USDA B&I Loan for business acquisitions

November 11, 2023

by a lender from University of Massachusetts at Amherst in Atlanta, GA, USA

One of the purposes of USDA B&I loans is for business acquisitions. Anyone had experience using it?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

You can certainly use a USDA loan to fund a business acquisition. However, the biggest hurdle with using the USDA loan program is that the loan must be fully secured by business assets. Unlike the SBA that will advance against goodwill value and will have a loan to value that can far exceed 100%, the USDA will not advance against goodwill value. So long as you have business assets that support the loan amount, you can do a business acquisition with a USDA loan, but you cannot have an unsecured portion of a USDA loan.

I have seen transactions with a lot of equipment and / or real estate where the Bank uses the USDA program for a large portion of the debt and then uses the SBA 7A loan program for the unsecured goodwill / business interest. This is an option.

One thing to keep in mind with the USDA loan program. It is separately implemented in the State in which the product is by the USDA in that state. There is no PLP status like there is for SBA loans where the loan is automatically approved by the SBA once the Bank approves it. The USDA has a separate approval process on top of the Bank approval and it can take quite a bit of time, and the time involved can vary from state to state. I usually tell people to expect 4 to 6 months to get a deal closed USDA.

If you have additional questions you can reach me here or directly at redacted Good luck.

Reply by an intermediary
from Texas A&M University in Houston, TX, USA

I have a client that is closing on a $18mm usda loan this week on an acquisition. Believe as much as $25mm can be funded via usda. Please note that in this case the usda fee is 3%

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