Cons of USDA-Guaranteed Business Loans
However, as with the former, the latter guaranteed loans do have some cons. Following are some of the cons of USDA business loans.
These Are Highly Competitive Loans
Each year, a certain amount of money is allocated by Congress for the USDA. This money often runs out before 12 months are up. At the start of the next fiscal year of the government, Congress grants more funding; although, in the interim before that, there will not be funds for new USDA loans.
Occasionally, it grants supplemental funds in the year, but that is not guaranteed. All of this means USDA loans are usually in short supply, making the application process rather competitive.
Personal Guarantees and Collateral Are Required
To get a USDA loan, a qualified potential borrower will need to put something up as collateral or provide a personal guarantee. Your collateral’s value also has to be equal to the business loan amount.
Furthermore, guarantees will be needed from partners, owners, and shareholders with 20% or more interest in the entity. By signing the guarantee, you make yourself personally liable for this type of loan.