Talking About Government Loans!

Regardless of political affiliation or how you feel about the government, there is one thing that is very helpful in commercial today, government-backed loans.  Because the government is backing them, money is readily available on these types of deals all day.  In past newsletters, we have explored SBA loans.  But I want to talk today about a much lesser known loan, a USDA loan.

 These loans can be used for owner-occupied businesses, like the SBA loan, but can also be used for INVESTOR PROPERTIES!  They can go all the way up to $10 Million – much higher than SBA.  And they require a lot less down, typically 10%-20%, much less than most banks will lend on – especially on investor deals.  And these can be used for construction as well.  The key is that they must be in rural areas which is defined by a population of less than 50,000 people in that city.  Many lenders won’t lend in towns of less than 50,000 people so this loan program really fills a gap.  And with so many banks no longer doing construction loans, this product is HOT.  If what you are building will create jobs; it is even better.

For example, say you want to build a hotel in a city that is near a major metro area but only has a population of 30,000 people.  This describes a tremendous amount of cities across America – including the city I live in.  If that loan size is $7 Million or so you are going to be stuck.  SBA only goes to $5 Million, and the big construction money only wants to look at hotels over $10 Million.  But the USDA loan can fill the gap and you will not have to put down 35% either!  Rates will usually be tied to prime on an adjustable but that puts you in the 5-6% range right now and fixed rates may be available on extremely strong deals.  Because it is a government-backed loan, it does take longer to close but this loan WILL get you closed and with a lot less down than a conventional loan.  Hey, you can do investor hotels on this deal!  We have a loan that just got approved on this program for a saw mill refinance in Arkansas.  That broker had been trying to place that loan for 6 months and we are getting it done!  Had terms out in two days and initial approval in less than a week after getting docs!  If you have a deal that you think might fit these parameters, give us a call today at 866-926-0576 x 704 .