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USDA Loans Why Developers Are Lining Up For Them

Regardless of political affiliation or how you feel about the government, there is one thing commercial real estate investors find very beneficialin today's new credit environment, government-backed loans. Because the government is backing them, money is readily accessible on these types of deals all day. In recent articles I have written , I have explored SBA loans, but I want to tell you about a much lesser known loan, a USDA loan.

USDA loans can be used for commercial properties that have owner occupied business owners in them, justl like the SBA loan, buth the best feature about USDA loans is that they are for INVESTORS ALSO! They can go all the way up to $10 Million, much higher than SBA. And they require a lot less down, typically 10% to 20%, much less than most banks will lend on, especially on investor deals. And these can be used for development 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 folks so this loan program really fills a gap. And with so many banks no longer doing development loans, this product is sizzling. If what you are building will create jobs; it's even better.

For instance, say you want to build a storage facility in a city that is near a key metro area but only has a population of 40,000 individuals. This describes a tremendous amount of cities across America. If that loan size is $7 Million or so, you are going to be stuck. SBA only goes to $5 Million, and the large construction money only wants to look at deals over $10 Million. But the USDA loan can fill the gap and you will not have to put down 35% either! Rates will ordinarily be tied to prime on an variable but that puts you in the 5-6% range right now and fixed rates might be available on exceptionally strong deals. Because it's a government backed loan, it does tadditionally take longer to close but who cares. This loan WILL get you closed with a lot less down then a conventional loan and help you or your client creating deals that win again.

About Author Blaise Dietz :

If you or you clients think developement financing is non existent than think again.  The USDA is here to help. Blaise Dietz is a managing director at Charlotte Capital Partners Inc. and specializes is commercial real estate lending and capital structure creation.  He can be reached at

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Article Added on Sunday, September 6, 2009
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