USDA B & I Loan Guarantee

USDA Rural Development’s Business & Industry (B&I) Guaranteed Loan Program helps rural businesses by guaranteeing loans of commercial lenders who might not otherwise extend credit.  The B&I guarantee is an incentive to spur business lending in rural areas.  

Westar Trade Resources has completed numerous applications for the B&I Loan Program by assisting our clients with preparing loan packages and feasibility studies. With many successful applications, Westar has developed an excellent reputation with our clients, lenders, and the USDA. Refer to the "Quick Links" on the right-hand side for an overview of the B&I loan process.

For a free, no-obligation consultation, contact Westar at 866-480-4405.

Program Highlights include:

  • No minimum funding amount
  • Maximum $25 million
  • No hard deadlines, applications accepted on a rolling basis
  • Eligibility - Any rural area that has a population of less than 50,000

Benefits To Businesses

  • Higher loan amounts, strengthens the loan application, less equity injection, lower interest rates and longer repayment terms assist businesses that may not qualify for conventional lender financing.
  • Assists a business in providing stability, growth expansion and rural employment.

Benefits To Lenders

  • Provides lenders with another tool to expand their loan portfolio while reducing risk exposure.
  • Improves the economy and quality of life in rural communities.
  • Reduces concerns regarding collateral/appraisal issues often found in smaller communities.
  • Allows lenders to make loans above their legal lending limits.
  • Increase profitability by selling guaranteed portion on the secondary market.

B&I Lender Role

  • The B&I program is fundamentally a lender-driven process.  
  • USDA cannot consider a B&I proposal in detail until a lender expresses serious interest in the project.
  • Whenever a lender begins to seriously consider a loan for a possible B&I guarantee, they are encouraged to call USDA to discuss the project on an informal basis. 
  • USDA can give at least a tentative indication as to the eligibility of the project for a B&I guarantee. 

Eligible Borrowers

  • Any legal entity, including individuals, public and private organizations and federally recognized Indian tribal groups, may qualify.
  • There is no size restriction on the businesses.
  • Local economic development organizations and investors can be considered.
  • Business and industrial loans can be guaranteed in rural cities up to 50,000 population. Priority is given to applications for loans in rural communities of 25,000 or less.

Eligible Loan Purposes

  • Business and industrial acquisitions, construction, conversion, expansion, repair, modernization or development costs.
  • Purchase of equipment, machinery or supplies.
  • Startup costs and working capital.
  • Processing and marketing facilities.
  • Pollution control and abatement.
  • Refinancing for viable projects, under certain conditions.
  • Purchase of startup cooperative stock for family sized farms where commodities are produced to be processed by the cooperative.

Ineligible Loan Purposes

  • Line of Credit.
  • Agricultural production which is not part of an integrated business involved in the processing of agricultural products.
  • Any project likely to result in the transfer of employment from one area to another.
  • Any project involving transfer of ownership, unless this will keep the business from closing, prevent the loss of jobs in an area or provide more jobs.
  • Paying off a creditor in excess of the value of the collateral.
  • Payment to owners, partners, shareholders or others who retain any ownership in the business.
  • Corporations and businesses not at least 51% owned and controlled by U.S. citizens.
  • Charitable and educational institutions, religious organizations and affiliated entities and fraternal organizations.

Loan and Guarantee Amounts

  • Maximum Loan Amount: Loan Guarantees are limited to a maximum of $25 million.
  • Loan Guarantee Limits Vary: 80% up to $5 million; 70% over $5 million to $10 million, and 60% for $10 million to $25 million.

Collateral & Appraisals

  • All collateral must secure the entire loan.
  • Repayment must be reasonably assured.
  • Personal and corporate guarantees are required.
  • A qualified appraisal report is required on property that will serve as collateral.
  • Loan To Appraised Market Value Ratios – Lenders will discount collateral consistent with sound loan to value policies and standards.

Minimum Repayment Terms

  • Working Capital - 7 years.
  • Machinery and Equipment - 15 years (or useful life).
  • Real Estate - 30 years.

Interest Rates

  • Interest rates for loans may be fixed or variable.
  • The rate is negotiated between the lender and borrower and is similar to those rates customarily charged to other borrowers in similar circumstances.
  • A variable rate must be tied to a nationally published rate.
  • Variable rates cannot be adjusted more than quarterly.

Fees & Costs

  • A one-time guarantee fee of 3 percent of the guaranteed principal amount is paid by the lender and may be passed on to the borrower.
  • Subject to annual renewal fee of .5% on the unpaid principal balance; guaranteed portion of the loan only.
  • Other typical lender costs may also be incurred.

Borrower Equity Requirements

  • A minimum of 10 percent tangible balance sheet equity is required at the time of issuing the loan note guarantee for existing businesses.
  • Twenty percent (20%) tangible balance sheet equity is required for new businesses.
  • All financials must be prepared in accordance with general accepted accounting principles.
  • Feasibility studies may be required.

Credit Quality

  • Lender addresses the business adequacy of equity, cash flow collateral, history, management and the current status of applicable industry in a written credit analysis.

Servicing / Liquidation

  • Financial statements developed in accordance with generally accepted accounting principles are required.
  • Lenders will service and, if necessary, liquidate the loans (with USDA Rural Development’s concurrence).

Where Should Applications be Filed?

Complete applications should be sent to the USDA Rural Development State Office for the project location. A list of offices and additional information can be obtained at http://www.rurdev.usda.gov/recd_map.html.

Business & Industry Guaranteed Loan Program Information

A variety of documents for the Business & Industry (B&I) Guaranteed Loan program are listed below for your convenience. Links to Regulations
Key documents needed for applying to this program include:

Feasibility  StudyTechnical  ReportEnvironmental  Report

Contact Westar Trade Resources for a free, no obligation consultation to determine eligibility and cost for applying to the USDA Business and Industry Loan Guarantee program at sales@westartrade.com or call 866-480-4405.