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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
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David H Robinson Northern Regional Coordinator
Rural Development/Rural Business – Cooperative
Service
202-768-0586
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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 [email protected]
Southern Region Valarie Flanders 207-257-4441 [email protected]
Midwestern Region Robin Moore 202-701-4018 [email protected]
Western Region Robert Fry 202-768-0589 [email protected]
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
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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
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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
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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
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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)
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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.
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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.
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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.
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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.
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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
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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
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Typical Projects
• Hospitals, Medical Clinics, Treatment Facilities
• Nursing Homes
• Schools
• Libraries
• Municipal Buildings
• College Dormitory
• Community Centers
Community Facilities
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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
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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.
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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
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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.
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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
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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
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www.rd.usda.gov
Stay Connected with USDA
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