Business Financing
 

U S D A and Rural Development Logos

  • Business and Industry Guaranteed Loans (B&I)

    The purpose of the B&I Guaranteed Loan Program is to improve, develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities.  This purpose is achieved by bolstering the existing private credit structure through the guarantee of quality loans which will provide lasting community benefits.  It is not intended that the guarantee authority will be used for marginal or substandard loans or for relief of lenders having such loans.

    What Types of Projects Qualify?

            1.    Business start-ups or existing businesses;
            2.    Real estate development, equipment purchases and/or working capital;;
            3.    Ground up construction and/or rehabilitation

  • Who May Borrow?

    A borrower may be a cooperative organization, corporation, partnership, or other legal entity organized and operated on a profit or nonprofit basis; an Indian tribe on a Federal or State reservation or other federally recognized tribal group; a public body; or an individual.  A borrower must be engaged in or proposing to engage in a business that will:

            1.    Provide employment;
            2.    Improve the economic or environment climate;
            3.    Promote the conservation, development and use of water for aquaculture; or 
            4.    Reduce reliance on nonrenewable energy by encouraging the development of renewable systems.

    Individual borrowers must be citizens of the United States (U.S.) or reside in the U.S. after being legally admitted for permanent residence.  Corporations or other nonpublic body organization-type borrowers must be at least 51 percent owned by persons who are either citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence.  B&I loans are normally available in rural areas, which include all areas other than cities or towns of more than 50,000 people and the contiguous and adjacent urbanized area of such cities or towns.

    How May Funds be Used?

    Loan purposes must be consistent with the general purpose contained in the regulation.  They include but are not limited to the following:

            1.    Business acquisitions when the loan will keep the business from closing, save jobs or create jobs.
            2.    Improve the economic or environment climate;
            3.    Promote the conservation, development and use of water for aquaculture; or 
            4.    Reduce reliance on nonrenewable energy by encouraging the development of renewable systems.

    What is the percentage of Guarantee?

    The percentage of guarantee, up to the maximum allowed, is a matter of negotiation between the lender and the Agency.  The maximum percentage of guarantee is 80 percent for loans of $5 million or less, 70 percent for loans between $5 and $10 million, and 60 percent for loans exceeding $10 million.

    What are the Loan Amounts?

    The total amount of Agency loans to one borrower must not exceed $10 million.  The Administrator may, at the Administrator’s discretion, grant an exception to the $10 million limit for loans of $25 million under certain circumstances.  The Secretary may approve guaranteed loans in excess of $25 million, up to $40 million, for rural cooperative organizations that process value-added agricultural commodities.

    What are the Loan Terms?

    The maximum repayment for loans on real estate will not exceed 30 years; machinery and equipment repayment will not exceed the useful life of the machinery and equipment purchased with loan funds or 15 years, whichever is less; and working capital repayment will not exceed 7 years.

    What are the Interest Rates?

    The interest rate for the guaranteed loan will be negotiated between the lender and the applicant and may be either fixed or variable as long as it is a legal rate.  Interest rates are subject to Agency review and approval.  The variable interest rate may be adjusted at different intervals during the term of the loan, but the adjustments may not be more often than quarterly.

    Is Collateral Required?

    Yes.  Collateral must have documented value sufficient to protect the interest of the lender and the Agency.  The discounted collateral value will normally be at least equal to the loan amount.  Lenders will discount collateral consistent with sound loan-to-value policy.

    Annual Renewal Fee?

    The annual renewal fee is paid once a year and is required to maintain the enforceability of the guarantee as to the lender.

    The rate of the annual renewal fee (a specified percentage) is established by Rural Development in an annual notice published in the Federal Register, multiplied by the outstanding principal loan balance as of December 31 of each year, multiplied by the percent of guarantee.  The rate is the rate in effect at the time the loan is obligated, and will remain in effect for the life of the loan.

    Annual renewal fees are due on January 31.  Payments not received by April 1 are considered delinquent and, at the Agency’s discretion, may result in cancellation of the guarantee to the lender.  Holders’ rights will continue in effect as specified in the Loan Note Guarantee and Assignment Guarantee Agreement.  Any delinquent annual renewal fees will bear interest at the note rate and will be deducted from any loss payment due the lender.  For loans where the Loan Note Guarantee is issued between October 1 and December 31, the first annual renewal fee payment will be due January 31 of the second year following the date the Loan Note Guarantee was issued.

    Where Should Applications be Filed?

    Complete applications should be sent to the USDA Rural Development State Office for the project location.  A list of offices and additional information can be obtained at http://www.rurdev.usda.gov/recd_map.html.

  • Small Business Administration (SBA) 504
  • Commercial and Retail Projects:

  • 50-40-10 lending ratio:

       o 50% Bank
       o
    40% SBA
       o 10% Borrower
     

  • Borrower must occupy at least 51% of the property.
     
