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USDA Loans​

USDA Business Loans

When you need a hotel loan to buy or refinance your property, we have the right loan for you. There are many different loan programs, and we can help find something to fit your unique needs. One of the loans we utilized quite often is the USDA loan.

What is a USDA Loan?

USDA Business loans, also known as USDA Business and Industry loans, are guaranteed by the US Department of Agriculture  (USDA). Lenders like us offer these loans to businesses in rural areas. They are very similar to Small Business Administration (SBA) loans but focus on offering loans to small businesses in rural communities in particular.

What can you use a USDA loan for?

You can use a USDA loan for many things, including:

  • Commercial real estate purchase, development or improvement
  • Working capital
  • Machinery, equipment, supplies or inventory purchases or installation
  • Debt refinancing to improve cash flow
  • Business conversion, enlargement, modernization, development and repair
  • Business acquisition when a loan will save jobs or create new ones
  • Integrated agriculture production or processing facilities

Not all businesses are eligible to apply, but if you have a hotel or motel in a rural area, the chances are very good that you can proceed with a USDA commercial real estate loan.

Qualifications for a USDA Business Loan

If you are purchasing a new hotel or have an existing hotel, you are eligible to apply for a USDA business and industry loan. The USDA has set a specific set of minimum requirements for businesses to qualify for these loans including:

  • Rural Area Location: The USDA defines this as any area other than a city with a population over 50,000 or the urbanized area of a city.
  • U.S. Citizenship or Permanent Residency Status: This holds for both individual borrowers as well as businesses.
  • Sufficient Cash Flow: Without it, you will not meet the minimum requirement.
  • Must Be an Eligible Type of Borrower: Includes for-profit businesses, nonprofits, public bodies, federally recognized tribes and other individuals. Private entities must show that the loan funds will remain in the U.S. and that the facility being financed will create new or existing jobs.
  • Good Credit History: This applies to both individuals and businesses.
  • Tangible Balance Sheet Equity Position: 10% for existing businesses, 20% for new businesses, 25% to 40% for energy projects
  • Insurances: Life, hazard, worker’s compensation, flood and others
  • Completed Feasibility Study
  • Personal and Corporate Guarantees
  • Collateral

USDA Hotel Loans – Amounts, Terms and Rates

When you partner with HotelLoans.com, we negotiate loan terms with you. USDA B&I loans generally do not exceed $10 million. Most USDA business loans are between $200,000 and $5 million, and the average loan is approximately $3 million. There are also requirements on the loan-to-value ratio, and these are based on how you intend to use the loan. A down payment will also be required.

Real Estate: The maximum LTV ratio is 80% with a down payment of 20%.

Equipment/Machinery: LTV is 70% with a down payment of 30%.

Inventory, Supplies: LTV is 60% with a down payment of 40%.

Loan Terms and Maturities

Loan terms are also negotiated for you by us, and it is good to know that the USDA does set maximum terms on how you plan to use the loan proceeds. Even if your loan is for multiple purposes, there are separate loans, or one loan which has “blended” terms.

Real Estate: Maximum term is 30 years.

Machinery / Equipment: Lesser of useful life or 15 years

Working Capital: Term is 7 years.

USDA loan rates are similar to those on SBA loans, which are subject to maximum limits that are attached to the Prime rate, LIBOR rate, or an optional peg rate. Interest rates are set by the lender with the USDA ensuring that the interest rate is reasonable when compared to similar loans. Interest rates on USDA loans can be fixed, variable, or a combination of fixed and variable. For loans with a variable or combination rate, the rate cannot be adjusted more than once per quarter.

Work With Us for Your USDA Loan

Right from your initial consultation, through to a successful closing, Hotelloans.com will be with you every step of the way. If you need a loan to build, buy, or refinance a hotel property, contact us today. Our hotel financing experts look forward to speaking with you. Contact us today for more information.

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