tim smith's usda-rd presentation
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Tim Smith's presentation at 2014 Lender's Meeting at Arkansas State University in Jonesboro, Arkansas.TRANSCRIPT
USDA Rural Development
ASU Small Business And Technology Development Center
May 20, 2014
Tim Smith Business and Cooperative Programs Director
USDA Rural Development
USDA Rural Development
• Rural Housing and Community Facilities Programs
• Rural Utilities Programs• Rural Business and
Cooperative Programs
We are essentially an investment bank for rural America with a combined portfolio of more than $100 billion in business, infrastructure, housing, and community facilities.
Rural Business and Cooperative Programs
• Mission:- Creating Jobs- Strengthening Communities- Diversifying the Rural Economy
Rural Business and Cooperative Programs
Loans Grants Loan Guarantees
Business and Industry Guaranteed Loan Program
Business and Industry Guaranteed Loan Program
• Purpose is to create and maintain employment and improve the economic climate in rural communities.
• Guarantee loans made by commercial and other authorized lenders.
Business and Industry Guaranteed Loan Program
• Benefits to Businesses– Higher loan amounts– Lower interest rates– Longer terms– Makes capital available
Business and Industry Guaranteed Loan Program
• Benefits to Lenders– Reduces risk– Lending limit restrictions– Access to secondary market
Business and Industry Guaranteed Loan Program
• Guarantee percentages (maximum)– 80% for $5 million or less– 70% between $5 million and $10 million– 60% from $10 million to $25 million
Business and Industry Guaranteed Loan Program
Eligible areas include all rural areas except cities with a population larger than 50,000 and the urbanized areas contiguous with them.
Business and Industry Guaranteed Loan Program
• Eligible Borrowers– Individuals– Partnerships– Corporations and Cooperatives– Indian Tribes– Public Bodies
Business and Industry Guaranteed Loan Program
• Eligible Loan Purposes– Working Capital– Machinery and Equipment– Buildings and Real Estate– Debt Refinancing
Business and Industry Guaranteed Loan Program
• Ineligible Loan Purposes– Line of Credit– Agricultural Production– Projects that transfer employment– Golf Courses, Gambling Establishments, and
Race Tracks
Business and Industry Guaranteed Loan Program
• Maximum Repayment Terms– Working Capital – 7 Years– Machinery and Equipment – 15 years (or useful
life)– Real Estate – 30 Years
Business and Industry Guaranteed Loan Program
• Collateral– Value established by certified appraisal– Discounted collateral value sufficient to support
the loan
Business and Industry Guaranteed Loan Program
• Equity Requirements– 20% minimum for new business– 10% minimum for existing business– Equity calculated in accordance with Generally
Accepted Accounting Principals (GAAP)
Business and Industry Guaranteed Loan Program
• Credit Quality– Lender credit analysis must address adequacy
of equity, cash flow, collateral, history, management, and current status of industry
Business and Industry Guaranteed Loan Program
• Interest Rate– Fixed or Variable– Negotiated between lender and borrower– Must be similar to customary rates– Variable rates adjusted no more than quarterly
Business and Industry Guaranteed Loan Program
• Fees and Costs– One time guarantee fee– Annual renewal fee – Paid by lender– Passed on to borrower– Other typical lender fees
Rural Business and Cooperative Programs
• Contact Information– 700 West Capitol, Rm 3416– Little Rock, AR 72201– (501) 301-3280
– www.rurdev.usda.gov