More About the B&I Program

As I mentioned in the last post that my knowledge of B&I loans are somewhat limited I have copied the information from the USDA site.  The following is the guidelines that appeared on the USDA site.

The Business and Industry (B&I) Guaranteed Loan Program guarantees loans made by commercial lenders against a portion of loss resulting from borrower default. The purpose of the guarantee authority is to improve the economic climate in rural communities in “partnership” with the existing private credit sources by increasing the local lender’s legal lending limit and allowing “increased” benefits to return to the lender via sale of both the guaranteed and non-guaranteed portions of the loan in the secondary market.  Typical guarantee percentages are as follows:

Loans of up to $5 million - 80%
Loans between $5 and $10 million - 70%
Loans over $10 million - 60%
The percentages can change based on the loan proposal, collateral, repayment ability, and the lender’s ability to service the loan.

Loan Purposes:

Loan proceeds may be used for working capital, machinery and equipment, buildings and real estate, and certain types of debt refinancing.

Who Makes the Loan?

The loan is made by commercial and other recognized lenders; generally, authorized lenders, Federal or State chartered banks, credit unions, insurance companies, savings and loan associations, Farm Credit Banks or other Farm Credit System institutions with direct lending authority, or a mortgage company that is part of a bank-holding company, plus the National Rural Utilities Cooperative Finance Corporation, eligible Rural Utilities Service borrowers, and other lenders, approved by the Agency, who have met the designated criteria.

Who Is Eligible?

Virtually any legally organized entity including a cooperative, corporation, partnership, trust or other entity organized and operating on a profit or nonprofit basis, Indian Tribe or Federally-recognized Tribal group, municipality, county, or other political subdivision of a State, or an individual. There is no test for credit elsewhere requirement.

Other Criteria:

Collateral must be sufficient to protect the interest of the lender and the Government and usually include personal and/or corporate guarantees.

Annual Renewal Fee
An annual renewal fee will be paid to Rural Development once a year and is required to maintain the enforceability of the guarantee as to the lender. The fee may be passed on the borrower.

The rate of the annual renewal fee for FY 2007 is one fourth of one percent, per notice published in the Federal Register. The annual renewal fee is determined by multiplying the renewal fee rate by the outstanding principal loan balance as of December 31 of each year, multiplied by the percent of guarantee. The rate is the rate in effect at the time the loan is obligated, and will remain in effect for the life of the loan.
FY 2009 Allocation

The FY ‘09 budget is now available for use in funding projects.  Funding will be adequate for FY ‘09.
Loan Amount:

The maximum aggregate B&I Guaranteed Loan amount is $25 million to any one borrower with the exception of cooperatives, which are eligible for $40 million.

Loan Maturity

Maximum maturities are 7 years for working capital, 15 years for machinery and equipment, and 30 years for real estate.

Time Frames for Turnaround

Loans are to be approved within 60 days of receipt of a completed application, subject to the availability of funds.

For more on the USDA visit their site. For more on our company Lightning Commercial Funding visit our site.  We also now have the ability to send out RSS Feeds automatically again so please sign up today.