COVID-19 UPDATE: CARES Act Helps Rural Businesses

On May 22, the USDA announced the Business & Industry CARES Act Program, a new coronavirus pandemic relief program that will increase access to commercial lending for businesses in rural areas.  The new program will provide up to $1B in loan guarantees for rural businesses, including agricultural producers who are ineligible for FSA funding, so long as the business was in existence on February 15, 2020.  The guaranteed loan funds are to be used as working capital to prevent, prepare for, or respond to the effects of the coronavirus pandemic, and can cover expenses such as wages, salaries, health care costs, property and hazard insurance, taxes, utilities, and agricultural production expenses, including supplies and labor.  The funds may not be used for business acquisition, construction, lines of credit, rental housing, golf courses, racetracks, gambling facilities, churches, and purchase of machinery or equipment.  Most types of businesses are eligible, including for profit-businesses, nonprofits, cooperatives, public bodies, and federally-recognized tribes.  “Rural” is any location outside of a city with a population of fewer than 50,000 people.  This includes all of New Hampshire, other than Manchester and Nashua.

Lenders apply to participate in the program by contacting their local Rural Development office.  Interested businesses should contact their lender for more information.  Most federal- and state-regulated banks and savings institutions are eligible to participate.  Lenders and businesses negotiate the loan terms (interest rate, principal, and term) although USDA has specified that terms may not exceed 10 years, payments must be fully amortized over the life of the loan, and that a 2% origination fee, 50BPS renewal fee, and collateral are required.  Payments on principal may be deferred for up to three years, and payments on interest may be deferred for up to one-year form origination.  The program guarantees 90% of the value of the loan and may be used to complement other CARES Act relief, including the PPP loan.  The program is open until funds are exhausted but no later than September 15, 2021.

More information is available at: https://www.rd.usda.gov/programs-services/business-and-industry-cares-act-program

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