The United States Department of Agriculture (USDA) has a program that offers USDA business loans to small businesses. The USDA loan program is designed to help businesses in rural areas get the financing they need to grow and expand their operations. USDA small business loans can be used for various purposes and in this blog post, we’ll discuss what the program is and how it can help your small business.
What is a USDA Loan for Business?
USDA loans help spur economic development in rural areas. To qualify for a USDA loan, businesses must meet certain requirements, such as being located in a designated rural area and having a certain number of employees. USDA loans can be used for a variety of purposes, such as buying land, constructing buildings, or making improvements to existing structures.
Why Would a Small Business Want One?
There are many benefits of a USDA business loan. Let’s briefly discuss a few:
- USDA business loans can be used by rural businesses for a variety of purposes, such as buying land, a commercial real estate purchase, constructing buildings, or even energy efficiency improvements to existing structures.
- The interest rates on USDA industry loans are often lower than those of other financing options.
- USDA business loans can have longer repayment terms than other types of loans, giving businesses more time to repay the loan.
- The USDA is a government agency, so businesses can feel confident that they are getting a loan from a reliable source.
How a USDA Loan Works
The USDA home loan program provides a 90% loan amount guarantee to approved lenders in order to reduce the risk of extending 100% loans to eligible borrowers. In order to be eligible for a USDA loan, applicants must meet certain income and credit requirements, and the property must be located in an eligible rural area. USDA loans do not require a down payment, making them an excellent option for those with limited savings.
- READ MORE: Small Business Loan Requirements
The Different Types of USDA Loans Available
There are several USDA loan types available to small businesses and federally recognized tribes, each with its own set of eligibility requirements. Here are a few:
USDA Rural Development Loan
This USDA loan can be used for business purposes such as buying land, constructing buildings, or making improvements to existing structures. The business must be located in a designated rural area, and the loan can be used for a variety of purposes.
USDA Business and Industry Loan
This loan can be used for businesses located in designated rural areas for the purpose of business expansion or modernization. Your business credit report history must look good and the business must be able to create new jobs or retain existing ones.
USDA Community Facilities Loan
This loan can be used by public entities, such as schools, libraries, and police and fire stations, located in designated rural areas. The loan can be used for a variety of purposes, such as construction, renovation, or purchase of facilities.
10 Best USDA Lenders of 2022
Access to capital is essential for businesses in rural communities. A USDA business loan is a great option for businesses in these areas. Here are the 10 best USDA lenders of 2022 to help you get the loan amount you need:
1. Flagstar Bank Mortgage
This lender offers USDA rural housing loans as a fixed-rate mortgage for properties located in eligible rural areas with no prepayment penalty for early payoff. This loan doesn’t require a down payment, and the monthly payment on the loan amount may be more affordable than for other types of loans.
2. CMG Financial
CMG Financial is a company that provides mortgages and home loans to customers throughout the United States. The firm’s commitment to responsible lending practices makes them an excellent choice as your mortgage lender!
3. Caliber Home Loans
Caliber Home Loans offers competitive interest rates on their loans. To qualify, you’ll need minimum credit scores of 580 for VA or FHA loans and 620 for USDA loans.
4. New American Funding
New American Funding offers a diverse product suite, competitive pricing, and their promise to expedite the process of closing.
5. AmeriSave Mortgage
They offer low rates and an online process that takes less than five minutes for you to get prequalified. With $115+ billion in loan volume under their belt, they’re a great choice when it comes time to buy or refinance.
6. Guild Mortgage – Loans for Rural Communities
Guild Mortgage offers some of the best financing options in the industry. They offer 100% financing of the purchase price, better-than-average interest rates, and a credit score requirement as low as 540.
7. Truist (formerly SunTrust Mortgage)
Truist is one of the leading providers of home loans in the United States. They are known for offering low rates, low fees, and fast preapproval times for their customers. Borrowers can also get a preapproval letter within 24 hours.
8. Watermark Home Loans
With their simple online process and cutting-edge tools you can easily access 24/7, they’re taking it one step further by making the customer experience as easy as possible! Plus there’s an experienced team of loan officers ready to help custom fit your mortgage.
9. PNC
PNC is now offering a new way for customers to finance their purchases with no down payment required. The mortgage is available for both new and existing PNC customers and can be used for either a purchase or a refinance.
10. Carrington Mortgage Services
Carrington Mortgage Services is committed to providing superior customer service. They take the time to assist their customers in selecting the right loan for their needs, and they work tirelessly to close loans on time, every time.
How to Apply for a USDA Loan Program – The Process Involved
Applying for USDA loans is easy. Zero-down financing is available through some lenders for eligible borrowers. The first step is to qualify for a USDA loan. With that out of the way, here are the steps to applying for a loan:
- Find a USDA-approved lender. You can find one easily by using the Lender Locator on the USDA website. Be sure to compare rates and terms before picking a lender.
- Get pre-approved for the loan. This step is important because it will give you an idea of how much house you can afford. It also helps the seller know that you are a serious buyer.
- Submit your loan application to the lender. Along with your application, you will need to submit proof of income, employment, and assets.
- The lender will then send the loan to USDA for approval. Once approved, you will have access to the loan funds.
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