Running Hill Self Storage, of Scarborough, Maine, is expanding its business using federal stimulus money. The federal money came from the U.S. Department of Agriculture's Business and Industry Guaranteed Loan Program, which assisted Running Hill in getting its loan from Northeast Bank. The loan was for $2.2 million, and Running Hill will use it to construct a new self-storage complex. The new complex will employ 60 people.
The money for the B&I program was allocated by Congress last February, when it passed the 2009 American Reinvestment and Recovery Act.
The USDA's Business and Industry Guaranteed Loan program is directed at rural communities, and is being administered by the USDA's Rural Development Agency. For purposes of the program, rural communities are considered to be cities or towns of fewer than 50,000 people, and the surrounding areas. The program does not directly provide the money for the loans, but guarantees them for an amount up to 80 percent of the loan for loans of $5 million or less, 70 percent for loans of between $5 and $10 million, and 60 percent for loans in excess of $10 million. According to the USDA's Rural Development Program fact sheet, however, the latter condition should almost never go into effect, because the program's guidelines prohibit loans in excess of $10 million. Occasionally, though, the program may make an exception to this rule for rural cooperative organizations. Exceptions will only be made, though, for organizations that produce value-added agricultural commodities.
In order for a business to qualify for a B&I loan, it must meet one of the following conditions:
- provide employment
- improve the economic or environmental climate
- promote the conservation, development, and use of water for aquaculture
- reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems and other renewable energy systems
Borrowers who are eligible for the program include cooperative organizations, corporations, partnerships, individuals, and other legal entities. Borrowers may be for profit or not-for-profit. Borrowers may also be public entities, including Native American tribes or reservations. Individual borrowers must be U.S. citizens or permanent legal residents of the U.S. At least 51 percent of the owners of corporations that apply must be U.S. citizens or permanent legal U.S. residents.
The terms of loans made through the B&I program may not exceed 30 years for real estate, 15 years or the life of the equipment for machinery and equipment, and 7 years for working capital. Interest rates may be fixed or variable. The borrower must be able to provide collateral in order to protect the lender and the federal program. There is also an annual fee, which is based on a percentage that is established by the Rural Development Agency and published annually in the Federal Register. To determine the annual fee, a business can multiply the percentage rate published in the Federal Register by the current outstanding principal loan balance as of December 31 of each year. Annual fees are due every year by January 31.