BI Guaranteed Loan Program USDA

BUSINESS & INDUSTRY GUARANTEED LOAN PROGRAM

Designed to Help Facilitate Commercial Lending in Rural Areas that will Help Create and Save Jobs in Rural Areas

BENEFITS to LENDERS  Guaranteed portion of loan mitigates potential loss for lender by percentage given  Active secondary market that often pays high premiums (USAF, Farmer MAC and others)  Guaranteed portion of loan does not count towards legal lending limit  B & I loans help satisfy Community Reinvestment Act (CRA) requirements

BENEFITS to BUSINESSES  Assist businesses in providing stability, growth, expansion and rural employment  Higher loan amounts, lower interest rates and longer repayment terms

LOAN LIMITS  No minimum limitations on loan amounts  The maximum request for B & I loans is $25 million  80% maximum guarantee on loans up to $5 million  70% maximum guarantee on loans from $5 to $10 million  60% maximum guarantee on loans from $10 to $25 million

TYPES of LOANS  Business and industrial acquisitions, construction, conversion, expansion, repair modernization or development costs  Purchase of equipment, machinery or supplies  Start up costs and working capital  Processing and marketing facilities  Refinancing for sound projects under certain conditions

ELIGIBLE AREAS  Rural areas including all areas other than cities of more than 50,000 people and their immediately adjacent or urbanizing areas  To check for eligibility go to http://eligibility.sc.egov.usda.gov

ELIGIBLE BUSINESSES  Any legal entity, including individuals, public and private organizations, and federally recognized Indian tribal group  No size restriction on the business

TERMS and FEES

Rate: Negotiated by lender and business. Fixed or variable (variable cannot adjust more often then quarterly) Terms: Working Capital- 7 years maximum Equipment- 15 years maximum (not to exceed useful life of collateral) Real Estate- 30 years maximum (not to exceed useful life of collateral) No balloon payments allowed (rate adjustments are permitted) Fees: Lender may charge reasonable customary loan fees USDA charges a one-time 3% fee to lender that can by passed on to the borrower Ex: $1 Million loan, 80% guarantee= $1 MM * 80% * 3%= $24,000 (Annual fee of (.50) of 1% )

“USDA is an equal opportunity provider, employer and lender.” To file a complaint of discrimination write USDA, Director, Office of Civil Rights, November 2012 1400 Independence Avenue, S.W., Washington, DC 20250-9410 or call (800) 795- 3272 (voice) or (202) 720-6382 (TDD). PURPOSES NOT ELIGIBLE for GUARANTEES  Line of credit  Projects that transfer employment from one area to another  Payment to owners, partners, or shareholders who retain ownership in the business  Corporations and businesses not at least 51% owned and controlled by US citizens  Charitable and educational institutions; religious organizations and affiliated entities; fraternal organizations  Loans to golf courses, gambling establishments, and race tracks

EQUITY REQUIREMENTS (Tangible balance sheet equity, as determined in accordance with Generally Accepted Account- ing Principles)  Existing businesses at least 10%  Startups or businesses less than 1 year old at least 20%

PERSONAL AND CORPORATE GUARANTEES MAY BE REQUIRED

APPLICATION PROCESS for LENDER  Pre-application submitted to USDA  Site Visit: USDA visits site to begin our environmental review  Complete application submitted and all necessary financial information  If approved USDA issues a conditional commitment, approving the guarantee subject to conditions being met  Lender closes loan and after meeting conditions the guarantee is then issued

TYPICAL ITEMS NEEDED  RD 4279 - Application  A current balance sheet and P&L <90 days old  2 years projected balance sheet, P&L and cash flow  Proforma balance sheet as of loan closing  Three years historical financial statements  Business Plan (can be 1-2 pages)  Lender’s Credit Memo

COLLATERAL  All collateral must secure the entire loan  A qualified appraisal report is required on all collateral  Minimum 1 to 1 LTV is expected

LOAN to APPRAISED MARKET VALUE RATIOS  Lenders will discount collateral consistent with sound loan-to-value policy  Collateral must have documented value sufficient to protect the interest of the lender and Rural Development

SERVICING and LIQUIDATION  Annual financial statements and a written analysis will be performed annually by the lender  The lender and Rural Development will meet annually to discuss the status of the borrower  Lenders will service and liquidate (with Rural Development concurrence) the loan if necessary

FOR MORE INFORMATION CONTACT: Debra Nesbitt, 704-787-2857, [email protected]