The B&I Guaranteed Loan Program is a little known government sponsored loan for business and investors where the property is located in a rural community. The point of the program is to improve and develop business/employment, again in rural communities. Like SBA commercial loans, the B and I program guarantees banks and lenders so that they are more willing to lend in small town communities.
Again the primary goal of the program is to stimulate the economy, so virtually all borrowers are eligible, as long as they:
1. Provide employment,
2. Improve the economic or environmental climate
3. Promote the conservation, development, and use of water for aquaculture
4. Reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems and other renewable energy systems.
The way the loan proceeds can be used must be in alignment with above. In addition, the proceeds can be used to prevent the failure of a business and or the prevention of job loss. Also, funds can be used for business conversion, enlargement or the purchase of land, buildings or equipment, supplies, etc.
Normally most banks are not interested in lending in smaller communities due to the lack of diversification of the economy. Values can fluctuate widely. The program guarantees banks up to 80% of the loan balance, for loans less than $5,000,000, in case of borrower default. The guarantee drops as the loan amount increases.
General Detail of the B and I Loan
The loan limit is normally capped at $10,000,000 though exceptions can be made to $25,000,000. Loan terms are general 30 years , while machinery or equipment may not exceed the useful life. Working capital cannot exceed 7 years. Rates can be fixed or adjustable at the lenders discretion.
B and I loans are still viable and many banks and lenders are pushing borrowers to go this route so that they can be assured via the guarantee. Due to the credit crisis this maybe the best option for borrowers in the market.
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