What Are the Differences Between SBA 7(a) Commercial Loans and USDA B&I Loans?

Did you know that the US federal government offers loan programs that help rural communities all around the country?

That’s right. Government-guaranteed loans are available to manufacturing and production businesses, industrial businesses, family entertainment centers, car washes, and self-storage businesses all across the land. Both the Small Business Administration (SBA) and the US Department of Agriculture (USDA) offer loan programs that benefit all types of businesses.

The USDA is most suited to providing these funding programs to rural businesses.

One of the main purposes of the USDA loan program is to preserve and create jobs in rural America.

There are three distinct loans available through the USDA Rural Development Program:

• USDA Business & Industry Loan
• USDA Renewable Energy for America Loan
• USDA Community Facilities Loan

The distinctions between the SBA 7a Commercial Loan and the USDA Business & Industry Loan are listed below.

The purpose of the USDA Business and Industry Loan program is to promote employment in rural areas. The federal government is attempting to promote economic growth and provide financial assistance to businesses looking to establish factories and other businesses in these under-developed small towns and rural areas.

The funding can be used to build many types of businesses, including manufacturing facilities, as long as the property is situated in a town or city with less than 50,000 inhabitants. The program is not only limited to agriculture development.

Similar to the SBA 7a Loan Program in many ways, the USDA Business and Industry Loan Program can meet many of your finance needs. The significant distinctions between the SBA 7a loan program and the USDA B&I loan program are listed below:

• Maximum loan amount: USDA – $25 million, SBA – $5 million
• Minimum loan amount: USDA – $2 million, SBA – no minimum
• Geography/Location: USDA – rural, SBA – no restrictions
• Interest rates; USDA – Competitive, SBA – competitive
• Prepayment penalty: USDA – depends on lender, SBA – 5 percent of prepayment in first year, 3 percent in second year, 1 percent after third year
• Repayment term: USDA – 30 years, SBA – 25 years
• Owner occupancy: USDA – none required, SBA – owner is required to occupy 51 percent of the square footage

As you can see, both the USDA and SBA (both US federal government agencies) offer terrific loan programs for small business owners to build, acquire, or improve their businesses. Consult with an experienced commercial mortgage advisor for details.