USDA (B&I) Program

USDA (B&I) Program

The USDA Business and Industry (B&I) Program is designed to improve, develop, or finance businesses, industry and employment, and improve the economic and environmental climate in rural areas. It is mainly used to acquire or refinance commercial real estate.

Other eligible uses of proceeds such as working capital and equipment acquisition financing can be considered by LCC in conjunction with a commercial real estate loan request.

You’ll need a 1st Deed of Trust/Mortgage on commercial real estate which meets USDA qualifications, along with a maximum Loan to Value of 80%.

To be eligible you must be engaged in or proposing to engage in a business which will:

  • Provide employment
  • Improve the economic or environmental climate
  • Promote the conservation, development and use of water for aquaculture
  • Reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems and other renewable energy systems.
  • The borrowing entity must reside in a community (MSA) of 50,000 or less as determined by the most recent US Census (You may need to contact LCC directly for help with determining the eligibility of your property)
  • You must have tangible balance sheet equity at the loan closing of no less than 10 to 20% for existing businesses, 20% for new business and 40% for energy or bio-based businesses.

Some examples of eligible use of proceeds are:

  • To purchase and develop land, easements, rights-of-way, buildings or facilities
  • To convert businesses, enlarge, repair, modernise or develop
  • To purchase equipment, machinery or inventory
  • To refinance existing business indebtedness which is not already structured with reasonable terms and conditions.

Here are the key points for this program:

  • The most you can borrow is $5,000,000
  • Real Estate Maturity and Amortization up to 30 years, with Equipment Amortization up to 15 years and Working Capital up to 7 years (Blended maturity and amortization is applied depending on the final structure as determined by B&I guidelines)
  • The maximum LTV for Real Estate is up to 80%; for Equipment Acquisition, Working Capital and Debt Refinancing it’s up to 60% LTC

Multi-use owner occupied properties are preferred, here are some examples:

  • Office: Professional, Condominium, Medical, Dental and Veterinarian.
  • Industrial: Heavy and Light Manufacturing, Warehouse and R&D Flex.
  • Retail: General.
  • Special Use: Assisted Living Facilities, Adult Care, Day Care Facilities, Restaurants, Funeral Homes, Hotels/Motels.

Interest rates are generally adjustable based loans, tied to the Prime Index rate. Maturities up to 30 years are available based on use of loan proceeds. The USDA collects a 2% guarantee fee on the guaranteed portion of the loan. A 0.25% renewal fee is assessed annually based on the outstanding principal balance.

To qualify, here are the underwriting requirements:

  • You must have prior ownership and management experience
  • Minimum FICO of 680
  • All loans are Full Recourse and require the personal guarantee of any and all individuals or entities holding 20% of the ownership interest or more
  • A 1.25 x Minimum Debt Coverage Ratio (DCR) for the most recent FYE and Interim period is required.

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