development Rural Development issues the Loan Note Guarantee QUESTIONS? Thank You! John Jebian Area Director USDA Rural Development (760) ext. 4 fax: (760)