SBA and USDA Loan Programs

When it comes to financing options available for the hotel industry, several financial institutions will utilize the SBA (Small Business Administration) and the USDA (United States Department of Agriculture) Rural Development business loan programs that area available through the United States Government.

The government loan programs help facilitate business loans for lenders along with their potential borrowers in order to improve job creation and overall economic development. The SBA and USDA loan programs also provide an opportunity for financial institutions to participate in certain loan requests that they normally could not with just traditional financing; while allowing the potential borrower an opportunity for better financing terms to include lower down payments options.

SBA (Small Business Administration)

The only cabinet level federal agency fully dedicated to small business and provides counseling, capital and contracting expertise as the nation’s resource for small business.  The SBA 504 and the SBA 7a loan programs are heavily utilized for financing options when it comes to new construction hospitality loans.

SBA 504 “Grow” Loan Program:

  • The SBA 504 Loan Program is used to finance fixed assets for small business enterprises at below market rates and is funded by Wall Street Bonds.
  • A Certified Development Company (CDC) is an economic development organization that has been authorized by the SBA to make loans under the SBA 504 loan program.
  • The CDC works in partnership with the lender and small business to process, approve, close and service the SBA 504 loan.

SBA 7a “Advantage” Loan Program:

  • The SBA 7a Loan Program is used to finance fixed assets, working capital, inventory etc. for small business enterprises; while broadening a bank’s lending to include businesses outside of their normal bank policy to include startups, changes of ownership and high turnover businesses.
  • A 7a loan doesn’t come directly from the SBA, instead an authorized SBA lender makes the and the SBA guarantees a portion of it, mitigating much of the risk for the lender.
  • With the SBA guaranteeing a large portion of the loan, the lender has the ability to lower its lending standards, allowing small business owners with less established credit histories or less cash flow to qualify.
  • SBA 504 Loan Program Information
    This link will take you to the NADCO (National Association of Development Companies) website where you can find details pertaining to the SBA 504 loan program which includes loan structure, eligibility and the reasons why one should utilize the SBA 504 loan program.

USDA (United States Department of Agriculture) Rural Development

A federal agency with the United States Department of Agriculture that runs programs intended to improve the economy and the quality of life in Rural America.

USDA B & I (Business and Industry) Guaranteed Loan Program:

  • It is a loan guarantee program designated to assist credit-worthy rural business enterprises obtain needed financing for most any legal business purpose.
  • The program is specifically targeted to rural business; meaning a business can qualify if its project location falls within an eligible rural areas (all areas other than cities and or towns larger than 50,000 people);
  • http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
  • USDA B& Loan Program Information
    This link will take you to the B & I (Business & Industry) Loan Guarantee fact sheet where it provides more information on the program requirements, loan terms and loan amount guarantees available.

The downloadable document will provide a side by side comparison of the SBA and USDA loan products offered to include loan limits., guarantee amounts, eligibility requirements, fees etc. This comparison document can help you chose the SBA or USDA loan product that can meet your businesses financing needs and goals.


Questions?

Choice has a dedicated loan consultant, Yolanda Merriweather that can also facilitate your needs when it comes to lender resources. You may contact her by submitting your question(s) below.

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    Updated on December 23, 2020

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