USDA Rural Development partners with businesses to boost loan opportunities

Published 5:00 pm Wednesday, June 30, 2010

With conventional lending institutions tightening their rules on business loans, small rural businesses find their options are limited when trying to borrow money for such things as expansion, remodeling or acquiring new machinery to improve efficiency.

In such an environment, it’s not hard to understand why the popularity of the U.S. Department of Agriculture’s Rural Development program has grown.

Vicki Walker, Rural Development’s state director in Oregon, said her agency’s business loan guarantee program can mean the difference between a company acquiring a conventional loan or not.

“In many cases, the only way a business can obtain a loan is to have that guarantee,” explained Walker, who spoke to members of the Astoria Women Executives June 1.

The loan guarantee program is available to businesses in rural communities. The business is responsible for working with a bank or other financial institution on the details of the loan, such as length and interest rate. Rural Development’s sole role is to guarantee the loan’s repayment.

“The process begins with the banks,” Walker said. “We don’t set the rate or the terms of the loan.”

As lending institutions have imposed higher thresholds on business loans, Walker said more businesses are taking advantage of Rural Development’s program.

Last year, the agency guaranteed an $880,400 loan for a waste recycling business in Warrenton.

In addition to its loan guarantee program, Rural Development also provides outright grants to major projects through its Rural Business Enterprise Grant program.

Home loan guarantee

Walker, a former Oregon state senator who was appointed in November by President Barack Obama to her position in Rural Development, said her agency’s mortgage loan guarantee program for single-family homes also has seen unprecedented activity.

The program has become so popular, in fact, that it ran out of money in mid-May. Walker said Congress is currently considering legislation to provide additional funding for the program.

“Brokers, sellers, lenders and buyers are all impacted,” she said.

Walker noted that in one week, her office approved $3 million in home loan guarantees. Under the program, mortgage loans can be guaranteed for up to 90 percent with no down payment required.

Public facilities, infrastructure loans

The third major component in Rural Development’s portfolio is its long-term loan program for rural community facilities (city hall, library, or health clinic) and public infrastructure (water and sewer systems).

For communities seeking loans for large projects, Walker said it’s best that local officials work together to develop ” a strategic plan” to prioritize what is needed, rather than propose a number of projects.

“It helps to know the (direction the) community is going, rather than throw a little money here and a little bit there,” Walker said.