DID YOU KNOW...?

You can use the USDA and SBA loan guarantee programs in tandem for the same borrower. 

[We know it's possible, because we've done it! ]

If you have a project that is too large for one program or contains some owner-occupied and some investment property, let's discuss the options.  

Link Funding, Inc.

USDA Guaranteed Commercial Loans 

The USDA commercial guaranteed loan programs are similar to the SBA 7a program in many respects but less well-known. The USDA issues a loan guarantee after reviewing and approving an application package.  After the loan closes, the guaranteed portion can be sold into the secondary market for a premium.  The USDA has a Business and Industry program ("B&I") for almost any type of business borrower as well as a Community Facilities program ("CF") for non-profit ventures and municipalites.

There are some important differences between the USDA and the SBA programs:

Geographic Limitations:  USDA programs are for "rural" areas only, usually defined as areas having a population of less than 50,000.   But many places near large metro areas are eligible, depending on the size of the particular political subdivision and other factors.  We have access to mapping software to determine the eligibility of a particular address.

Tangible Net Worth:  The USDA B&I program has strict requirements for a borrower's tangible net worth.  This is not a factor in SBA underwriting. (Nor does it apply to the USDA CF program.)

Loan Limits and Guarantees:  USDA B&I  loan limit is $10 Million per borrower (and higher--with special approval--which is rare.)  There is an 80% guarantee on loans up to $5 Million (vs. SBA's 75% guarantee); and a 70% guarantee on loans between $5 -$10 Million. Loan limits and guarantees can be even more favorable in the USDA CF program.

Property Types:  An important difference between the programs is that USDA funds can be used for commercial investment properties.  There is no "owner-occuped" requirement. 

Loan Term:  Like SBA, the loan must be fully amortizing and the term tied to the use of proceeds.  USDA B&I  will permit up to a 30 year amortization period for real estate loans and the CF program up to 40 years (vs. SBA's 25 year maximum).

Lenders:  Unlike the SBA program, the USDA programs permit  life insurance companies to lend and obtain loan guarantees.

Processing:  These USDA programs are administered by offices located in each State, unlike SBA where there is central processing.  

Guarantee Fee:  The USDA B&I guarantee fee is 3% of the guaranteed amount.  The USDA CF program guarantee fee is 1% of the guaranteed amount. 

Pricing:  The USDA programs offer greater flexibility in interest rates, base rates and adjustment periods. 


Like the SBA program, the guaranteed portion of the USDA loans can be sold on the secondary market at premiums of up to 110+ .  Banks also can receive continuing servicing income.  And remember, using one of the guarantee programs will allow your commercial lending department to make loans in excess of your lending authority because only the non-guaranteed portion applies to that limit.