Business & Industry Loans – Your Ticket to the Growth Highway

Posted on: June 22nd, 2017

The United States Department of Agriculture (“USDA”) has multiple lending programs to help businesses in rural areas. One of the increasingly popular programs is called Business & Industry loans.

These are loans made available to any type of business located in any city or town with population less than 50,000. While the loan program is targeted on rural businesses, it captures many non-rural businesses if they are not near large cities.

Many business owners bypass these loans due to their perception that they are for only agricultural businesses. Given how attractive these loan structures are, you should give this program a second look.

This program is a terrific way to accelerate your growth. These loans are not the USDA loans of yesteryear.

They are new and improved and some of the most attractive loans available in the market. Business & Industry loans have long terms, large sizes and low interest rates.

We have seen several USDA loans range from 15 years to 19 years in maturity. They possess a unique combination of features, making them a valuable component of any capital structure.

Their long term and low cost give them tremendous value as a foundational piece of any long-term expansion or acquisition plan. This combination of benefits is rarely seen in loans that originate from banks, and give them an equity like flavor.

Their inherent advantages stem from the fact that the USDA provides a government guarantee to the originating lender, and stands behind a percentage of the loan. This enables the originating lender to have more flexibility with respect to collateral availability and loan term.

Additionally, originating lenders can rely more on cash flow projections than a bank usually can. Business & Industry loans can be used for business expansions, plant modernizations and even acquisitions if it will sustain employment in the area.

This program is increasing in popularity as it allows banks a way to serve the capital needs of local middle market companies. Regardless of your business type, Business and Industry loans from the USDA could be your ticket to the Growth Highway.

During their underwriting processes, acquisition financing providers analyze probable performance projections for their proposed borrowers. The underwriter often toggles between a few scenarios to sensitize the growth variables leading to slower revenue and margin growth over time. The lender’s underwriting view is usually an extension of its credit intelligence and historical experience.

Mezzanine debt loans occupy the risky echelon beneath the bank but ahead of the equity in a capital structure. They are naturally subordinated to the bank loan via an intercreditor agreement wherein the senior lender retains the power to block their interest or force them to standstill.

In the middle market, acquisition financing providers are regarded as super intelligent and hardworking. They have distinguished themselves at elite banks or consulting firms and possess the ability to synthesize voluminous levels of info into a coherent, succinct takeaway or observation. This skill is extremely valuable in attributing causation to business drivers in a financial model used to foretell the future.