  • Loan limit = $1.5 MM; $2 MM in rural areas.
     
  • If the business has been in existence for less than 2 years or if the project is a special use building, e.g. gas stations, movie theatre, etc:

       o Borrower injection = 15%.
       o
    Mountain West Business Finance Loan Max = 34%.
  •           Manufacturing Projects:

  • 50-40-10 lending ratio
     
  • Loan limit = $4 MM.
  • Equipment

  • Same lending ratios as real property.
     
  • Must have at least a 10 year useful life.
     
  • Cannot be "rolling stock" (vehicles licensed to operate on roads). 
  • Contacts:

    Rich Trang
    Vice President
    3281 No Decatur, #280
    Las Vegas, NV  89130 
    Tel: 702-396-5544
    Fax: 702-396-5547
    Cell: 702-682-6600

    Cecily Miller
    Regional Mgr.
    3880 Stockton Hill Rd Ste 103-151
    Kingman, AZ 86409 
    Tel: 928-692-9440
    Fax: 928-692-9411
    Cell: 928-303-4554

  • Small Business Administration (SBA) 504

  • Commercial and Retail Projects:

  • 50-40-10 lending ratio:

       o 50% Bank
       o
    40% SBA
       o 10% Borrower
     

  • Borrower occupancy requirements:

       o 51% if project involves existing building.
       o
    60% if project involves new building.  80% within 3 years.
       o 10% borrower
     

  • Loan limit = $1.5 MM; $2 MM in rural areas.
  • If the business has been in existence for less than 2 years or if the project is a special use building, e.g. gas station, movie theatre, etc.:

       o Borrower injection = 15%.
       o
    Mountain West Business Finance Loan Max = 34%.
  • Manufacturing Projects:

  • 50-40-10 lending ratio.
     
  • Loan limit = $4 MM.
  • Equipment:

  • Same lending ratios as real property.
     
  • Must have at least a 10 year useful life.
     
  • Cannot be "rolling stock" (vehicles licensed to operate on roads).
  • Ineligible Businesses:

  • Spec real estate
  • Non-profits
  • Passive real estate investments
  • Gambling
  • Financial institutions
  • Opinion molding entities
  • Pyramid sales
  • Illegal activities
  • Monopolies
  • Principal owners on probation, parole or with pending criminal charges
  • Book and magazine publishers
  • Ineligible Projects:

  • Working capital/mortgage refinance
  • Organizational costs
  • Franchise fees
  • Lender fees on permanent loans
  • Grow Arizona Direct Loan Program
  • Designed to assist borrowers who do not meet qualifying criteria for SBA 504.

    Loan Amounts:

  • Stand Alone Structure

       o 85% - 90% of total project cost or appraised value, whichever is less.
       o
    Loan limit = $1.5 MM ($2.5 MM for the New Markets Grow Arizona).
     

  • Participation Structure

       o 85% - 90% of total project cost or appraised value, whichever is less.
       o
    Loan limit = $1.5 MM ($2.5 MM for the New Markets Grow Arizona).
       o
    BDFC will assist in securing private lender to loan in first position on 50% of the project.            
       o
    Grow Arizona loan will be issued in second position for up to 35% or 40% of the total project.
                 Borrower contributes 10% - 15%.

  • Terms, Rates and Fees:

  • Regular Grow Arizona

       o Loan term = 20 years.
       o
    Rate = 10 year Treasury Note plus 4.66%.
       o Origination fee = 2.5% of loan amount.
  • New Markets Grow Arizona

       o Loan term = 25 years.
       o
    Rate = 7 year Treasury Note plus 2.4%.
       o
    Rate after 7 years = 10 year Treasury Note plus 3.85%.
       o
    Origination fee = 1.5% of loan amount.
     

  • SBA 504 Equity Injection Grow Arizona

       o Loan term = 20 years.  Can be shortened if secured by collateral other than SBA project property.
       o
    Rate = 10 year Treasury Note plus 4.66%.
       o
    Origination fee = 2.5% of loan amount.
  • Qualifications:

  • Mandatory
  •    o Project must be located in a qualified low-income census tract (contact BDFC officer for
                 specifics).  50% of employees and 50% of company assets must be located in low-income
                 census tract.           

  • Must meet one of the following criteria:

       o Job creation and/or retention
       o
    Project located in target business development area.
       o
    Serve disadvantaged populations as business owners.
       o
    Qualified non-profit businesses.
       o
    Project meets miscellaneous community impact objectives.

  • Contact:

    Joseph Lunsford
    Business Development Officer
    3300 N. Central Ave., Suite 600
    Phoenix, AZ 85012
    Tel: 602-381-6292, Ext. 37
    Cell: 480-221-5346
    jlunsford@bdfc.com
     

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