USDA Opens up a Billion-Dollar Coronavirus Rural Business Loan Program
USDA's Rural Development has up to $1 billion in loan guarantees for rural businesses to help with capital needs during the coronavirus pandemic, USDA stated. Farmers who also are not eligible for traditional FSA loans could also be eligible for the new loan program dubbed the USDA Business & Industry (B&I) CARES Act Program.
The B&I Program has specific requirements for using working capital that must be applied "to prevent, prepare for or respond to the effects of the coronavirus pandemic." Businesses, non-profits, cooperatives, tribes and public entities can apply for the loans as long as they were in operation on Feb. 15, 2020, and are located in a rural area such as a city or town with fewer than 50,000 people. The loan application must made through a traditional lending institution such as a bank, Farm Credit lender, or credit union.
USDA has a long list, though, of what the funds cannot be used for. The B&I Program loans can't be used to buy or develop land or commercial property; buy another business; construction; lease improvements; machinery and equipment; lines or credit; rental housing; agricultural production, though some exemptions apply; or debt refinancing, unless the debt occurred after Feb. 15, 2020, for eligible purposes.
The loan guarantees can go up to 90% of the total loan and the maximum term is 10 years, though a loan recipient could pay interest-only payments for up to three years.
For more details on the B&I Program, reach out to your local USDA Rural Development office or go to https://www.rd.usda.gov/…
Disaster Set-Aside Loan Provision
FSA also will expand its Disaster Set-Aside (DSA) loan provision for farmers affected by COVID-19. The provision typically is used in the wake of natural disasters.
The DSA allows a producer to extend the payment on an FSA direct loan. The payment due date is moved to the end of the loan maturity day or extended up to 12 months in the case of an annual operating loan, FSA stated. Producers who have already used a set-aside for a prior disaster may be able to set aside another loan payment as well.
Groups such as the National Sustainable Agriculture Coalition stated they have been advocating for FSA to declare the coronavirus as eligible to trigger a DSA provision. "NSAC applauds FSA for making this change and we will be watching closely next year to see if it needs to be extended beyond next September given that the recovery from this crisis is likely to be a long-term affair," the group stated.
Producers with FSA direct loans are encouraged to contact their local FSA office to discuss their loans and options for flexibility in payments, USDA stated. Right now, USDA Service Centers are only open by phone appointment. Those appointments will ramp up quickly on May 26 as USDA opens up enrollment for the Coronavirus Food Assistance Program.