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USDA Rural Development Business and Industry

Guaranteed Loans

What is the Business and Industry

Guaranteed Loan Program?

The U.S. Department of Agriculture (USDA)through its Rural Development Business andIndustry (B&I) Guaranteed Loan Program

guarantees loans made by eligible lenders to ruralbusinesses. Rural Developments (RD) missionis to increase economic opportunity and improvethe quality of life for all rural Americans. TheB&I programs primary purpose is toimprove theeconomic and environmental climate in ruralareas by improving, developing, or financingbusiness, industry, and employment. Theprogram covers any areas other than a city ortown that has a population of greater than 50,000inhabitants and the urbanized area contiguous and

adjacent to such a city or town.

How can banks benefit from participating in

the B&I program?

The federally guaranteed portion of the loanis protected against loss, reducing lenderscredit risk exposure.

There is an active secondary market for B&Iguaranteed loans (e.g., Farmer Mac II and

Small Business Administration markets)providing lenders with liquidity options.

Lenders have the flexibility to use their ownforms, loan documents, and securityinstruments.

The guaranteed portion of the loan does notcount against bank lending limits.

B&I guaranteed loans may be considered forpositive consideration under the CommunityReinvestment Act (CRA) lending test.

B&I loans receive preferential capital treatmentbased on USDAs guaranty.How do lenders participate in the B&I

program?

Similar to the SBA loan programs, lendersoriginate the B&I loans to businesses. B&Ilenders consult with USDAs RD state offices.RD staff process the pre-applications (whenappropriate) or applications for the borrowers.Forms and details about the B&I applicationprocess are availablehereor throughUSDA RDstate offices.

Lenders are responsible for applicationpreparation, ensuring credit quality, loandocumentation, construction supervision (when

appropriate), distributing loan funds, and loanservicing. In addition, lenders are responsible, inconsultation with borrowers, for developingenvironmental impact analyses, where necessary.The Agency is responsible for a general reviewof the lenders analysis of the credit. For furtherinformation, seeRD AN No. 4509 (4279-A and4279-B)April 5, 2010.

http://www.rurdev.usda.gov/ga/guarrbs.htmhttp://www.rurdev.usda.gov/ga/guarrbs.htmhttp://www.rurdev.usda.gov/ga/guarrbs.htmhttp://www.rurdev.usda.gov/recd_map.htmlhttp://www.rurdev.usda.gov/recd_map.htmlhttp://www.rurdev.usda.gov/recd_map.htmlhttp://www.rurdev.usda.gov/recd_map.htmlhttp://www.rurdev.usda.gov/SupportDocuments/an4509.pdfhttp://www.rurdev.usda.gov/SupportDocuments/an4509.pdfhttp://www.rurdev.usda.gov/SupportDocuments/an4509.pdfhttp://www.rurdev.usda.gov/SupportDocuments/an4509.pdfhttp://www.rurdev.usda.gov/SupportDocuments/an4509.pdfhttp://www.rurdev.usda.gov/SupportDocuments/an4509.pdfhttp://www.rurdev.usda.gov/recd_map.htmlhttp://www.rurdev.usda.gov/recd_map.htmlhttp://www.rurdev.usda.gov/ga/guarrbs.htm

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What can B&I guaranteed loan funds be used

for?

Most B&I loans are used for the followingpurposes:

Business and industrial acquisitions; Business conversion, enlargement, repair,

modernization, or development;

Purchase and development of land; orPurchase of equipment, machinery, supplies,or inventory.

How are B&I loans typically structured?

B&I guarantees are negotiated between thelender and the agency. The maximumpercentage of guarantee is 80 percent forloans of $5 million or less, 70 percent forloans between $5 million and $10 million,and 60 percent for loans exceeding $10million.

To increase financing for high-priorityprojects, the American Recovery andReinvestment Act of 2009 provided a limitedamount of 90 percent guarantee authority forloans of $10 million or less.

Loan amounts usually may not exceed $10million. At the RD Administratorsdiscretion, the loan limit may be increased to$25 million. The USDA Secretary mayapprove guaranteed loans in excess of $25million, up to $40 million, for ruralcooperative organizations that process value-added agricultural commodities.

Loan terms range from 7 to 30 years,depending on whether the loan is for workingcapital, equipment, or real estate.

Interest rates, whichmay be either fixed orvariable, are negotiated between the lenderand the applicant.

Collateral is required and must havedocumented value sufficient to protect theinterest of the lender and the agency.

Renewal fees are paid annually, usually bythe borrower, and are required to maintain theenforceability of the lenders guarantee. Theamount of the annual renewal fee isestablished by Rural Development. The

annual renewal fee in effect at the time theloan is obligated remains the same for the lifeof the loan.

Who are the borrowers?

Eligible borrowers include businesses dealing inmanufacturing, retail, wholesale, or services,which are operating as profit or nonprofitcorporations, individuals, cooperatives, trusts,political subdivisions (municipal, county or

other), and federally recognized Indian tribalgroups.

Additional information on B&I Loan

Guarantee Program

Program overview

Lenders Guide to B&I Guaranteed Loan Program

Processing Guide and Application Checklist

Secondary market information

USDA Priority Scoring System

USDA's Business and Industry Guaranteed LoanProgram, Community Developments Insights,OCC, June 2012

http://www.rurdev.usda.gov/rbs/busp/b&I_gar.htmhttp://www.rurdev.usda.gov/rbs/busp/b&I_gar.htmhttp://www.rurdev.usda.gov/GA/lenderoverview.pdfhttp://www.rurdev.usda.gov/GA/lenderoverview.pdfhttp://www.rurdev.usda.gov/wa/document/REAP/BI_ApplicationChecklist_Lenders.dochttp://www.rurdev.usda.gov/wa/document/REAP/BI_ApplicationChecklist_Lenders.dochttp://www.farmermac2.com/Program/http://www.farmermac2.com/Program/http://www.rurdev.usda.gov/or/biz/BIscore.pdfhttp://www.rurdev.usda.gov/or/biz/BIscore.pdfhttp://occ.gov/topics/community-affairs/publications/insights/insights-usda-business-industry-guaranteed-loan-program.pdfhttp://occ.gov/topics/community-affairs/publications/insights/insights-usda-business-industry-guaranteed-loan-program.pdfhttp://occ.gov/topics/community-affairs/publications/insights/insights-usda-business-industry-guaranteed-loan-program.pdfhttp://occ.gov/topics/community-affairs/publications/insights/insights-usda-business-industry-guaranteed-loan-program.pdfhttp://occ.gov/topics/community-affairs/publications/insights/insights-usda-business-industry-guaranteed-loan-program.pdfhttp://www.rurdev.usda.gov/or/biz/BIscore.pdfhttp://www.farmermac2.com/Program/http://www.rurdev.usda.gov/wa/document/REAP/BI_ApplicationChecklist_Lenders.dochttp://www.rurdev.usda.gov/GA/lenderoverview.pdfhttp://www.rurdev.usda.gov/rbs/busp/b&I_gar.htm