USDA B&I Loan Program

Table of Contents History of the USDA Objective Benefits Program Highlights Differences Between USDA B&I and SBA Financing Loan Eligibility Borrowing Eligibility Loan Limits Loan Terms Interest Rate Program Fee In Case of Default Application Process Application Requirements Contact Us

How did the USDA come about? History How did the USDA come about? In 1862, President Abraham Lincoln signed into law an act of Congress establishing the United States Department of Agriculture (USDA). The USDA’s mission is to provide leadership on food, agriculture, natural resources, rural development, nutrition, and related issues based on sound public policy, the best available science, and efficient management. The Rural Development Program of the USDA was designed to provide financial assistance and business planning in rural areas to create or preserve quality jobs and promote a clean rural environment in under-served areas. With this objective, the USDA introduced the Business and Industry (B&I) Guaranteed Loan Program.

Objective and Benefits Why Business and Industry Guaranteed Loans? Objective of the B&I Program: To improve, develop, or finance business, industry, and employment, aiming to improve the economic and environmental climate in rural communities. The B&I Guaranteed Loan Program guarantees loans for businesses activities that will: • provide employment; • improve the economic or environmental climate; • promote the conservation, development, and use of water for aquaculture; or • reduce reliance on nonrenewable energy resources by encouraging renewable energy systems (e.g., wind energy systems, geothermal energy systems, etc.). Benefits for the borrowers: Lesser equity requirements leading to more working capital High loan amounts, lower interests rate than conventional loans Longer repayment terms

Differences Between USDA B&I and SBA Financing Program Highlights Differences Between USDA B&I and SBA Financing Subject commercial real estate property does not have to be 51% owner-occupied like SBA loans, and can also include investment properties Individual USDA B&I loan sizes can be much higher than SBA loan size limits No size restriction on borrowing entity

Program Highlights Loan Eligibility Eligible Loan Purposes: Commercial real estate and business acquisitions when the loan will keep the business from closing, prevent the loss of employment, or provide expanded job opportunities. Purchase of land, machinery, and equipment, Construction, enlargement, expansion or modernization Educational or training facilities, tourist facilities Pollution control equipment, start up costs, working capital Refinancing to improve cash flow & create new or save jobs Eligible fees and costs Ineligible Loan Purposes: Residential housing projects, including owner occupied and rental properties. However, housing site development may be eligible Golf courses, gambling facilities, or racetracks Lines of credit Lease payments Payment of delinquent obligations like taxes Distribution or payment to an owner, beneficiary, or a close relative Projects larger than $1,000,000 & relocation of 50 or more jobs Agriculture production that is not integrated with processing

Borrowing Eligibility Program Highlights Borrowing Eligibility Eligible: Any corporation, partnership, individuals, Co-op, LLC, Indian Tribe, etc. organized either on a for profit or nonprofit basis. There are no size restrictions. Based in a rural area - not within the boundaries of a city of 50,000 or more, or adjacent urbanized areas. 51% owned by U.S. Citizens or persons admitted for permanent residence. Ineligible: Charitable institutions. Churches or church-controlled or fraternal organizations. Lending and investment institutions, insurance companies Businesses with government employees or military personnel as directors, officers, or owners (20 percent or more control).

Program Highlights Limits Maximum limit of the Loan: The total amount of loans limited to $10 million per borrower. The Administrator of the Program may, at the its discretion, grant loans up to $25 million under certain circumstances. The USDA Secretary may approve guaranteed loan up to $40 million, for rural cooperative organizations that process value-added agricultural commodities Loan Guarantee Limits: $0 - $5 Million: 80% Guarantee $5 Million - $10 Million: 70% Guarantee Excess of $10 Million: 60% Guarantee

Program Highlights Maximum Loan Terms Maximum repayment terms for: Real estate - 30 years. Machinery and equipment - the lesser of 15 years or its useful life. Working capital - 7 years No balloon payments allowed Interest Rate: Negotiated between the lender and the applicant May be either fixed or variable or fixed converting into variable and vice-versa. Variable rate may be adjusted at interervals not more often than quarterly Interest rates are subject to agency review and approval. Program Fee: Guarantee Fee – 2% of the guaranteed portion of the original loan amount, due at loan closing. Annual renewal fee will be applicable

Program Highlights In Case of Default The lender has to notify the USDA when a borrower is 30 days past due, and if the default exceeds 60 days, the lender must arrange a meeting with the USDA. Corrective actions may include : Deferment of principal Additional unguaranteed temporary loan Re-amortization of the loan. Transfer and assumption of the loan. Reorganization. Liquidation. Changes in interest rates with the USDA’s, the lender’s, and the holder’s approval, with the requirement that the interest rate is adjusted proportionately between the guaranteed and unguaranteed portions of the loan and the type of rate remains the same .

The Application Process Within 60 days of receiving a complete application, the USDA will make a final approval decision and will issue a commitment, subject to conditions. If the project appears viable, the parties are encouraged to submit a complete application. If the project warrants, the USDA will then arrange a meeting with all parties, usually at the project site (usually within 15 days). Lender and business submits a joint pre-application. Note: Loans up to $ 5 million are approved locally, larger ones are approved in Washington D.C.

Application Requirements Lender analysis needs to address borrower’s management ability, repayment ability, credit history, etc. Financial statements required - Past 3 years historic and 2 years of projections supported by a feasible business plan. Life insurance on key primaries. Personal guarantee required for owners with 20% or more ownership . Feasibility studies are required on all new motel & hotel projects. Minimum 10% equity for existing & 20% for start ups excluding intangible assets like goodwill, loans fees, etc. Collateral needs to be sound and sufficient to protect interests of the lender and agency (same for guaranteed and unguaranteed portion) and needs to be appropriately discounted to reflect recovery values.

Contact Us 877.850.5130 623.321.6171 avanateam@avanacapital.com If you’d like to know more about the USDA B&I product, or any other products or services AVANA Capital offers, please contact us and we’ll be happy to assist. 877.850.5130 623.321.6171 avanateam@avanacapital.com Toll Free: Fax: Email: