Creating New Opportunities RURAL DEVELOPMENT Creating New Opportunities for Rural America Visit us at www.rurdev.usda.gov/ca ONLINE

USDA RURAL DEVELOPMENT RBS - Rural Business-Cooperative Service RHS - Rural Housing Service RUS - Rural Utilities Service TO ORIENT YOU WITH USDA’S STRUCTURE YOU CAN SEE BY THIS SLIDE THAT RURAL DEVLOPMENT IS DEVIDED INTO THREE AREAS RURAL BUSINESS SERVICES IS THE AREA WE WILL COVER TONOGHT THE OTHER TWO HAVE MANY PROGRAMS BUTTHEY DO NOT RELATE DIRECTLY TO ENTANOL PROJECTS

Business and Industry Guaranteed Loan Program RBS Business and Industry Guaranteed Loan Program A Private-Public partnership RURAL BUSINESS SERVICES IS A PARTNERSHIP BETWEEN PRIVATE SECTOR AND THE PUBLIC SECTOR

Objective Improve and develop Rural Businesses by financing business needs that result in greater employment Improve economic and environmental climate in rural communities

Who are we? Rural Development is a branch of the United States Department of Agriculture.

What do we do? Guarantee loans by eligible local lenders to rural businesses

What we don’t do? Inspect Meat Commodity Payments Farm Loans

Why do we do it ? To create and save jobs in rural America Thus, improving the economy in rural America.

Why should a business want a Business and Industry (B&I) Guaranteed Loan? 1. Higher Loan Amounts

Why should a business want a B & I Guaranteed Loan? 2. Lower Interest Rates

Why should a business want a B & I Guaranteed Loan? 3. Longer repayment terms

Why should a business want a B & I Guaranteed Loan? 4. Assists in providing: a. Stability b. Growth c. Expansion d. Rural Employment

Why would a lender want to do a Business and Industry Guaranteed Loan? 1. Provides another tool to expand their loan portfolio

Why would a lender want to do a B & I Guaranteed Loan? 2. Reduce the risk of loss on rural business loans

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

Why would a lender want to do a B & I Guaranteed Loan? 4. Reduces concerns about collateral /appraisal issues often found in rural California

Why would a lender want to do a B & I Guaranteed Loan? 5. Allows loans to be made above their legal lending limits

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

Why would a lender want to do a B & I Guaranteed Loan? 7. Uses their forms, loan documents, and security instruments

What is a Rural area? All areas except for cities of more than 50,000 people and their urbanized areas

Who can borrow? 1. Any legal entity: a. Individuals b. Public organizations c. Private organizations d. Federally recognized tribal groups

Who can borrow? 2. Majority ownership by US. citizens or permanent residents. 3. Less than 20% ownership by government or military employees

What businesses are excluded from the B & I Guaranteed Loan Program? Owner-occupied and rental housing projects

What businesses are excluded from the B & I Guaranteed Loan Program? Golf courses, racetracks, and gambling facilities

What businesses are excluded from the B & I Guaranteed Loan Program? Lending, investments, insurance companies

What businesses are excluded from the B & I Guaranteed Loan Program? Production agriculture

What can you do with the B& I loan funds? Business and industrial acquisitions Construction Conversion Expansion Repair Modernization Reasonable Fees

Business Expansion

New Retail Center

New Theater

Purchase Manufacturing Building

What can you do with the loan funds? Purchase of equipment, machinery, or supplies

What can you do with the loan funds? Start-up costs and working capital

What can you do with the loan funds? Processing and marketing facilities

What can you do with the loan funds? Pollution control and abatement

What Can You Do With the Loan Funds? Recreational type projects

What can you do with the loan funds? Refinancing for viable projects, under certain conditions

What CAN’T you do with Loan Funds? Lines of Credit

How much can be guaranteed? Loan guarantees typically range from $750,000 to a maximum of $10 million. Exceptions to $25 million

What are Loan Guarantee Limits? (maximum % applies to the entire loan) 80% for $5 million or less 70% for over $5 million to $10 million 60% for over $10 million to $25 million

What are the Terms? Working Capital - 7 years maximum Equipment - 15 years maximum Real Estate - 30 year maximum Blended Terms OK

What are the Equity Requirements? New Business - 20% Tangible Equity Existing Business - 10% Tangible Equity Recreation and energy businesses may be higher Book Value Basis with intangibles deducted.

FEASIBILITY STUDIES A feasibility study is generally required: a new business (start-up) eg. Ethanol Plant an existing Company lacking profitable history significant expansion. The feasibility study should be prepared by an independent consultant with expertise in that type of operation.

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.

What is Adequate Collateral? Sufficient Value, established by appraisal, to secure the loan. The values are discounted depending on the type of security offered.

B&I vs. SBA GUARANTEES B&I can do Tenant Occupied Buildings (No 51% occupancy rule) B&I can do Non-Profit Corporations B&I Guarantee Fee at 2% B&I limited to Rural Areas (<50,000 population)

How do I apply? Lender contacts the local B&I Loan Officer - or - Larry Strong / Davis Contact Davis Office with any questions (530) 792-5805

Lender submits Preapplication Loan Process Lender submits Preapplication Simple Format with basic information Local B&I Loan Officer reviews it and schedules field visit

Lender submits Complete Application Loan Process Lender submits Complete Application Form 4279-1 Lender Credit Memo, Appraisals, Credit reports, etc. ALL LENDER FORMS !

Rural Development Reviews Application Loan Process Rural Development Reviews Application B&I Loan Officer processes the application and presents it to the State Loan Review Board.

Approval Loan Process SLRB Approves Guarantee Request allocation NO fund 6 day wait minimum for funding Local Office issues the Conditional Commitment to lender

Issuing the Guarantee Loan Process Lender closes loan, provides documentation meeting conditions to Rural Development Rural Development issues the Loan Note Guarantee

QUESTIONS? Thank You! John Jebian Area Director USDA Rural Development (760) 342- 4624 ext. 4 fax: (760) 347-4074