Recently updated on October 25th, 2022 at 12:09 pm
If your business is among the 17% of American firms that operate in the rural area of the country, then you know how hard it usually is to get access to a loan. This often makes it hard for a majority of small businesses in rural America to stay up and running due to lack of and difficulties in accessing financing. The good news is that thanks to USDA small business loan, entrepreneurs in rural areas can now turn their ideas into reality.
If you want to know what is the USDA loans then it’s a zero-down payment mortgage for rural homebuyers as well as for entrepreneurs in rural areas. Some of the benefits of taking out this type of loan areas outlined below.
1. Easily Accessible
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Although the competition is significantly lower, and they create jobs for two-thirds of Americans, businesses in rural America often face a unique set of challenges. One of the most significant of these challenges, however, is limited access to capital. This is majorly due to the lack of trusted lenders and high interest rates set by the few trustworthy lenders available.
The USDA loan program is primarily designed to combat this problem. They make it easier for businesses with the potential to grow to access funds they can use as capital at affordable rates. Ease of access to these loans is because for a company to be eligible, it must be in an area with a population of 50,000. Therefore, the competition is significantly reduced.
2. Any Type of Business Can Apply
While a business must meet the basic eligibility requirements first, almost all types of companies can apply. Whether you run a small business firm, a non-profit enterprise, a cooperative, or a public body startup, the process remains the same. You can put in your application as long as you meet the necessary requirements.
3. Large Loanable Amounts
While other factors contribute to the growth and success of a business, capital is one of the most significant. An entrepreneur might have unique business ideas, but without enough money to fuel them, then he/she will probably close shop within a few months of starting. Thankfully, USDA small business loans prevent this from happening. Other than being easily accessible, the average loan amounts offered are also quite large. Depending on the eligibility of an enterprise, they start from as low as $200,000 to $5 million. In fact, with an administrator, it’s possible for a business in rural America to get a loan of up to $10 million. This makes it easier for businesses in rural communities to grow.
4. Better Loan Repayment Terms
Although the USDA does not advertise interest rate guidelines, most government-backed loans often feature incredibly competitive interest rates. This means that the interest rates charged on a USDA small business loan are in line with the SBA 7(a) loan guidelines. What’s even better is that there is room for negotiations with the lender. Therefore, depending on how excellent your negotiation skills are, you may walk away with a competitive interest rate.
When it comes to the repayment period, however, the terms vary. For instance, real estate applicants often have a maximum repayment period of 30 years, while those taking out a loan to serve as working capital have up to seven years of repayment.
Owning a business in rural America can be pretty rewarding. For instance, due to lower operational costs, entities in rural America often enjoy economies of scale. However, they also have challenges, the most significant, as mentioned, being limited access to capital. Thankfully, this is a challenge they can now overcome using a USDA small business loan from North Avenue.