What is the process for securing a USDA bridge loan?
When critical projects can’t wait for USDA loan approval, a USDA bridge loan provides businesses with fast, flexible funding to keep momentum on track. This article explores how USDA bridge loans work, from enabling the commencement of construction projects to facilitating time sensitive acquisitions, and highlights the step-by-step process to secure one.
With insights on eligibility, the application process, and how Growth Lending supports businesses every step of the way, discover how USDA bridge loans help companies advance projects smoothly.
Read on to see if this solution could accelerate your next project…
What is a USDA bridge loan?
A USDA bridge loan is a funding package provided to a business as a short term solution while they await a loan under one of the USDA’s guaranteed loan programs. This enables the business to proceed with planned projects while they await approval from the USDA and funding from the approved USDA lender.
You can find out more about the United States Department for Agriculture’s (USDA) guaranteed loan programs here.
You can read more about USDA bridge loans and why they are beneficial to businesses here.
When would a business benefit from a USDA bridge loan?
Many of the programs supported by the USDA have been introduced because of the positive impact that they have on businesses and the communities they serve.
Important projects such as those developing energy infrastructure and critical community services would potentially not happen without the USDA’s support, so any delay in receiving USDA approval for financing can be a significant roadblock to progress.
A USDA bridge loan ultimately ensures that projects do not stall, enabling construction, procurement and/or operations to remain on schedule. A business would therefore benefit from a USDA bridge loan in scenarios such as:
1. When projects are time sensitive
Businesses with time-sensitive requirements such as developers working in renewable energy or agriculture, benefit from USDA bridge loans because the advanced cash enables them to secure materials, begin construction and/or hire key personnel before USDA-backed loans are officially disbursed.
Another example is a buyer looking to acquire a business or a specific piece of property within a specific timeframe.
Without the interim solution of a bridge loan, such businesses could face significant project delays, and missed opportunities. The faster access to cash means they can maintain momentum and meet critical milestones, setting themselves up for long-term success once the USDA-backed loan is finalized.
2. When current debt is very expensive
Such businesses may also be faced with maturing debt that requires settlement.
A USDA bridge loan enables businesses to refinance this while awaiting finalization of the USDA permanent loan.
3. When the business needs additional working capital
In other instances, a USDA bridge loan can provide much needed working capital ahead of receiving the permanent USDA backed loan. Providing a life-line to businesses and/or new projects.
Overall, USDA bridge loans are an essential tool for businesses that need to start or advance projects without waiting for formal USDA loan approval. They provide the flexibility and capital needed to seize opportunities, avoid disruptions and ensure smooth project execution.
Examples of a USDA bridge loan in action:
We have helped many businesses accelerate projects by providing bridge funding. Here are some examples of how they have benefitted:
- Purchase and development of land, buildings and/or infrastructure:
USDA bridge loan used to acquire rural land or commercial properties and begin construction or infrastructure development before the USDA-backed funding is finalized. - Business acquisitions, start-ups and expansions:
Interim funding provided to facilitate acquisitions or launch new ventures while permanent USDA financing is still in progress. - Purchase and installation of machinery and equipment:
Bridge loans enable businesses to secure critical equipment or machinery needed for operations or project development without delays. - Startup costs, working capital, inventory and supplies:
Earlier access to funds ensures businesses can cover initial operating expenses and maintain sufficient working capital while they await long-term USDA financing. - Early commencement or continuation of construction:
Financing supports construction timelines by enabling project commencement or avoiding interruptions during USDA approval processes. - Time-sensitive acquisitions of critical project assets or businesses:
Bridge loans enable companies to seize acquisition opportunities or secure essential project components that are time-sensitive, ensuring projects stay on track.
What is the process for securing a USDA bridge loan?
1. Introduction to Growth Lending
Businesses that would benefit from a USDA bridge loan are usually introduced to us via third party channels such as brokers and referral partners, but as awareness of the USDA bridge loan product grows, business leaders are increasingly finding us organically. If you’re one of them, it’s great to be connected!
Regardless of how the introduction occurs, we will work collaboratively with you from day one, to ensure the bridge loan process runs seamlessly.
2. Initial request for information
Once the relationship is established, our deal team will request preliminary information to gain a better understanding of your project. This includes your specific funding requirements and how far along the USDA loan process you are.
Since our product is a USDA bridge loan, we require a USDA application to have been submitted or for an application to be actively in progress prior to funding.
3. Sightings paper and Credit Committee approval
To streamline the process, our deal team collaborates closely with the USDA underwriter and borrowing team, leveraging existing documentation to avoid duplicating efforts. The sightings paper provides an overview of the project and is submitted to Growth Lending’s Credit Committee for initial approval.
4. Term sheet finalization and commitment deposit
Upon approval of the sightings paper, we can issue you a final term sheet. Then, you sign the term sheet and pay a commitment deposit — which contributes towards legal expenses — and the process moves into the detailed due diligence phase.
5. Detailed due diligence and legal documentation
Our deal team conducts a deeper review of the project by requesting additional documentation, which is reviewed alongside the information already provided by and to the USDA. Legal documentation is drafted simultaneously to ensure smooth execution upon final approval.
6. Final Credit Committee approval and legal execution
Once all due diligence is completed, the final credit paper is presented to Growth Lending’s Credit Committee for approval. With approval in place, legal documents are finalized and executed, bringing you one step closer to securing financing.
7. Funding!
After all conditions are met and agreements are signed, Growth Lending disburses the bridge loan, enabling you to move forward with your project and meet critical project milestones while waiting for permanent USDA loan approval.
