RURAL DEVELOPMENT

1. RURAL DEVELOPMENT Creating New Opportunities for Rural America Visit us at www.rurdev.usda.gov/ca ONLINE

2. USDA RURAL DEVELOPMENT • RBS - Rural Business-Cooperative Service • RHS - Rural Housing Service • RUS - Rural Utilities Service

3. RBS Business and Industry Guaranteed Loan Program A Private-Public partnership

4. Objective • Improve and develop Rural Businesses by financing business needs that result in greater employment • Improve economic and environmental climate in rural communities

5. Who are we? • Rural Development is a branch of the United States Department of Agriculture.

6. What do we do? • Guarantee loans by eligible local lenders to rural businesses

7. What we don’t do? • Inspect Meat • Commodity Payments • Farm Loans

8. Why do we do it ? • To create and savejobs in rural America • Thus, improving the economy in rural America.

9. Why should a business want a Business and Industry (B&I) Guaranteed Loan? 1. Higher Loan Amounts

10. Why should a business want a B & I Guaranteed Loan? 2. Lower Interest Rates

11. Why should a business want a B & I Guaranteed Loan? 3. Longer repayment terms

12. Why should a business want a B & I Guaranteed Loan? 4. Assists in providing: a. Stability b. Growth c. Expansion d. Rural Employment

13. Why would a lender want to do a Business and Industry Guaranteed Loan? 1. Provides another tool to expand their loan portfolio

14. Why would a lender want to do a B & I Guaranteed Loan? 2. Reduce the risk of loss on rural business loans

15. Why would a lender want to do a B & I Guaranteed Loan? 3. Improves the economy and quality of life in rural California , while satisfying CRA requirements

16. Why would a lender want to do a B & I Guaranteed Loan? 4. Reduces concerns about collateral /appraisal issues often found in rural California

17. Why would a lender want to do a B & I Guaranteed Loan? 5. Allows loans to be made above their legal lending limits

18. Why would a lender want to do a B & I Guaranteed Loan? 6. Increases their return when guarantee is sold in the active secondary market

19. Why would a lender want to do a B & I Guaranteed Loan? 7. Uses their forms, loan documents, and security instruments

20. What is a Rural area? • All areas except for cities of more than 50,000 people and their urbanized areas

21. Who can borrow? 1. Any legal entity: a. Individuals b. Public organizations c. Private organizations d. Federally recognized tribal groups

22. 2. Majority ownership by US. citizens or permanent residents. 3. Less than 20% ownership by government or military employees Who can borrow?

23. What businesses are excluded from the B & I Guaranteed Loan Program? • Owner-occupied and rental housing projects

24. What businesses are excluded from the B & I Guaranteed Loan Program? • Golf courses, racetracks, and gambling facilities

25. What businesses are excluded from the B & I Guaranteed Loan Program? • Lending, investments, insurance companies

26. What businesses are excluded from the B & I Guaranteed Loan Program? • Production agriculture

27. What can you do with the B& I loan funds? • Business and industrial acquisitions • Construction • Conversion • Expansion • Repair • Modernization • Reasonable Fees

28. Business Expansion

29. New Retail Center

30. New Theater

31. Purchase Manufacturing Building

32. What can you do with the loan funds? • Purchase of equipment, machinery, or supplies

33. What can you do with the loan funds? • Start-up costs and working capital

34. What can you do with the loan funds? • Processing and marketing facilities

35. What can you do with the loan funds? • Pollution control and abatement

36. What Can You Do With the Loan Funds? • Recreational type projects

37. What can you do with the loan funds? • Refinancing for viable projects, under certain conditions

38. What CAN’T you do with Loan Funds? • Lines of Credit

39. How much can be guaranteed? • Loan guarantees typically range from $750,000 to a maximum of $10 million. Exceptions to $25 million

40. What are Loan Guarantee Limits? (maximum % applies to the entire loan) • 80% for $5 million or less • 70% for over $5 million to $10 million • 60% for over $10 million to $25 million

41. What are the Terms? • Working Capital - 7 years maximum • Equipment - 15 years maximum • Real Estate - 30 year maximum • Blended Terms OK

42. What are the Equity Requirements? • New Business - 20% Tangible Equity • Existing Business - 10% Tangible Equity • Recreation and energy businesses may be higher • Book Value Basis with intangibles deducted.

43. FEASIBILITY STUDIES • A feasibility study is generally required: • a new business (start-up) eg. Ethanol Plant • an existing Company lacking profitable history • significant expansion. • The feasibility study should be prepared by an independent consultant with expertise in that type of operation.

44. What type of collateral is required? • Collateral secures the entire loan. 100% • Personal and corporate guarantees are required. • A qualified appraisal report is required on property that will serve as collateral.

45. What is Adequate Collateral? • Sufficient Value, established by appraisal, to secure the loan. The values are discounted depending on the type of security offered.

46. B&I vs. SBA GUARANTEES • B&I can do Tenant Occupied Buildings (No 51% occupancy rule) • B&I can do Non-Profit Corporations • B&I Guarantee Fee at 2% • B&I limited to Rural Areas (<50,000 population)

47. How do I apply? • Lender contacts the local B&I Loan Officer - or - Larry Strong / Davis • Contact Davis Office with any questions • (530) 792-5805

48. Loan Process Lender submits Preapplication • Simple Format with basic information • Local B&I Loan Officer reviews it and schedules field visit

49. Loan Process Lender submits Complete Application • Form 4279-1 • Lender Credit Memo, Appraisals, Credit reports, etc. ALL LENDER FORMS !

50. Loan Process Rural Development Reviews Application • B&I Loan Officer processes the application and presents it to the State Loan Review Board.