Are you a business person from rural America and worried about fund crunch arising out of the working capital gap to run your business smoothly? You are at the right place that can help you deal with the matter. Here you will know how the Department of Agriculture of the US Government ensures commercial loans to individuals, profit and non-profit organizations, and companies whose registered office is located in the rural areas.

Purposes for Which USDA Caters Loans

The US Department of Agriculture (USDA) guarantees the lender a part of the loan disbursed to encourage the rural youth and alongside provides a sustainable backup to the lenders to promote rural employment. The goal is to promote job creation amongst the rural unemployed communities. Here are the purposes for which the loans are processed and disbursed:

• Purchasing, developing and improving commercial real estate
• Integrated agricultural processing facilities
• Business development, modernization, gross repair of machinery or equipment
• ?       Purchase of new machinery or equipment
• Purchase of inventories
• Working capital requirement
• Debt refinancing to improve cash flow which capacitates creation or saving jobs
• Acquisition of business if fresh borrowing promotes fresh job opportunities or saves existing jobs

The eligible candidates can avail a wide range of commercial loans with interest rate competitive to the market and flexibility in endues of the fund.

Eligibility Criteria for Getting USDA Business Loan

USDA B&I (Business and Industry) loan is applicable to both fresh and existing business persons. USDA has set a minimum requirement for eligibility criteria though the lending bank or firm may impose additional criteria for their own. However, USDA designed minimum requirements are stated below:

• Business registered office should be located in a rural area that has a population of less than 50,000.
• Applicant must be a permanent US citizen, and the permanent citizen must have at least a 51% share of the business.
• The applicant of loan must be an eligible person by the guidelines prescribed by the USDA. It means that the borrower should be a profit or non-profit organization, company, public body, listed tribe, and an individual within the scope and definition of USDA guidelines for eligibility criteria.

Loan Amount, Interest Rates, and Terms

You can negotiate about the loan amount and other terms and conditions of loan with the lending authority. However, USDA has set the following specification on loan amount and other terms and conditions:

Loan Amount

There is no minimum bar for the loan, but USDA B&I loan has set a maximum general limit not exceeding $10 million with an exception to go up to $25 million or more in some special cases. However, most of the business loans disbursed in general remain between $200,000 and $5 million. Loan amount to be disbursed is assessed based on loan-to-value ratio, and the down payment that needs to be paid. The loan-to-value ratio and down payment are different for different category of loan as prescribed in USDA norm.

Other Terms and Conditions

The maximum permissible loan repayment term for real estate may extend up to 30 years. The maximum period of repayment for purchase of machinery and equipment may be allowed up to the life of the machinery and equipment, or 15 years, whichever is less. The maximum period allowed for a working capital loan may be up to 7 years. The loan amount is amortized over the entire period allowed. It means monthly loan payment is fixed throughout the whole period of repayment, and no lump sum payment is allowed in between. The lender fixes interest rates for commercial loans and generally stays between 6% and 9%.

Not many business owners like taking out loans but sometimes, it’s the only way to propel a business to the top. Some of the biggest businesses in the world rely on loans to not only get by, but to keep their finances more manageable. So, if you’re wondering why many small businesses apply for loans, or you’re struggling to find out why your small business might need one, have a look at the below possible reasons.

To Keep Your Business Afloat

The main reason why you might want to apply for a small business loan is to simply keep your business running. For whatever reason your business isn’t doing brilliantly financially, you don’t need to lose any pride in taking out a loan to keep your business afloat. Quite simply, taking a loan out when a business is in a poor financial state could be the difference between turning things around and becoming a success. It could help you consolidate existing debt into easier to manage payments at lower interest, saving you money over the long run.

To Purchase New Equipment to Increase Efficiency

Thousands of businesses around the world fail every year because they are inefficient. The trick to maximum productivity in the workplace is to have the necessary equipment in order to make employees jobs easier and quicker. Whether that’s having a new forklift in the warehouse or a new computer system in the office that’s easier to use – it’s these changes that improve overall efficiency regardless of the working environment. So, if your employees are wasting time with the same repetitive tasks because they don’t have the right equipment, it could be a wise move to get a small business loan to invest in such equipment. More efficient employees could be the difference in not needing to hire another employee.

To Build a Good Credit History

You might not necessarily need a loan now to take your business forward, but it could be a clever option for the future, especially if your business is already in an excellent financial position. Many business owners wouldn’t see the point in applying for a loan if they didn’t need it, but later regret it in the future when they want to expand their business physically and can’t get enough capital to do so because of a lack of payment history. If you’re looking to build credit now to build for the future, online business loans are available at https://www.excelcapmanagement.com – better yet, this company specializes in providing loans for those business with little or a bad credit history.

There are many other possible reasons why you may want to apply for a small business loan: to expand your physical location, to invest in more inventory to increase profit margins and lower the buy price, or because you’ve been presented with a business opportunity that can’t be missed. A small business loan has many uses and doesn’t always need to be considered purely by businesses that are in a bad spot.

People with bad credit can now get approved for business loans. These kinds of loans are not processed through the usual banking circles. They require a different kind of collateral such as account receivable collaterals. When you look for a loan with a bank, they want their customers to have an excellent credit and require collateral. If you want to start a business and your credit got screwed because of late payments, skipped payments, or a bankruptcy, then you should not go to a bank for loans. When loans are issued to borrowers, they will look into the future sales. And to get an idea, they will look into the past sales of your business. If your past credit history has not been good enough, then most of the banks will not approve your loan application.

When a lender is granting funds to the borrower, they will offer some financial assistance in the form of advice so that he does not have to go through any kind of financial crisis in the future. There are many lenders that will try to scam the borrowers by saying that they will remove negative information from their credit report. They advertise that they can remove judgments, bankruptcies, late payments, tax liens, collections, foreclosures and repossessions along with their offer of poor credit lending. When you are applying for any business loan, you should check the legitimacy of the loan company. There are many genuine loan companies who offer help to people with bad credit so that they can get back to their feet.

Nowadays, many lenders and financial institutions know that an individual’s financial situation can get worse anytime because of unexpected losses in the business, family emergency or any other unavoidable reasons. The possibility of poor credit lending is increased in the past few years. There was a time when business loans for people with bad credit were denied. Earlier, if anyone faced a loss in the business, he had to look towards private sources or his personal savings. The small business administration, libraries and bookstores offer guidelines for good business practices so that critical financial difficulties can be avoided.