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Birmingham, Michigan

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USDA Loans aka Business and Industry Loans

Posted at Commercial Real Estate Loans by Jeff Rauth

Oct. 15, 2008

Tagged with: b and i loans, business and industry loans, usda loans

What exactly are B and I loans? They’re a government sponsored program, similar to the small business administration loans. The program was set up to help building owners in rural communities, primarily with populations LESS than 50,000, in an effort to both create and retain jobs. All in all, the USDA loan program was created to stimulate rural communities.

This is the niche that the B and I Loan fill. And it’s very important to note that there is a major void here. Virtually all banks, lenders and hard money sources will not consider commercial loan requests where the population is less than 50,000. And most won’t look at deals with populations less than 100,000.

So many people that want to buy property for their business or for investment simply didn’t have a lot of options (or none at all), unless they consider the B & I loans. Many borrowers are shocked to learn how limited their options are in rural communities

Not only do these loans fill that void, they also have some really interesting terms. For example they offer 30 year amortization schedules on most deals. Compare that to the typical commercial real estate loan of 20 year amortization and it’s a huge difference. What this does is drastically reduce the borrower’s cash flow. The difference in monthly payment between a 20 year amortization and a 30 year is around 20%-25% (assuming the rate and loan amount are comparable).

Also, the Business and Industry program boasts some of the highest financing levels around. You can go up to 80% loan to value on both purchase and refinances. This high level of financing exist for typical buildings like office or retail and more special purpose like restaurants or automotive facilities properties.

Underwriting standards with B and I loans are more flexible than small bank loans as well. Debt coverage ratios for example can be “bent” or adjusted if the funding bank and the USDA think the loan request is close.

If you own a commercial property in a small town, this is a program that you should give serious consideration to, as it maybe the best financing option you will be able to find.

Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan a national commercial mortgage brokerage firm. 248 885-8797. He also has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc.

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