These days, rural communities can benefit tremendously from investment. In fact, the investment of capital in a local area is precisely the type of thing that drives growth in a residential, farming or business community.
For decades, the United States Department of Agriculture (USDA) has been offering those who are leading industrial and farming efforts ways to gain access to much-needed capital. One such way is through the USDA Business and Industry Loan Program.
Essentially, the program offers a way to boost employment and promote business and industry in rural communities. The program works by guaranteeing quality loans for projects that are designed to produce lasting benefits to a local community.
However, not every type of loan qualifies. For example, loans that are marginal or substandard are not to be guaranteed by this program. Overall, the program strives to provide quality loans that improve the economic and/or environmental prospects of the local community where the loan money will be invested.
To learn more about this unique program, here are 5 FAQs about the USDA Business and Industry Loan Program:
1. Who is eligible to borrow?
Qualified borrowers include a cooperative organization, corporation, or other legal entity. Indian tribes on Federal or State reservations, public bodies, and individuals can also qualify.
To be eligible, the borrower must be planning a project that will provide employment, contribute to the overall economic or environmental climate, and either conserve water for aquaculture or reduce reliance on nonrenewable energy resources.
Furthermore, borrowers must either be U.S. citizens or be legal residents. For corporate borrowers, 51% or more of their owners must be U.S. citizens or legal residents.
2. How may I use the money I borrow?
The money that is borrowed may be used for business and industrial acquisitions whereby the loan will keep the business from closing, prevent the loss of employment, or bolster employment.
The loans can also be used for business conversion, enlargement, repair, or modernization. They can also be used for the purchase and development of land, easements, and rights-of-way. Finally, they can be used toward the purchase of equipment, leasehold improvements, machinery, supplies, or inventory.
3. How much may I borrow?
In most cases, the maximum amount a person, group or corporation can borrower is $ 10 million. However, there are some exceptions to this rule.
4. What is the loan repayment period?
Loan repayment periods depends upon the type of loan. For loans on real estate, the repayment period shall be a maximum of 30 years. Machinery and equipment loans will not exceed the useful life of the machinery or equipment – or 15 years – whichever is less. And, working capital loans must be repaid within 7 years.
5. Do I need collateral for this type of loan?
Yes, these loans do require collateral. It must be documented to have value to protect the interest of the lender and the USDA (the Agency). Collateral value needs to be at least equal to the loan amount.
If you are considering checking out the USDA Business and Industry Loan Program, consider these 5 FAQs as you decide whether you may be eligible for the program.