USDA’s Business & Industry (B&I) loan program is designed to improve business, industry, employment, and the overall economic and environmental climate in rural communities. In an effort to ease the credit crunch on “Main Street,” the American Recovery and Reinvestment Act (ARRA) aims to boost the existing B&I program to encourage lenders to participate.
ARRA provides several B&I program enhancements, which are available through September 30, 2010:
o $1.7 billion of loans for new rural businesses can be guaranteed. This is in addition to the 2010 budget amount and is approximately twice the level of B&I’s previous annual activity.
o B&I-ARRA funds will be approved as requested by a central pool in the National Office to avoid potentially inappropriate state allocations of funds.
o The B&I guarantee commission is reduced from 2% to 1%.
o The ¼% annual renewal fee is eliminated.
o 90% guarantees are available on “high priority loans” up to $10 million
“High Priority Loans,” which are eligible for a 90% guarantee, score at least 55
points under the B&I scoring system. Generally speaking, a loan is considered “high priority” if it provides “quality jobs” and is in a “distressed community”:
o A company provides “quality jobs” if it meets one of the following criteria:
o Pays an average wage rate that exceeds 125% of the federal minimum wage or at least $9.07 per hour.
o Qualified under the Work Opportunity Tax Credit Program
o Offers a health care benefits package to all employees, with at least 50% of the premium paid by the employer
o A business is considered to be in a “distressed community” if the area experiences any of the following:
o Emigration: Population loss every decade for the last 40 years
o Persistent poverty: poverty rate of 20% or more during the last 30 years
o High unemployment: More than 125% of the national unemployment rate
o Underserved area or underrepresented group: area that has not historically benefited from assistance from B&I or a minority or women-owned business
If a business is not located in a distressed community and/or does not provide quality jobs, the project may still be eligible for B&I-ARRA financing with less than 90% guarantee.
Along with the benefits, B&I-ARRA funding brings additional requirements:
o Buy American: Projects for the construction, alteration, maintenance or repair of a public building or public works must use American iron, steel and manufactured products.
o Vehicles: Any vehicles financed must be made in the USA.
o Davis Bacon Act: For loans where more than $2,000 will be spent for construction, alteration, or repair, laborers and mechanics must be paid prevailing wages in accordance with the Davis Bacon Act
o Ineligible projects:
or zoos
or aquariums
o Convenience stores (unless creating quality jobs and selling E85 fuel upon completion)
Swimming pools
or water parks
o Hotels/motels with pools/water parks
o Golf courses
or museums
o Casinos or other gambling establishments
Apart from these restrictions, the program works the same as the original B&I guaranteed
loan program In addition, any project that meets B&I standards but does not meet additional ARRA requirements can still be approved as a regular B&I loan at the state level.