The United States Department of Agriculture's
Business and Industry Program

The purpose of the B&I Guaranteed Loan Program is to improve, develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities. This purpose is achieved by guaranteeing quality loans that provide lasting community benefits.

Who May Borrow - A borrower may be a cooperative organization, corporation, partnership, or other legal entity organized and operated on a profit or nonprofit basis; an Indian tribe on a Federal or State reservation or other Federally recognized tribal group; a public body; or an individual. A borrower must be engaged in or proposing to engage in a business that will:

1. Provide employment;
2. Improve the economic or environmental climate;
3. Promote the conservation, development, and use of water for aquaculture; or
4. Reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems and other renewable energy systems.

Individual borrowers must be citizens of the United States (U.S.) or reside in the U.S. after being legally admitted for permanent residence. Corporations or other nonpublic body organization-type borrowers must be at least 51 percent owned by persons who are either citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence. B&I loans are normally available in rural areas, which include all areas of less than 50,000 people.

Use of Funds - Loan purposes include, but are not limited to the following:

1. Business and industrial acquisitions when the loan will keep the business from closing, prevent the loss of employment opportunities, or provide expanded job opportunities.
2. Business conversion, enlargement, repair, modernization, or development.
3. Purchase and development of land, easements, rights-of-way, buildings, or facilities.
4. Purchase of equipment, leasehold improvements, machinery, supplies, or inventory.

What is the percentage of Guarantee - The percentage of guarantee, up to the maximum allowed, is a matter of negotiation between the lender and the USDA. The maximum percentage guarantee is:

· 80% percent $5 million or less,

· 70% percent for loans between $5 and $10 million, and

· 60% percent for loans exceeding $10 million.

Loan Amounts - The USDA may grant an exception to the $10 million limit for loans up to $25 million under certain circumstances. The Secretary of the USDA may approve guaranteed loans in excess of $25 million, up to $40 million, for rural cooperative organizations that process value-added agricultural commodities.

Loan Terms - For real estate the maximum term is 30 years. For machinery and equipment, repayment cannot exceed its useful life or 15 years, whichever is less. For working capital loans, 7 years.

Interest Rates - Interest rates may be either fixed or variable as long as it is a legal rate. They are subject to USDA review and approval. Variable rates may not adjust more than quarterly.

Collateral - Collateral must have documented value sufficient to protect the interest of the lender and the USDA. The discounted collateral value will normally be at least equal to the loan amount.

Annual Renewal Fees - There is an annual renewal fee that is paid once a year and is required to maintain the enforceability of the guarantee as to the lender. The fee is established by the USDA in an annual notice published in the Federal Register.