The USDA
provides five(5) loan types to small businesses. These
are government backed loans that are offered through local
lending institutions. These include:
-
Business & Industry (B&I) Loan program
-
Intermediary Relending Program (IRP)
-
Biorefinery Assistance program
-
Rural Energy for America Program Guaranteed Loan
Program (REAP LOANS)
-
Rural Economic Development Loan and Grant
(REDLG)
These are funding that small
businesses can access and utilize to grow their businesses
if they meet the funding requirements.
USDA Business & Industry (B&I) Loan
The USDA provide loans to small businesses under
the
Business & Industry loan program.
Loans can go as high as $40,000,000 with special
approval from the USDA Secretary.
Loan
guarantees range from 60% to 80% depending on
the amount of the loan.
Loan terms range
from 7 to 30 years.
Interest rate is
negotiated beetween the lender and the
applicant.
Collateral is required.
There is an Annual Renewal Fee requirement.
The loan can be used for the following-
- Business and industrial acquisitions
when the loan will keep the business from
closing, prevent the loss of employment
opportunities, or provide expanded job
opportunities.
- Business conversion, enlargement,
repair, modernization, or development.
- Purchase and development of land,
easements, rights-of-way, buildings, or
facilities.
- Purchase of equipment, leasehold
improvements, machinery, supplies, or inventory.
The USDA also provide loans to small businesses
under the
Intermediary Relending Program.
Under this program small businesses can borrow
up to $250,000 from an Intermediary Lender.
To qualify for this loan you must be a
citizen or legal resident; your business must be
located in a rural area with a population of
25,000 or less; your business just be a
corporation, partnership, LLC, individual (Sole
Proprietor), or non-profit corporation.
The loan can be used for real estate, machinery,
startup cost, working capital, pollution control
& abatement, transportation services;
feasibility studies, hotels, motels, B&Bs,
convention centers.
The
Biorefinery Assistance loan program
is designed to assist in the development of new
and emerging technologies for the development of
advanced biofuels (renewable forms of fuels).
There is no minimum loan amount.
The maximum is $250,000,000.
The loan is
60-90% guaranteed by the federal government.
The loan term is negotiated by the lender
and the borrower.
Collateral is required.
There are guarantee fee requirements which
range from 1-3%.
There is also an Annual
Renewal Fee which ranges from 0.50-1%.
The following entities are elibible to borrow
under this program: Individuals, corporations,
Indian Tribe, local governments, farm
cooperative, farmer cooperative organization,
Assocition of agricultural producers, national
laboratory, institution of higher education,
rural electric cooperative, public power entity.
This type of loan can be used for: -
Equipment purchase - Construction or
retrofitting - Permit and license fee - Working capital - Land
acquisition - Cost of financing,
excluding guarantee and renewal fees
To
be eligible the project must meet these
criteria:
- The project must be for
the development and construction of
commercial-scale biorefineries using eligible
technology or retrofitting of existing
facilities with eligible technology.
-
The project must use an eligible feedstock for
the production of advanced biofuels and biobased
products. Examples of eligible feedstocks
include, but are not limited to, renewable
biomass, biosolids, treated sewage sludge, and
byproducts of the pulp and paper industry.
- The majority of the biorefinery
production must be an advanced biofuel. A
project that creates an advanced biofuel that is
converted to another form of energy for sale
will still be considered an advanced biofuel.
- The project must provide funds of
not less than 20 percent of eligible project
costs.
Note: All projects require
an independent feasibility study and technical
assessment as part of the application.
Rural Energy for America Program Guaranteed Loan
Program (REAP LOANS)
REAP Loans was designed to
encourage the commercial financing of renewable
energy.
There are loans and
grants available under this program. Loan
amount ranges from $5,000 to $25 million.
Grant amount ranges from $1,500 to $500,000.
Loans are
guaranteed for up to 75% of total eligible
project costs.
Grants are
guaranteed for up to 25% of the total eligible
project cost.
Combined grant
and loan guarantee funding up to 75% of the
total eligible project cost.
To
be eligible the borrower must be an agricultural
producer or rural small business.
The loan can be used for equipment,
construction, professional services fee,
feasibility studies, technical reports, business
plans, retrofitting, construction of new energy
efficiency facility, working capital, and land
acquisition.
Under
the RED Loan program,
USDA provides zero interest loans to local
utilities which they, in turn, pass through to
local businesses (ultimate recipients) for
projects that will create and retain employment
in rural areas. The ultimate recipients repay
the lending utility directly.
Eligibility
requirements are:
- Have borrowed and
repaid or pre-paid an insured, direct, or
guaranteed loan received under the Rural
Electrification Act or,
- Be a not-for-profit
utility that is eligible to receive assistance
from the Rural Development Electric or
Telecommunication Program
- Be a current Rural
Development Electric or Telecommunication
Programs Borrower
Eligible Projects
include:
- Capitalization of
revolving loan funds - Technical
assistance in conjunction with projects funded
under a zero interest REDLoan
- Business Incubators
- Community
Development Assistance to non-profits and public
bodies (particularly job creation or
enhancement)
- Facilities and
equipment for education and training for rural
residents to facilitate economic development
- Facilities and
equipment for medical care to rural residents
-
Telecommunications/computer networks for
distance learning or long distance medical care
