Pub. 13 2016 Issue 1

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S 16 USDA’s B&I loan guarantee program provides guaranteed loan backing to lenders to make good quality loans to rural businesses. The borrower’s headquarters may be based within a larger city as long as the project is located in an eligible rural area. Eligible ru- ral areas include any rural community under 50,000 population, and not adjacent to a urban area above 50,000 population. Most of NewMexico qualifies as rural for the B&I loan guarantee program. Rural Businesses work with private-sector lenders, who in turn work with USDA-Rural Development to obtain a B&I guarantee on the lender’s loan to the rural business. B&I loan guarantees make it possible for lenders tomake larger sized loans to rural businesses and to extend more credit to greater number of rural businesses. Lenders who can utilize the B&I program include: Federal or State chartered banks; Farm credit banks; Credit Unions, and savings and loans. The maximum amount of the loan guarantee varies, depending on the size of the loan. USDA-Rural Development can provide up to a maximum 80% guarantee for loans through 5 million; 70% for loans between 5 million through 10 million; and 60% for loans ex- ceeding 10million dollars. Typically, B&I loans are limited to loans not exceeding 25 million, however, USDA-Rural Development can guarantee loans up to 40 million on loans to eligible cooperative organizations for value-added commodity processing requests. There is no small business size standard requirement, or ‘test for credit’ requirements for the B&I loan guarantee program. B&I Loans can include a wide range of typical business purposes including: business conversion, enlargement, repair, moderniza- tion, or development; purchase and development of land, ease- ments, rights-of-ways, buildings, or facilities; purchase of equip- ment, leasehold improvements, machinery, supplies, or inventory; debt refinancing (if request is less than 50% of the purpose of the loan). ‘Takeout’ financing from a different lender is not considered refinancing. B&I loan purpose restrictions are relatively few. B&I loans can- not be used for: Lines of credit; reimburse business owner-occu- pied and rental housing; golf courses; racetracks or gambling facil- ities; churches or church-controlled organizations; fraternal organizations; lending, investment and insurance companies; pro- duction agriculture (with certain exceptions); debt refinancing (if request is 50%ormore of the purpose of the loan); reimbursements to owners or business investor; or projects exceeding 1 million dol- lars and involve the relocation of 50 or more jobs. Maximum loan terms for real estate is 30 years; the lesser of use- ful life or 15 years for equipment; a maximum of 7 years for work- ing capital loans. Loans can be a blended term structure, and can include a ‘interest only’ payment structure for the initial 3 years of the loan. Interest rates may be fixed or variable and are negotiated be- tween the lender and borrower. Variable rates may not be adjusted more often than quarterly, and must be tied to a published index. Existing businesses must document a minimum 10% tangible networth balance sheet equity position at loan closing. New busi- nesses must document a minimum 20% tangible networth balance sheet equity at loan closing. B&I loans must be adequately collateralized. Typically, loan col- lateral values will be at least equal to the loan amount. USDA-Rural Development offersmonthly B&I loanmaking sem- inars, typically scheduled on the third Thursday of each month in Albuquerque. B&I loan making seminars typically do not exceed 1 hour in length, and start at 10:00 am. Upon request, USDA-Rural Development can provide a on-site group presentation of the B&I loan program. In addition to the B&I program, USDA-Rural Development also offers different guaranteed loan products for: Renewable Energy or Energy Efficiency projects; Community Facilities loans; Pub- lic water and Waste projects; Single Family housing loans; and Multi-Family Housing projects.  Please contact Richard Carrig or Pat Navarrette with USDA-Rural Development to discuss your Rural Guaranteed loan needs. Richard Carrig may be reached by email at Richard.Carrig@nm.usda.gov or by phone at (505) 761-4956. Pat Navarrette may be reached by email at Patricia.Navarrette@nm.usda.gov or by phone at (505) 761-4961. The USDA-Rural Development Business & Industry (B&I) Loan Guarantee Program Can Help Lenders Make Rural Loans BY RICHARD CARRIG AND PAT NAVARRETTE, USDA-RURAL DEVELOPMENT