Although commercial real estate investment is on the increase, it’s a fact that not only isn’t it easy to find a great commercial property, but financing once you find the perfect property can take almost as long as it takes to perform due diligence.
But what if you could not only choose properties from around the country, but get Uncle Sam to finance up to 80% of the loan?
Well, that’s exactly what you get when you consider a Rural Development Loan.
What Is Actually A Rural Development Loan?
Rural development loans are sponsored by the USDA, and apply to areas defined as having less than 50,000 people. However, what most people don’t know is that although the national census is what defines which cities qualify for a rural development loan, population numbers haven’t been updated since the last census – which was in the year 2000.
According to the Housing Assistance Council, 97% of the land in the U.S. qualifies for a rural development loan. Or in other terms – 1 out of every 3 people lives in area that is eligible.
And you might be one of them.
What Areas Are Eligible?
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.
Who Can Borrow?
The rural development loan is fairly flexible about who can obtain the loan. You can be a corporation, either profit or nonprofit, or an individual. You must be a U.S. Citizen, if an individual borrower, or admitted legally for permanent residence.
Corporations must be composed of at least 51% U.S. citizens, or people admitted legally for permanent residence. You must be willing to provide a business that will not only provide jobs for the area, but will also be “green” by using eco-friendly energy resources.
How Can I Use the Funds?
In order to receive a loan, you’ll need to prove that the business you’re interested in purchasing will prevent jobs from being lost. Or other option is to add additional jobs to the area.
This could occur through buying land and developing it, enlarging, converting, or modernizing an existing business. Other way is to buy purchasing equipment, supplies, or inventory, that will help your business become more profitable, and provide more jobs to more people.
What Are The Loan Terms?
Loans for amounts of up to 10 million dollars are available, although the maximum guarantee is 80% for loans of less than $5 million, 70% for loans between $5 million and $10 million.
It is possible to get a loan through an exception from the Administrator of up to $40 million. However, these are only for “rural cooperative organization that process value-added agricultural commodities.”
Loans for land or other real estate can be paid back for up to a 30 year repayment period. For loans given in order to buy machinery or equipment, the maximum repayment period depends on the useful life of the machinery, or 15 years. It depends of whichever is the lesser amount.
Lastly, working capital loans have up to 7 years to be repaid.
Where Can I Apply?
You can find out what you need to apply for a rural development loan.
However, there is one important caveat: the USDA has plans to update the population data in October of this year. According to the Housing Assistance Council, that means that means nearly 7.8 millin people will become ineligible for this loan program.
If you’re interested, you can still send in your application, as long as you can get everything you need by the deadline.
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