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Ad-Vice_Man
01-02-2009, 04:29 PM
If you're on this site you are probably aware of the SBA. The Small Business Administration... and if you're reading in this section are probably acutely aware that one of the things the SBA is best known for is the SBA loan. A loan from a bank that the SBA guarantees in order to help small businesses get the working capital they need to grow and succeed.

However, how many of you knew that if you live in a small town or rural area (population under 20,0000) you could actually qualify for a similar government backed loan from the USDA.... Yes the United States Department of Agriculture, The people who stamp our meat at the grocery store.

Despite what you might think, these loans aren't just for farming. There intent is for business development in rural areas. Movie Theaters, Water Parks, Hotels etc.

Here's the link if you're interested.

http://www.rurdev.usda.gov/rhs/cf/cp.htm

Also I know some SBA/USDA Approved lenders if you'd like a referral.

vangogh
01-04-2009, 12:32 AM
Thanks for the info and the link. I won't qualify given where I live, but it's still good to know.

KristineS
01-04-2009, 10:25 AM
Interesting. I'm guessing people in the area where I live would qualify. I wasn't even aware loans were available, so it's good to know.

Aaron Hats
01-04-2009, 03:27 PM
Just remember that your credit score is still most important with these small business loans no matter how great a business plan or the agency backing the loan.

Ad-Vice_Man
01-04-2009, 11:37 PM
That's absolutely true. The thing the SBA and similary the USDA does to level the playing field is to allow those that are under collarateralized to get the funding they need to grow and this is the important part....TO CREATE JOBS.

However that said you still have to have good credit, you've got to have a rock solid business plan. not a great idea on a napkin mind you but a fleshed out, i's dotted t's crossed plan of action for the next three years, and most importantly you've got to have significant experience in the market you're business will be in. IE.. you can't have been an IT Technician for the past 10 years and decide to open a restaurant... at least not if you want the SBA or USDA to fund it.

phanio
01-16-2009, 05:34 PM
Are these USDA loans for any business purpose? And, do they require collateral and equity like the SBA programs?

Ad-Vice_Man
01-26-2009, 03:27 PM
Pretty much any business purpose yes. and they do require collateral and equity if you have it, but they will loan more than you can support with your collateral.

For example... if you owned a house worth 300,000 with a 100,000 mortgage on it. The SBA or USDA would put a lien on the remainder of the equity in your home up to the amount you borrow. However, the SBA/USDA will guarantee a qualified loan more than your house is worth. So using this same example,,, if you needed a $1,000,000 loan to get your business off the ground, while 200,000 would be secured by your house, the other 800,000 would be unsecured.

That said, you could have no equity or collateral at all and still get that $1,000,000 Loan if you qualified all other ways.

phanio
01-27-2009, 10:35 AM
Great points about credit and collateral.

I have also found that you have to show an ability to repay.

So, two main items –your willingness to repay and ability to repay. Your willingness comes from your past credit history. Your ability can come from several factors.

Most lending institutions require three sources of repayment.
1) Cash flow – either the conversion of current assets (inventory, accounts receivables), or from operating profits.
2) Collateral – at a value to provide significant cash flow to cover, not only principle, but all other costs should the lender have to take your collateral - these include fees, resale costs, legal costs, lost interest, etc. The SBA and I would assume the USDA will take more of a risk here as they are only guaranteeing a portion of the loans – but, there does have to be collateral that provides some assurance of repayment. Further, most lenders will allow you to pledge a certain piece of collateral even below the value of the loan (as stated above) but then may further protect themselves with a blanket lien or from number 3 below.
3) Personal guarantee. Thus, should the above not cover the costs and losses from a loan default, they can still come after your other personal assets.

Also, keep in mind that with these government guaranteed facilities, you will go through two underwriting processes. One for the lender and one for the guarantor. Both will require different information.

Additionally, you will also pay two different sets of fees. One group of fees to the lead underwriter (the lender) and one set to the guarantor. Thus, this can be a bit expensive (even though the guarantor and some lenders) will roll these fees into the loan.

Just some thoughts