tim smith's usda-rd presentation

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USDA Rural Development ASU Small Business And Technology Development Center May 20, 2014 Tim Smith Business and Cooperative Programs Director USDA Rural Development

DESCRIPTION

Tim Smith's presentation at 2014 Lender's Meeting at Arkansas State University in Jonesboro, Arkansas.

TRANSCRIPT

Page 1: Tim Smith's USDA-RD Presentation

USDA Rural Development

ASU Small Business And Technology Development Center

May 20, 2014

Tim Smith Business and Cooperative Programs Director

USDA Rural Development

Page 2: Tim Smith's USDA-RD Presentation

USDA Rural Development

• Rural Housing and Community Facilities Programs

• Rural Utilities Programs• Rural Business and

Cooperative Programs

We are essentially an investment bank for rural America with a combined portfolio of more than $100 billion in business, infrastructure, housing, and community facilities.

Page 3: Tim Smith's USDA-RD Presentation

Rural Business and Cooperative Programs

• Mission:- Creating Jobs- Strengthening Communities- Diversifying the Rural Economy

Page 5: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

Page 6: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Purpose is to create and maintain employment and improve the economic climate in rural communities.

• Guarantee loans made by commercial and other authorized lenders.

Page 7: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Benefits to Businesses– Higher loan amounts– Lower interest rates– Longer terms– Makes capital available

Page 8: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Benefits to Lenders– Reduces risk– Lending limit restrictions– Access to secondary market

Page 9: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Guarantee percentages (maximum)– 80% for $5 million or less– 70% between $5 million and $10 million– 60% from $10 million to $25 million

Page 10: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

Eligible areas include all rural areas except cities with a population larger than 50,000 and the urbanized areas contiguous with them.

Page 11: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Eligible Borrowers– Individuals– Partnerships– Corporations and Cooperatives– Indian Tribes– Public Bodies

Page 12: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Eligible Loan Purposes– Working Capital– Machinery and Equipment– Buildings and Real Estate– Debt Refinancing

Page 13: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Ineligible Loan Purposes– Line of Credit– Agricultural Production– Projects that transfer employment– Golf Courses, Gambling Establishments, and

Race Tracks

Page 14: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Maximum Repayment Terms– Working Capital – 7 Years– Machinery and Equipment – 15 years (or useful

life)– Real Estate – 30 Years

Page 15: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Collateral– Value established by certified appraisal– Discounted collateral value sufficient to support

the loan

Page 16: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Equity Requirements– 20% minimum for new business– 10% minimum for existing business– Equity calculated in accordance with Generally

Accepted Accounting Principals (GAAP)

Page 17: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Credit Quality– Lender credit analysis must address adequacy

of equity, cash flow, collateral, history, management, and current status of industry

Page 18: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Interest Rate– Fixed or Variable– Negotiated between lender and borrower– Must be similar to customary rates– Variable rates adjusted no more than quarterly

Page 19: Tim Smith's USDA-RD Presentation

Business and Industry Guaranteed Loan Program

• Fees and Costs– One time guarantee fee– Annual renewal fee – Paid by lender– Passed on to borrower– Other typical lender fees

Page 20: Tim Smith's USDA-RD Presentation

Rural Business and Cooperative Programs

• Contact Information– 700 West Capitol, Rm 3416– Little Rock, AR 72201– (501) 301-3280

– www.rurdev.usda.gov