Business. Loan Processing

Transcription

1 Business Loan Processing

2 Business and Industry Guaranteed Loan Program USDA Rural Business-Cooperative Service

3 Business and Industry Guaranteed Loan Program Improve, develop, or finance business, industry, and employment, and improve the economic and environmental climate in rural communities. Bolster the existing private credit structure through the guarantee of quality loans that will provide lasting community benefits.

4 Location Rural Area - not within the boundaries of a city or town with more than 50,000 inhabitants or the urbanized area of the city and town.

5 Borrower Any legal entity, Federally-recognized tribal group, public body or individual. Manufacturing, wholesaling, retailing, service oriented.

6 Partnership with Lenders Traditional Lenders - Federal or State chartered banks, Farm Credit Bank, Savings & Loans Other Lenders - legal authority, sufficient experience and financial strength to operate a successful lending program All lenders must have adequate experience and expertise to make, secure, service, and collect B&I loans

7 Loan Purposes Common purposes - Real estate purchase and improvements Machinery and equipment Working capital Integrated agriculture production/processing facilities Debt refinancing and business acquisitions - under certain conditions

8 Fees and Percentage of Guarantee Fees Annual Renewal Fee Guarantee Fee Loan Limits Percent of Guarantee Limits

9 Annual Renewal Fee The fee is calculated based on: The outstanding principal balance as of December 31 multiplied by the percent of the guarantee Fee rate is annually published in the Federal Register Annual fee for B&I loans made in FY2007 is 0.25% Fee remains fixed at the percentage for the life of the loan Committed to the future of rural communities

10 Loan Structure Negotiated by the lender and borrower and approved by the Agency Fixed/Variable/Combination Customary Maximum terms Real estate - 30 years Machinery and equipment - the lesser of 15 years or useful life Working capital - 7 years No balloon payments

11 Preapplication/Application Preapplication optional but encouraged (Memo or State form must be signed by the lender and applicant) Application - Form (Parts A & B) Form A (Parts I & II) (MUST be signed by the lender and borrower) Form , DOL (if applicable) Form , Environmental Personal and Commercial Credit Reports Appraisals Financial Statements

12 Application Lender s written analysis: Spreadsheets for three previous years for existing businesses Pro forma balance sheet at startup/loan closing Two years projected yearend balance sheets/income statements with ratios and comparisons with industrial standards Data shown in complete dollars and in common-size form, obtained by expressing all items a a percentage of assets (balance sheet) and sales (income statement)

13 Application, cont. Lender s credit analysis: The lender is primarily responsible for determining credit quality through a written credit and financial statement analysis Repayment ability, including a cash flow analysis Must address borrower s management History of debt repayment Necessity of any debt refinancing Credit reports of the borrower, its principals and any parent, affiliate, or subsidiary.

14 Application, cont. Proposed Loan Agreement (See (b)(11) for requirements to be included) Business Plan Feasibility Study Lender Certification

15 Feasibility Study Economic Market Technical Financial Management

16 Equity Tangible Balance Sheet Equity - Financial statements prepared in accordance with GAAP, except for the Coop Stock Purchase Program where financial information may be provided that is generally accepted by commercial agricultural lenders. Minimum of 10 percent for existing businesses. Minimum of 20 percent for new businesses.

17 Equity, cont. Tangible Balance Sheet Equity Minimum of percent for energy projects. Intangibles - goodwill, R&D, amortized loan costs, customer lists, etc. Appraisal surplus not allowed Subordinated debt is debt not equity. Subordinated owner debt allowed when refinancing Federal direct or guaranteed loans.

18 Collateral Sound and sufficient to protect interests of the lender and Agency (normally discounted value will be at least equal to the loan amount). Appropriately discounted. B&I Guarantees are not collateral. Cannot secure unguaranteed portion with other collateral separate from the guaranteed loan.

19 Planning and Performing Development Lender responsibilities include: Design policy Project control

20 Insurance Hazard Life Worker Compensation Flood Other

21 Conditional Commitment Agency requirements All conditions must be met and incorporated into the final loan agreement Don t let it expire

22 7 CFR Regulations A 4279-B 4287-B

23 Examples of B&I Healthcare Projects Sabine Medical Center, Many, Louisiana. $7.28 million guaranteed loan to fund seller finance, working capital, and refinance existing debt. The SMC facility is a one story structure with slightly over 28,000 square feet of space has 48 acute care beds including 4 intensive care unit beds. Potomac Valley Hospital of WVA, Inc., Keyser, West Virginia. $10 million guaranteed loan to construct a new 25-bed Critical Access Hospital.

24 Examples, continued Desert View Regional Medical Center, Pahrump, Nevada. $17.5 million guaranteed loan to construct a 25-bed acute primary care hospital. Northern Dutchess Hospital, Rhinebeck, New York. $12.34 million guaranteed loan to take out construction financing and debt refinancing of a 68-bed acute care facility.

25 Examples, continued CareSouth Carolina, Darlington, SC. $1.25 million guaranteed loan for permanent working capital to a private, non-profit health and human services provider located in the Pee Dee region of South Carolina. During the past 2 decades, the Society Hill Family Health Clinic grew to become a national model of health care delivery in rural communities. Now called CareSouth Carolina, the private non profit community owned business operates 9 medical centers in seven communities in the Pee Dee region

26 Web Links USDA Rural Development Rural Business-Cooperative Service Rural Area Eligibility

27 The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation, or marital or family status. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA s TARGET Center at (202) (voice and TDD). To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 1400 Independence Avenue, SW, Washington, DC or call (202) (voice or TDD). USDA is an equal employment opportunity lender, provider, and employer.