2. Rural Development
Business & Industry Loan Guarantees
• Purpose – Provide loan guarantee to banks
encouraging them to extend credit to
businesses in rural areas.
• Provides better rates and terms to the
customer while reducing the loan risk for
the bank and increasing profits.
7. Number of Loans Outstanding as of
September 30, 2015
1,258,658
20,297 4,780
RHS
RUS
RBS
7
8. Outstanding Portfolio by Program Size as of
September 30, 2015
Top 8 Programs # of Loans Principle
1) Single Family Housing Guaranteed 942,524 $112,124,987,457
2) Electric Direct 2,617 $43,127,004,160
3) Single Family Housing Direct 284,790 $15,276,645,659
4) Water & Waste Direct 16,200 $12,507,893,000
5) Multi Family Housing Direct 24,071 $10,785,002,000
6) Business Programs Guaranteed 3,175 $6,095,311,014
7) Community Facility Direct 5,864 $5,515,017,000
8) Telecommunications Direct 1,387 $4,402,469,153
8
9. B & I LoanGuarantees
• Nationally we have 2,965 loans with a $5.7
billion loan balance.
• Ohio currently has 98 outstanding loans
with a principal balance of $188 million.
10. Applicant Eligibility
• Applicant may be a sole proprietor,
cooperative, corporation, LLC
– Can be a for profit or not-for-profit
– Can be a public body
• Businesses can include manufacturing,
wholesaling, retailing or service oriented
• Business must provide employment; or improve
economic or environmental climate.
11. Eligible Loan Purposes
• Real Estate and Improvements
• Machinery & Equipment
• Term Working Capital
• Business Acquisitions
• Tourism & Recreation
• Hotels & Motels
• Refinancing (including existing lender debt)
12. Guarantee Limits
• Minimum loan amount $400,000 ???
• Special circumstances where SBA cannot assist.
• Up to $5,000,000 is an 80% Guarantee
• $5,000,000 to $10,000,000 is a 70% Guarantee
• Average Loan is over $3,000,000
• One time Fee of 3% of the Guaranteed Portion of Loan
• Annual Renewal Fee of .50%
13. Loan Terms (maximums)
• Real Estate - 30 Years
• Machinery and Equipment - 15 Years
• Term Working Capital - 7 Years
• Blended term can be considered depending on use
of funds.
• Term and the amortization must match
– Balloon payments are not permitted
14. Interest Rates
• Interest rates will not be more than those rates customarily
charged the typical commercial borrower.
• Variable rates must be tied to a published base rate agreed
to by the lender and the Agency.
– WSJ Prime rate, LIBOR, Treasury
• The variable interest rate may be adjusted at different
intervals during the term of the loan, however, not more
often than quarterly
15. Benefits to the Lender
• Increased Confidence of Banking Regulators
• Improved Loan Portfolio Quality
• Increased Rate of Return
– Increased profits
• More Competitive
16. Customer Benefits
• Longer Term Loan
• Better Interest Rate
• Improved Cash Flow
• Helps to ensure a successful project.
17. Examples
• Natural Gas equipment manufacturer: The company produces high
pressure gas valves and vessels along with other natural gas field
equipment. Funds were used to purchase equipment to expand
production, refinance existing debt and provide term working capital.
– Guaranteed Loan $1,940,000
– Borrower 381,000
– TOTAL $2,321,000
• Term of 10 year term,60 Jobs Created,49 Jobs Saved
18. Examples
• Excavation & Trucking Company: Funding provided to refinance
and consolidate existing debt to substantially improve the cash flow of
the company. Project was completed in conjunction with the SBA.
•
• USDA Guaranteed Loan $ 9,000,000
• SBA Guaranteed Loan 3,100,000
• TOTAL $ 12,100,000
•
• Term of 20 Years
• 55 Jobs Saved/Created
19. Examples
• Hotel with Franchise: Provided funds to construct a 103 room, 3
story, interior corridor hotel with an expanded breakfast area and an
indoor pool.
• Guaranteed Loan $3,500,000
• Lender Loan Unguaranteed $3,000,000
• Borrower $2,200,000
• TOTAL $8,700,000
• Term of 21 years
• 31 Jobs Created
20. USDA B & I program compared
to SBA 7A
• Both have the same federal guarantee (secondary
market premiums.)
• USDA RD deals can be up to $20 million
• USDA RD program approval process. Loan
authority at local level for loans under $7.5
million. Program Director
• Liquidation plans
• SBA 7A preferred lender program vs USDA RD
21. Ohio Business Program Contacts
Michael Rutherford, Business & Cooperative Programs Director
Phone: 740-373-7113 Ext. 206 Email michael.rutherford@oh.usda.gov
Randy Monhemius, Business Program Specialist
Phone: 614.255.2424 Email randy.monhemius@oh.usda.gov
Debbie Rausch, Business Program Specialist
Phone: 614.255.2425 Email: deborah.rausch@oh.usda.gov
Christie Hooks, Business Program Specialist
Phone: 614.255.2397 Email: christie.hooks@oh.usda.gov
22. Ohio Business Program Contacts
Cindy Musshel, Business Program Specialist
Phone: 614-255-2427 Email: cindy.musshel@oh.usda.gov
Jennifer Brown, Business Program Specialist
Phone: 614-255-2423 Email: jennifer.brown@oh.usda.gov
