What Should You Expect From USDA Commercial Loans?

With USDA commercial loans, you can bolster your rural business using a secure form of financing. This program provides capital for small businesses that cannot qualify for SBA or bank loans. The USDA made investments of approximately 150 million USD in 2014 for small rural businesses.

The emphasis of these loans is to help small businesses to innovate and create new jobs in their respective rural regions. Here’s a roundup on business loans offered through the USDA:

What does the USDA Business Loan program entail?

The Business and Industry (B&I) Loan Guarantee from the USDA is a popular program for rural areas. These loans are subsidized, but like other SBA loans, the federal government doesn’t directly offer them. It, instead, works with a financial institution that lends commercial loans to the applicants proving their eligibility.

The USDA makes sure that the institution is well-insured against financial risks if the borrowers default. It is an easy-access credit for small businesses thriving in rural communities.

What is the eligibility for the USDA Commercial Loan?

Through the B&I Loan Program, the USDA defines the eligibility of businesses to get the finance. This may include the credit history and size of the business. Most of the eligibility requirements are similar to those in SBA loans. But, there is a big difference in location preferences for lending finance. The loan applicant should reside in a rural area anywhere in the country.

The ‘rural area’ for this loan is defined as a region apart from a town or city having more than 50,000 residents. Businesses in such areas can apply for B&I commercial loans. You can also get a loan if the headquarters of your business is based in a populated area, but you need funding for a project in a rural community.

What are the uses of funding under the USDA?

Depending on the type of project and size of your business, you may use USDA commercial loans for a variety of purposes. Apply for a loan if:

  • You need funding for business expansion, modernization, development, or conversion
  • Funds are needed to purchase inventory, land, or some equipment
  • The business needs debt refinancing to improve the cash flow
  • There is a business acquisition under process, and you need a loan to restructure

Whatever be the purpose of applying for the loan, you should maintain complete compliance with the underwriting and collateral guidelines of the USDA. Having a solid credit history and proof of equity further strengthens your application. Tell the loan provider why you need this funding and how will you repay the loan.

How to find the best business loan provider?

Before applying for a USDA business loan, try to find a lending company that gives you full attention and support. The lending team should be skilled and familiar with every aspect of the USDA B&I Loan program.

Ask about the interest rates and select a company offering competitive prices based on the prime rates in the market. Also, look for flexible terms to fit your funding needs. Most importantly, the collateral amount shouldn’t be more than or equal to the loan amount. With these points in mind, you can find the best loan for your needs.

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