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] .