B&I USDA Loan Program Primer

A Business and Industry Guaranteed Loan, or B&I, is a loan given for the improvement, development and/or financing of industry, business and employment. B&I’s are meant to improve rural communities, both economically and environmentally. How do these loans achieve their goals? They do so by guaranteeing quality loans that will beef up the existing private lending structure.

These loans aren’t for everyone. In order to qualify for a B&I loan, a person has to be in the process of doing or planning to do a number of things. B&I hopefuls must have the plans of either providing employment, promoting the conservation, use and development of agriculture, water, improving the environment or economic situation of their community, or trying to reduce the use of nonrenewable energies. Potential borrowers that are not legal entities (i.e.: a corporation or company) must be either American citizens or legal residents living in the U.S. Legal entities like companies or corporations hoping to get a B&I must be at least 51% owned by legal residents or citizens of the U.S. Business and Industry loans are only available to rural areas and/or cities and towns with a population of less than 50 thousand residents.

Once you’ve obtained a Business and Industry loan, you can only use it for certain things. Businesses can only use them to keep from closing and causing the loss of employment opportunities or to provide more jobs for the community. The loans can also be used to modernize, develop, or otherwise repair or enlarge a business. Another use for B&I’s is for the purposes of purchasing land, buildings and/or facilities. Finally the loans can be used for improving leaseholds, the purchase of equipments, supplies, machinery or inventory.

The B&I is a guaranteed loan from the United States Department of Agriculture. What does this mean? It means that the USDA promises to pay the loan if the borrower is no longer able to do so because of lack resources. This makes banks more liable to give a big loan to fragile business. However, the USDA only guarantees certain percentages of the loans. For loans of more than $10 million, only 60% of the loan is guaranteed. Loans between $5 and $10 million have a 70% guarantee and loans up to $5 million only are guaranteed to 80%. These percentages of guarantee are only maximum percentages. The actual guarantee percentage has to be negotiated between the borrower, the lender and the USDA.

Remember, Business and Industry Guaranteed Loans from the United States Department of Agriculture are only meant to provide encouragement for the development of rural communities. Any business or individual looking to get a B&I must comply with certain restrictions and certain expectations. The main goal is to promote growth and to prevent unemployment. The USDA wants to also ensure that companies are not going to do any further damage to the environment and/or community by relying heavily on non-renewable sources of energy or to neglect using aquamarine water.

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