Presentation on theme: "Creating New Opportunities"— Presentation transcript:
1 Creating New Opportunities RURAL DEVELOPMENTCreating New Opportunitiesfor Rural AmericaVisit us atONLINE
2 USDA RURAL DEVELOPMENT RBS - Rural Business-Cooperative ServiceRHS - Rural Housing ServiceRUS - Rural Utilities ServiceTO ORIENT YOU WITH USDA’S STRUCTUREYOU CAN SEE BY THIS SLIDE THAT RURAL DEVLOPMENTIS DEVIDED INTO THREE AREASRURAL BUSINESS SERVICES IS THE AREA WE WILL COVER TONOGHTTHE OTHER TWO HAVE MANY PROGRAMS BUTTHEY DO NOTRELATE DIRECTLY TO ENTANOL PROJECTS
3 Business and Industry Guaranteed Loan Program RBSBusiness and Industry Guaranteed Loan ProgramA Private-Public partnershipRURAL BUSINESS SERVICES IS A PARTNERSHIPBETWEEN PRIVATE SECTOR AND THE PUBLIC SECTOR
4 ObjectiveImprove and develop Rural Businesses by financing business needs that result in greater employmentImprove economic and environmental climate in rural communities
5 Who are we?Rural Development is a branch of the United States Department of Agriculture.
6 What do we do?Guarantee loans by eligible local lenders to rural businesses
7 What we don’t do?Inspect MeatCommodity PaymentsFarm Loans
8 Why do we do it ? To create and save jobs in rural America Thus, improving the economy in rural America.
9 Why should a business want a Business and Industry (B&I) Guaranteed Loan? 1. Higher Loan Amounts
10 Why should a business want a B & I Guaranteed Loan? 2. Lower Interest Rates
11 Why should a business want a B & I Guaranteed Loan? 3. Longer repayment terms
12 Why should a business want a B & I Guaranteed Loan? 4. Assists in providing:a. Stabilityb. Growthc. Expansiond. RuralEmployment
13 Why would a lender want to do a Business and Industry Guaranteed Loan? 1. Provides another tool to expand their loan portfolio
14 Why would a lender want to do a B & I Guaranteed Loan? 2. Reduce the risk of loss on rural business loans
15 Why would a lender want to do a B & I Guaranteed Loan? 3. Improves the economy and quality of life in rural California , while satisfying CRA requirements
16 Why would a lender want to do a B & I Guaranteed Loan? 4. Reduces concerns about collateral /appraisal issues often found in rural California
17 Why would a lender want to do a B & I Guaranteed Loan? 5. Allows loans to be made above their legal lending limits
18 Why would a lender want to do a B & I Guaranteed Loan? 6. Increases their return when guarantee is sold in the active secondary market
19 Why would a lender want to do a B & I Guaranteed Loan? 7. Uses their forms, loan documents, and security instruments
20 What is a Rural area?All areas except for cities of more than 50,000 people and their urbanized areas
21 Who can borrow? 1. Any legal entity: a. Individuals b. Public organizationsc. Private organizationsd. Federally recognized tribal groups
22 Who can borrow? 2. Majority ownership by US. citizens or permanent residents.3. Less than 20% ownership by government or military employees
23 What businesses are excluded from the B & I Guaranteed Loan Program? Owner-occupied and rental housing projects
24 What businesses are excluded from the B & I Guaranteed Loan Program? Golf courses, racetracks, and gambling facilities
25 What businesses are excluded from the B & I Guaranteed Loan Program? Lending, investments, insurance companies
26 What businesses are excluded from the B & I Guaranteed Loan Program? Production agriculture
27 What can you do with the B& I loan funds? Business and industrial acquisitionsConstructionConversionExpansionRepairModernizationReasonable Fees
32 What can you do with the loan funds? Purchase of equipment, machinery, or supplies
33 What can you do with the loan funds? Start-up costs and working capital
34 What can you do with the loan funds? Processing and marketing facilities
35 What can you do with the loan funds? Pollution control and abatement
36 What Can You Do With the Loan Funds? Recreational type projects
37 What can you do with the loan funds? Refinancing for viable projects, under certain conditions
38 What CAN’T you do with Loan Funds? Lines of Credit
39 How much can be guaranteed? Loan guarantees typically range from $750,000 to a maximum of $10 million. Exceptions to $25 million
40 What are Loan Guarantee Limits? (maximum % applies to the entire loan) 80% for $5 million or less70% for over $5 million to $10 million60% for over $10 million to $25 million
41 What are the Terms? Working Capital - 7 years maximum Equipment - 15 years maximumReal Estate - 30 year maximumBlended Terms OK
42 What are the Equity Requirements? New Business - 20% Tangible EquityExisting Business - 10% Tangible EquityRecreation and energy businesses may be higherBook Value Basis with intangibles deducted.
43 FEASIBILITY STUDIES A feasibility study is generally required: a new business (start-up) eg. Ethanol Plantan existing Company lacking profitable historysignificant expansion.The feasibility study should be prepared by an independent consultant with expertise in that type of operation.
44 What type of collateral is required? Collateral secures the entire loan. 100%Personal and corporate guarantees are required.A qualified appraisal report is required on property that will serve as collateral.
45 What is Adequate Collateral? Sufficient Value, established by appraisal, to secure the loan. The values are discounted depending on the type of security offered.
46 B&I vs. SBA GUARANTEESB&I can do Tenant Occupied Buildings (No 51% occupancy rule)B&I can do Non-Profit CorporationsB&I Guarantee Fee at 2%B&I limited to Rural Areas (<50,000 population)
47 How do I apply?Lender contacts the local B&I Loan Officer - or Larry Strong / DavisContact Davis Office with any questions(530)
48 Lender submits Preapplication Loan ProcessLender submits PreapplicationSimple Format with basic informationLocal B&I Loan Officer reviews it and schedules field visit