Tim Smith's presentation at 2014 Lender's Meeting at Arkansas State University in Jonesboro, Arkansas.

1. USDA Rural Development
ASU Small Business And
Technology Development Center
May 20, 2014
Tim Smith
Business and Cooperative Programs Director
USDA Rural Development

2. USDA Rural Development
• Rural Housing and
Community Facilities
Programs
• Rural Utilities Programs
• Rural Business and
Cooperative Programs
We are essentially an investment bank for rural America with a combined portfolio of more
than $100 billion in business, infrastructure, housing, and community facilities.

3. Rural Business and Cooperative
Programs
• Mission:
- Creating Jobs
- Strengthening Communities
- Diversifying the Rural Economy

4. Rural Business and Cooperative
Programs
 Loans
 Grants
 Loan Guarantees

5. Business and Industry Guaranteed
Loan Program

6. Business and Industry Guaranteed
Loan Program
• Purpose is to create and maintain
employment and improve the economic
climate in rural communities.
• Guarantee loans made by commercial and
other authorized lenders.

7. Business and Industry Guaranteed
Loan Program
• Benefits to Businesses
– Higher loan amounts
– Lower interest rates
– Longer terms
– Makes capital available

8. Business and Industry Guaranteed
Loan Program
• Benefits to Lenders
– Reduces risk
– Lending limit restrictions
– Access to secondary market

9. Business and Industry Guaranteed
Loan Program
• Guarantee percentages (maximum)
– 80% for $5 million or less
– 70% between $5 million and $10 million
– 60% from $10 million to $25 million

10. Business and Industry Guaranteed
Loan Program
Eligible areas include all rural areas except
cities with a population larger than 50,000
and the urbanized areas contiguous with
them.

11. Business and Industry Guaranteed
Loan Program
• Eligible Borrowers
– Individuals
– Partnerships
– Corporations and Cooperatives
– Indian Tribes
– Public Bodies

12. Business and Industry Guaranteed
Loan Program
• Eligible Loan Purposes
– Working Capital
– Machinery and Equipment
– Buildings and Real Estate
– Debt Refinancing

13. Business and Industry Guaranteed
Loan Program
• Ineligible Loan Purposes
– Line of Credit
– Agricultural Production
– Projects that transfer employment
– Golf Courses, Gambling Establishments, and
Race Tracks

14. Business and Industry Guaranteed
Loan Program
• Maximum Repayment Terms
– Working Capital – 7 Years
– Machinery and Equipment – 15 years (or useful
life)
– Real Estate – 30 Years

15. Business and Industry Guaranteed
Loan Program
• Collateral
– Value established by certified appraisal
– Discounted collateral value sufficient to support
the loan

16. Business and Industry Guaranteed
Loan Program
• Equity Requirements
– 20% minimum for new business
– 10% minimum for existing business
– Equity calculated in accordance with Generally
Accepted Accounting Principals (GAAP)

17. Business and Industry Guaranteed
Loan Program
• Credit Quality
– Lender credit analysis must address adequacy
of equity, cash flow, collateral, history,
management, and current status of industry

18. Business and Industry Guaranteed
Loan Program
• Interest Rate
– Fixed or Variable
– Negotiated between lender and borrower
– Must be similar to customary rates
– Variable rates adjusted no more than quarterly

19. Business and Industry Guaranteed
Loan Program
• Fees and Costs
– One time guarantee fee
– Annual renewal fee
– Paid by lender
– Passed on to borrower
– Other typical lender fees

20. Rural Business and Cooperative
Programs
• Contact Information
– 700 West Capitol, Rm 3416
– Little Rock, AR 72201
– (501) 301-3280
– www.rurdev.usda.gov