usda commercial loan programs · to listen by phone, dial 1-877-369-5243 then enter access code:...

To listen by phone, dial 1-877-369-5243 then enter access

code: 0101168## For Technical Assistance, Contact the

AT&T Helpdesk – 888-796-6118

USDA Commercial Loan Programs

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Vision: Robust sustainable rural communities

David H Robinson Northern Regional Coordinator

Rural Development/Rural Business – Cooperative

Service

202-768-0586

David.Robinson@usda.gov

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Rural Business Delivery Structure

Local Delivery – origination / servicing •Loan approval – $5 million to $10 million

•Lender relationship management

Regional Coordinators • Northern --- Southern --- Midwestern --- Western Regions

• Internal and External Support - facilitation

National Office • Credit approval up to $25 million

• Policy

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New England State Office Coordinator Contact

Northern Region

David H Robinson 202-768-0586 David.Robinson@usda.gov

Southern Region Valarie Flanders 207-257-4441 Valarie.Flanders@usda.gov

Midwestern Region Robin Moore 202-701-4018 Robin.Moore@usda.gov

Western Region Robert Fry 202-768-0589 Robert.Fry@usda.gov

Regional Contact Information

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Risk Mitigation

What sets USDA apart:

• Low impairment risk - up-front due diligence

• High net worth clients (business & energy guarantees)

• Construction risk – Agency may consider up-front issuance

• Rural or specialized collateral risk

• Entity risk: Non-profit; Cooperatives; Diversified ; Start-up

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Bank Financial Benefits

Convert Commercial Loans (low margin) to higher

yielding Marketable Securities

• Full faith and credit of U.S. government

• Premiums over par -

• Rate: Flexible to any published index

• Fixed / Variable / Multi-Year Variable

• Prepayment penalties permitted

• Servicing fee income

• Sale to secondary market or high net worth client

• Improve loan pricing advantage for sought after credits

Priorities

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Infrastructure

Innovation

Partnership

• Food Systems • Manufacturing

• Banking Partnerships • SBA Rural Initiative • Leverage

• Customer Service • Regulatory Reform

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Rural Utility Service

Rural Business Coop Service

Rural Housing Service

• Electric • Water & Environmental • Telecommunications

• Single Family • Multi Family • Community Programs

• Business Loan Guarantees • Intermediary (gap) Lending Programs • Energy Grants and Loan Guarantees • Cooperative Development & Support

Agencies of Rural Development

Rural Area By Program

Generally, the project must be located in a rural area or city of 50,000 people or less and not adjacent to an urbanized area.

RBS

The project must primarily serve rural residents or residents of a city of 20,000 or less population.

CF

The project must primarily serve rural residents or residents of a city of 10,000 or less population.

WEP

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Eligibility of project location can be accessed by address on the RD website: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

USDA Loan Guarantees

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Credit Enhancements

Mitigate Risk

Increase ROI

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Guarantee against potential loss

• Specialized Business

• Specialized Collateral

•Credit Standards Upper Limits

Industry Concentration

Limited Portfolio Experience—New Business Development

Community Reinvestment Act

Compliance

Allocate Interest Rate Risks to Secondary Market

Rural Development Local People and Local Access

Mitigate Risk

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Access to Capital

Larger Loans – Exceed Lending Limits

Loan Structure

• Longer Terms

• Full Amortization

• Align Balance Sheet

• Align Repayment to Cash Flow

Variable or Fixed Interest Rate

Credit Enhancements

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Sale of Guaranteed Portion to Secondary Market, Investors, and Farmer Mac

• Sales Premiums

• Servicing Fee/Retention

Access to Capital

Decrease Required Loss Reserves

Cross-sell Banking Services

Increase ROI

Rural Development Guaranteed Loan Programs

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• Business and Industry Guaranteed Loan Program

• Community Facilities

• Rural Energy for America Program (REAP)

• Water and Environmental Programs (WEP)

Business & Industry

(B&I) Loan

Guarantees

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Eligible Purposes

• Purchase, develop, expand, or improve facilities

• Purchase machinery, equipment, inventory and supplies

• Debt refinancing (limitations – next slide)

• Working Capital

• Business acquisition

• Conversions to employee-owned businesses

• Non-owner occupied CRE is eligible.

• No “Test for Credit” – high net worth clients are OK.

Debt refinancing

Must demonstrate cash flow benefit

Remove balloon payment

100% non-lender exposure

Existing lender debt – up to 49% of new loan

100% of federally guaranteed debt – even

existing lender (i.e. refi SBA).

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Eligible Rural Areas – Business Guarantee

http://eligibility.sc.egov.usda.gov/eligibility/

welcomeAction.do

State program staff are able

to assist in qualifying project

sites.

