USDA Rural Development (RD)

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2 USDA Rural Development (RD) David Kramer Business Programs Specialist (RD State Office, Topeka)

3 USDA Rural Development, Kansas Area Office Locations Area Offices (2010) CHEYENNE RAWLINS DECATUR NORTON PHILLIPS SMITH JEWELL REPUBLIC WASHINGTON MARSHALL NEMAHA BROWN DONIPHAN SHERMAN THOMAS SHERIDAN GRAHAM ROOKS OSBORNE MITCHELL CLOUD CLAY RILEY POTTAWATOMIE JACKSON ATCHISON JEFFERSON LEAVENWORTH WALLACE LOGAN GOVE TREGO GREELEY WICHITA SCOTT LANE NESS HAMILTON KEARNY FINNEY HODGEMAN GRAY FORD STANTON GRANT HASKELL ELLIS RUSH PAWNEE EDWARDS KIOWA RUSSELL BARTON STAFFORD PRATT LINCOLN ELLSWORTH RICE RENO KINGMAN OTTAWA DICKINSON SALINE McPHERSON MARION HARVEY SEDGWICK GEARY MORRIS CHASE BUTLER WABAUNSEE LYON GREENWOOD ELK SHAWNEE OSAGE COFFEY WOODSON WILSON DOUGLAS FRANKLIN ANDERSON ALLEN NEOSHO Wyandotte JOHNSON MIAMI LINN BOURBON CRAWFORD MORTON STEVENS SEWARD MEADE CLARK COMANCHE BARBER HARPER SUMNER COWLEY CHAUTAUQUA MONTGOMERY LABETTE CHEROKEE (contact Hays Area Office) Garden City Area Office (#5) 2106 E Spruce Hays Area Office (#1) 2715 Canterbury Drive Hays, KS Manhattan Area Office (#2) 3705 Miller Parkway, Suite A Manhattan, KS Newton Area Office (#4) 1405 S Spencer Road Newton, KS Iola Area Office (#3) 202 W Miller Road Iola, KS 66749

4 Business Programs ( B&I, REAP/9007 ) Agency Contacts: Newton (Area Office) Doug Clary Manhattan (Area Office) Larry Holz Iola (Area Office) Katie Casper Hays (Area Office) Brandon Prough Topeka (State Office) David Kramer

5 Business & Industry (B&I) Guaranteed Loan Program

6 Business & Industry (B&I) Program Funding Levels (Nationally) Program Funding Growth: - Fiscal year 2010 program

7 Government Guaranteed Loans Government supports the lender (credit enhancement) Guarantees require fewer tax dollars than direct loans Guarantees create effective capital for lenders Two primary programs are SBA and USDA USDA program - Loan limits are much larger with maximum loan size of $25 million. - No minimum loan size

8 B&I LOAN PROGRAM Benefits to Borrower/Business Better terms than conventional loans Longer repayment terms (fully amortized loans) Possible higher loan to discounted collateral values Smaller equity requirements Liquidity & improved cash flow

9 B&I LOAN PROGRAM Benefits to Lender Government absorbs up to 80% of potential loan losses (risk sharing tool) Only non-guaranteed portion impacts legal lending limit (another tool to expand loan portfolio) Guarantee strengthens loan portfolio Opportunity for immediate liquidity through the sale of the guarantee (Increase earnings thru participation in the secondary market)

10 Business & Industry (B&I) Loan Guarantee Available on the Internet - B&I Application (or RD can you the application upon request) - B&I Instruction (4279-B)

11 Application Process (brief summary) Lender originates the loan: (Lender Analysis / Commercial Credit Standards) - Lender evaluates the proposal Cash Flow / Collateral / Equity Management / etc. - Determine if loan should be made - Establish parameters on credit (draft loan agreement)

12 Application Process (continued) - Lender submits application to USDA Rural Development (RD) * Part A (completed by Applicant / Business) * Part B (completed by Lender) * # Attachments

13 Application Process (continued) - RD Reviews/Evaluates application material provided by lender and applicant - Completes an internal Write-up on loan - Presents to B&I Loan Committee - Prepares a Conditional Commitment for guarantee, if favorable action - Issues Guarantee once conditions are met (loan requests over $10 mill. must go to National Office Loan Committee)

14 Basic Eligibility Location Borrower / Entity Type Project

15 Eligible Areas Population of 50,000 or less (use 2000 census and maps)

16 Eligible Borrowers - Type of Entity - Citizenship - Rural Area

17 Types of Projects (Funded with B&I Program) Some past projects funded in Kansas: - Manufacturing - Retail Business Most all types of businesses

18 Movie Theater 22

19 Lumber Yard 24

20 Manufacturing 28

21 Assisted Living 29

22 Expansions Eligible Loan Purposes Machinery & equipment Business purchases Construction costs Start up working capital (not line of credit) Refinancing (some limitations, including - when necessary to improve cash flow & create or save jobs)

23 Ineligible Loan Purposes Line of Credit Owner-Occupied Housing Golf Courses Gambling Facilities

24 Percentage of Guarantee 80% up to $5 Million 70% over $5 Million to $10 Million 60% over $10 Million to $25 Million

25 Loan Rates & Terms Rate (Lender & Borrower negotiate) : Interest Rates (Fixed or Variable) Maximum Terms: - 7 years start up and working capital - 15 years on machinery and equipment - 30 years real estate & improvements

26 Borrower Equity Requirements 10% tangible balance sheet equity for existing business 20% tangible balance sheet equity for new business USDA RD measures equity in accordance with Generally Accepted Accounting Principles (GAAP)

27 Loan Fees Generally Fees are as follows: Guarantee Fee: 2% x loan X % of guar. (pd when guar. issued) ¼ of 1% annual renewal fee Other Loan Charges allowed: Routine Lender Fees / Professional Services

28 B&I Program (clarifications / common misconceptions) Inability to obtain other credit is NOT a requirement. NOT just for rural Areas (as many might define a rural area) NOT just for agricultural related business

29 Notes:

30 Rural Energy for America Program (REAP) Energy Efficiency (EE) Improvements or Renewable Energy (RE) Systems

31 Rural Energy for America Program (REAP) A program to help rural small businesses or agricultural producers make energy efficiency (EE) improvements or purchase renewable energy (RE) systems.

32 Energy Efficiency (EE) Renewable Energy (RE)

33 What size of REAP Grant is available? Not exceed 25% of total eligible project costs Minimum grant request Energy Efficiency (EE) improvements - $1,500 Renewable Energy (RE) system - $2,500 Maximum grant request Energy Efficiency (EE) improvements - $250,000 Renewable Energy (RE) system - $500,000 Maximum grants per applicant per fiscal year is $750,000

34 What size of REAP Guaranteed Loan (GL) is available? Not to exceed 50% of total eligible project costs Maximum combination GL and grant cannot exceed 75% of total eligible project costs Minimum GL request is $5,000 Maximum GL request is $25 million Can combine with up to $25M of Business and Industry GL for larger projects

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