SBA & USDA Loans

USDA loans are mortgages backed the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program.

This program offers a number of measures to finance the construction of affordable housing for year-round workers, seasonal workers and migrants. Applicants can be farmers, farming associations, family farms with legal entity status, nonprofit organizations, local or state government, and federally recognized tribes. Farm workers and their families who are engaged in labor, disabled or retired are entitled to live. Borrowers can use the borrowed funds for the construction, improvement, repair or purchase of housing, as well as related activities. Support under the Housing Program for Farm Workers is not limited to agricultural areas. The program can be implemented in any area where there is a lack of housing for farm workers.

Information about all USDA Agriculture Development Programs is available online or at the Program’s representative in your area.

Where to start:

  • Contact your local U.S. Department of Agriculture Agricultural Development Program representative for information on how to apply;
  • Financing cycles depend on the program you are interested in. Funding can be carried out annually, quarterly or continuously;
  • Program resources (forms, manuals, certifications, checklists, etc.) are available on the Internet.

Back in 1953, the United States passed the Small Business Act and established the Small Business Administration (SBA). Under Republican presidents, several attempts have been made to liquidate this institution, or at least to cut its powers and budget, but each time they run up against the congressive resistance.

As a result, the Small Business Administration managed to stand up as a powerful federal agency. Its top leaders are approved by the Senate. And Bill Clinton for the term of his presidency even raised the status of head of the SBA to the level of cabinet member, thereby equating the agency to the most influential ministries.

SBA has offices in all 50 states and all counties. Their budget is funded by the US Congress. And the main areas of competence can be indicated by the abbreviation consisting of three letters “C” – consulting, contracts, crediting. From the point of view of the creation and expansion of small business companies, financing is, of course, of paramount importance.

The small business administration has been given the opportunity to carry out direct lending at state expense. But another financial product is most popular and in demand – lending under state guarantees. In the business environment, it is known as program 7 (a) – by the number of the corresponding article in the law on small business.

The mechanism of action of such borrowings is quite simple. One of the banks in partnership with SBA gives a loan to the entrepreneur to establish a new or expand an existing business. The Agency, in turn, guarantees a return of up to 90% of the issued funds if the borrower suffers bankruptcy. Under Barack Obama, the maximum amount of one such loan was raised from two to five million dollars.

SBA does not give out guarantees left and right. Very strict selection principles have been established for existing firms. A business must exist for at least two years, be profitable and in the last 12 months achieve revenue of at least 50 thousand dollars.

In exchange for the aforementioned severities, dictated by a fully justified forethought, the agency sets the maximum allowable interest rates on loans.

So, with a loan term of less than 7 years, the marginal rate for a loan of up to 25 thousand dollars will be 8.5%. If the repayment of the loan is set for a seven-year or longer period, then it will reach the maximum possible 9%. With an amount of more than 50 thousand, the rate will be respectively 6.5 or 7%.

Credits are also provided for replenishment of fixed capital – the construction or acquisition of industrial premises and the purchase of industrial equipment (Fixed Asset Financing Program). Such borrowing is carried out through a network of certified non-commercial companies designed to promote local economic development (Certified Development Companies, CDC).

Under the terms of the program, the borrower incurs 10% of all expenses. Another 50% is provided by a bank or other lending institution under a one hundred percent SBA guarantee. The remaining 40% is provided by CDC also under the state obligation of a full refund.

As of July 2017, the rates on this loan were set at 3.83-4.56%. And the loan repayment period can be up to 25 years.