Business & Industry Loan Guarantees

Eligible Borrowers

• For-profit businesses

• Nonprofits –Cooperatives

• Federally-recognized Tribes

• Public bodies

• Individuals

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Business & Industry Loan Guarantees

Guarantee - Percent of Note Face

• 80% for loans of $5 million or less

• 70% for loans between $5 and $10 million

• 60% for loans exceeding $10 million, up to $25 million maximum

• Initial guarantee fee is 3% upon issuance of the Loan Note Guarantee

• Annual renewal fee of 0.5% is due based on the 12/31 principal balance

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Case Study: Business

Loan Guarantee

Product: Business Loan Guarantee

Borrower: Not-for-profit

Guarantee: 80% of $1,400,000

Collateral: First Lien Mortgage

Purpose: Ownership Transfer

Children’s Summer Camp

Camp Louemma: Sussex, NJ –Not-for-profit. Structured summer

camp programs designed to meet diverse recreational needs and

interests of campers.

Facilities include: Athletics, aquatics, creative and performing arts and

outdoor adventure. Unique in providing individualized instruction or

clinics.

Community Facilities Programs Overview

• Community Facilities Programs offer direct loans, loan

guarantees and grants to develop or improve essential

public services and facilities in communities across rural

America.

• These amenities help increase the competitiveness of rural

communities in attracting and retaining businesses that

provide employment and services for their residents

• These facilities improve the basic quality of life, and assist

in the development and sustainability of rural America.

Community Facility Loan

Guarantees

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Business & Industry Loan Guarantees

Purpose is to improve, develop, or finance essential community facilities in rural communities.

Eligible Loan Purposes

• Purchase, develop, expand, or improve facilities

• Purchase machinery, equipment, inventory and supplies

• Debt refinancing (limitations)

• Facility acquisition

Community Facilities

• Test for Credit: Document unable to make the loan without a

guarantee

• Up to a 90% guarantee to protect the lender on any loan loss

• One time, 1% fee upon issuance of Loan Note Guarantee.

• Interest rate set by lender (fixed or variable)

• Loan term set by lender (maximum 40 year term or useful life)

• Adequate security to protect the interest of the Government

• Borrower must show repayment ability

Guarantee Rates, Terms, and Fees

Typical Projects

• Hospitals, Medical Clinics, Treatment Facilities

• Nursing Homes

• Schools

• Libraries

• Municipal Buildings

• College Dormitory

• Community Centers

Community Facilities

Product: Community Facility Loan

Guarantee

Guarantee: 90% of $1,278,000

Collateral: First Lien Mortgage

Purpose: Child Education Center

Concord Children's Center: Concord, MA -

Accredited, nonprofit school that provides

development and early education to young children

from 10 weeks of age through second grade.

Facilities include: Infants and toddlers classroom;

Two preschool classes and afterschool program for

children in kindergarten through second grade.

Case Study:

Community Facility

Loan Guarantee

Rural Energy for America Program (REAP)

Renewable Energy Systems Energy Efficiency Improvements

Grant amount cannot exceed 25% of Eligible Project Cost

Minimum Grant Request $2,500 Total eligible project costs > $10,000

Minimum Grant Request $1,500 Total eligible project costs > $6,000

Maximum Grant Request

$500,000 Total eligible project costs > $2 million

Maximum Grant Request

$250,000 Total eligible project costs > $1 million

Minimum Guaranteed Loan Amount

$5,000 Total eligible project costs > $6,667

Maximum Guaranteed Loan Amount

$25 million Total eligible project costs > $33.4 million

Guaranteed loan amount cannot exceed 75% of eligible project cost. Leverage with local / state RLF – limit cash down.

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REAP promotes renewable energy and energy efficiency for agricultural producers and rural small businesses.

Rural Energy for America Program (REAP)

Eligible Applicants and Borrowers

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Agricultural Producer

Rural Small Business

• Individual or entity that receives 51 percent or more of their gross income from agricultural production – crops, livestock, aquaculture, forestry operations, nurseries, dairies

• For-profit small business - as defined

by the Small Business Administration (SBA)

• Rural area or non-metro community of < 50,000

Rural Energy for America Program (REAP)

Energy Efficiency Renewable Energy

Lighting Solar

Heat & Power Wind

Refrigeration Small Hydroelectric

HVAC Anaerobic Digesters

Equipment and Processes

Biomass

Automated Controls Geothermal

Buildings Updates Wave/Ocean Power

The technology must be commercially available. Research and development projects do not qualify.

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Leverage local & state

incentives.

Improve net income for

current or new bank

clients.

Energy Loan Guarantee Terms

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GUARANTEE • 85% for loans $600,000 or less • 80% for loans over $600,000 up to

$5 Million • 70% for loans over $5 Million up to

$10 Million • 60% for loans over $10 Million

Rural Energy for America Program (REAP)

FEES

• One-time guarantee fee of 1% • ¼% annual renewal fee

Water and Environmental Guarantee Loan Program

Eligible Loan Purposes

• Construct, enlarge, extend or otherwise improve rural drinking water, sanitary sewage, solid waste disposal, and storm wastewater disposal facilities.

• Refinancing existing Agency debts

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Water and Environmental Guarantee Loan Program

Eligible Borrowers

• Public Bodies

• Not-for-Profits

• State or Federally recognized tribes

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Water and Environmental Guarantee Loan Program

Eligible Community Size

A rural area or a city or town with not more than 10,000 inhabitants based on the most recent decennial census.

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https://www.rd.usda.gov

www.rd.usda.gov

Stay Connected with USDA

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