Commercial Loans Blog

Commercial Loans: SBA Loans Versus USDA Business and Industry Loans

Posted by George Blackburne on Mon, Jun 18, 2012

The USDA Business and Industry Loan Program is very similar to the SBA 7a Loan Program.  What's the difference?  When should you go with a USDA B&I loan, rather than an SBA 7a loan?

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You will recall that the USDA Business and Industry Loan program was developed to help foster employment in rural areas, defined as communities of less than 50,000 people.  Some of the lowest wage rates and the highest unemployment rates in America can be found in rural areas.  The Federal government is therefore trying to encourage companies to build factories in these underdeveloped areas.

Therefore it should not surprise you a company does NOT have to be a small business in order to qualify for a USDA B&I loan. The company could have 10,000 employees and still qualify.

Secondly, the property does not have to 51% owner-occupied in order to to qualify for a USDA loan.  Suppose a company wanted to move into a large, vacant industrial building; but they only intended to occupy 25% of the space.  They would still qualify.

In fact, investors can even qualify for a USDA B&I loan, even if they intend to lease out 100% of the space to others!

Non-profit organizations do not qualify for an SBA loan.  In contrast, the USDA will gurantee commercial loans to non-profit organizations.

While an SBA 7a commercial loan can be used to refinance existing debt, there must be a 20% reduction in the debt service.  In contrast, USDA Business and Industry Loans can also be used to refinance existing debt, but there is no requirement of a 20% reduction in debt service.

Lastly, the USDA will regularly guarantee commercial loans up to $10 million, as opposed to just $5 million for the SBA 7a loan program.  On a case-by-case basis, the USDA will guarantee commercial loans as large as $25 million.

You can submit your USDA Business and Industry loans requests, as well as your SBA commercial loan requests, to scores of hungry lenders in just four minutes using C-Loans.com   And C-Loans is free!  Just please be sure to check the box that says, "I need an SBA loan" or "I need a USDA Business and Industry loan."

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Topics: SBA loans versus USDA B&I loans