The majority of the general public associates the United States Department of Agriculture (USDA) with mortgage loans or, more plainly, agriculture. After all, it’s in the name.
However, the USDA also provides government-backed business loans to qualifying rural residents. The USDA does not make direct loans but rather works with financial institutions such as Stearns Bank, a USDA Multi-State Lender.
The USDA rural development business loan program is intended to assist small business owners in starting, maintaining, or growing their businesses while creating jobs and boosting the local economy in areas of less than 50,000 people.
Let’s take a closer look at some of the USDA business loan benefits that are frequently neglected.
Better interest rates are associated with higher credit scores.
USDA term durations and amortization are determined by the product as well as the traditional partner’s underwriting criteria.
Having decent credit is what it all boils down to. The standards for USDA rural development business loans, on the other hand, are often favorable.
Equifax defines fair credit as 580-669, good credit as 670-739, very good credit as 740-799, and excellent credit as anything above 800. The lower your interest rate, the higher your credit score.
Repayment & Interest Rates
USDA rural development business loans have low interest rates and flexible repayment schedules.
Interest rates on USDA business loans are established by your lender, with the USDA confirming that they are acceptable in comparison to similar loans. Interest rates can be fixed, variable, or a combination of the two. If your loan has a variable or combination rate, the rate can’t be changed more than once every quarter or four times a year.
The loan amount determines the guaranteed amount, with the USDA guaranteeing between 60 and 80 percent of a loan under the Business & Industry program.
Loans are fully amortizing, which keeps payments consistent throughout the loan’s life.
What’s the best part? There are no balloon payments to worry about down the future. It’s as simple as that: the length of the loan is determined by how the money are spent. Real estate has a maximum term of 30 years, machinery and equipment has a period of 15 years, and working capital has a term of seven years.
Companies that Qualify
For-profit and non-profit firms, cooperatives, federally recognized Native American tribes, public organizations, and people engaged in or planning to participate in business are all eligible for this loan program.
The initiative is aimed at a diverse range of developers, investors, and businesses. Stearns Bank advises prospective borrowers to contact a lender to discuss their project and financing requirements. Speaking with a seasoned lender can save you hours of sifting through red tape and complicated eligibility requirements.
A Business & Industry loan, according to the USDA, can be used for:
Areas with a high population may still qualify.
Rural is defined by the USDA as “any area, other than a city or town with a population of more than 50,000 residents, including the urbanized region contiguous and adjacent to such a city or town.” To determine eligible locations, the USDA provides an interactive map.
Even though they are close to a large population, a small business owner who is located outside of a suburban/metro area may be qualified for a USDA business loan. You should also keep in mind that firms situated in larger cities may still be eligible if their project is built in a USDA-approved community.
Stearns Bank has a direct line of communication with the USDA as a USDA Multi-State Lender, which typically results in a quicker procedure leading to final funding. Stearns Bank’s lending team is dedicated to providing personalized service, knowing the borrower’s goals and concerns, anticipating problems, and responding with innovative solutions. To learn more, speak with a USDA rural development loan expert.
