USDA

USDA loans are business loans guaranteed by the US Department of Agriculture. The loans are made by lenders, such as banks or credit unions, to businesses in rural areas. A portion of the loan is guaranteed by the USDA. The loans are like SBA loans but with a focus on promoting small businesses and creating jobs in rural communities. The loans can be used to purchase, develop or improve commercial real estate. The property must be in a rural area. The borrower must be a US citizen or have permanent residency status and the individuals that comprise the borrower must have a credit score that is 680 or above. The borrower must contribute at least 10% of the equity for existing businesses and at least 20% for new businesses. The USDA requires a feasibility study by an independent consultant for new businesses. Loan terms are negotiated between the borrower and the lender but the USDA does set maximum terms based on how the loan proceeds are planned to be used. If the loan is used for multiple purposes, the lender can make separate loans or one loan with a blended term. The process includes submitting a deal overview to a bank.The bank vets the deal and if it is a fit, they will submit a preapplication to a state branch of the USDA to determine eligibility. If eligible, the state branch will work with the borrower and the bank to complete a full application. The full application is then sent to the national office of the USDA. The national office ultimately approves or rejects the project.

• A business plan

• Personal credit reports of all owners

• Business credit reports

• Resumes of business owners

• Current balance sheet

• Profit & loss statement not more than 90 days old

• Proforma balance sheet projected for loan closing

• Balance sheet and cash flow projections for the next two

years

• Number of jobs created or saved and average wages

• Current personal or corporate financial statements for

guarantors

• Appraisal

• Environmental report

• Feasibility study by an independent consultant for new businesses

There is no hard rule on job creation. However, the loan application includes a list of the jobs that would either be saved or created with the project. It also includes an analysis of average wages and benefits.