USDA Rural Development, Business and Industry Loans

About the Program

The purpose of the B&I Guaranteed Loan Program is to improve, develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities. This purpose is achieved by bolstering the existing private credit structure through the guarantee of quality loans which will provide lasting community benefits.

Who May Borrow

A borrower may be a cooperative organization, corporation, partnership, individual or other legal entity organized and operated on a profit or nonprofit basis. A borrower must be engaged in or proposing to engage in a business that will:

1.      Provide employment;

2.      Improve the economic or environmental climate;

3.      Promote the conservation, development, and use of water for aquaculture; or

4.      Reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems and other renewable energy systems.

How Funds May be Used

Loan purposes must be consistent with the general purpose contained in the regulation. They include but are not limited to the following:

1.       Business and industrial acquisitions when the loan will keep the business from closing, prevent the loss of employment opportunities, or provide expanded job opportunities.

2.       Business conversion, enlargement, repair, modernization, or development.

3.       Purchase and development of land, easements, rights-of-way, buildings, or facilities.

4.       Purchase of equipment, leasehold improvements, machinery, supplies, or inventory.

What is the percentage of Guarantee

The percentage of guarantee, up to the maximum allowed, is a matter of negotiation between the lender and the Agency. The maximum percentage of guarantee is 80 percent for loans up to $25,000,000.

What is the equity requirements: 10% for exiting business with one full year business cycle. 20% for all startup business with less than one full year business cycle. 

What are the Loan Amounts

The total amount of Agency loans to one borrower must not exceed $25 million. 

Eligibility Map:  Google USDA Eligibility Map for USDA RD- B&I Loan Program

How may funds be used?
Funds can be used to purchase, construct, and / or improve essential community facilities, purchase equipment and pay related project expenses.

Examples of essential community facilities include:

• Health care facilities such as hospitals, medical clinics, dental clinics, nursing homes or assisted living facilities
• Public facilities such as town halls, courthouses, airport hangars or street improvements
• Community support services such as child care centers, community centers, fairgrounds or transitional housing
• Public safety services such as fire departments, police stations, prisons, police vehicles, fire trucks, public works vehicles or equipment
• Educational services such as museums, libraries or private schools
• Utility services such as telemedicine or distance learning equipment
• Local food systems such as community gardens, food pantries, community kitchens, food banks, food hubs or greenhouses

What are the funding priorities?

• Priority point system based on population, median household income
  • Small communities with a population of 5,500 or less
  • Low-income communities having a median household income below 80% of the state nonmetropolitan median household income.

What are the terms?

Funding is provided through a competitive process.

Direct Loan:

• Loan repayment terms may not be longer than the useful life of the facility, state statutes, the applicants authority, or a maximum of 40 years, whichever is less

Are there additional requirements?

• Applicants must have legal authority to borrow money, obtain security, repay loans, construct, operate, and maintain the proposed facilities
• Applicants must be unable to finance the project from their own resources and/or through commercial credit at reasonable rates and terms
• Facilities must serve rural area where they are/will be located
• Project must demonstrate substantial community support
• Environmental review must be completed/acceptable

What governs this program?

• Direct Loans: 7 CFR Part 1942, Subpart A

SBA 7(a) Loan Program Eligibility

In order for a business to qualify for the SBA 7(a) loan program, it must meet the following criteria:

• Be an operating business;
• Be organized for profit;
• Be small, as defined by the SBA;
• Be located in the United States or its territories or possessions; and
• Demonstrate a need for the desired credit.

In addition, the applicant must show that the funds are not available from alternative sources, including the principals’ personal resources.

Maximum guarantee amounts

It’s a common misconception that the SBA loans money. The SBA doesn’t loan money through its 7(a) program: it guarantees loans made by lenders. Also, the SBA doesn’t guarantee the full amount of the loan. The SBA will guarantee 85% of the loan amount for loans of $150,000 or less and up to 75% of loans larger than $150,000 The maximum amount that the SBA will guarantee on a 7(a) loan is $3.75 million. 

Loan maturities

Maturities of loans used for inventory and working capital are a maximum of 10 years. Maturities of loans used for furniture, fixtures, and equipment are a maximum of 10 years, unless the useful life of the asset exceeds 10 years (but still a maximum of 25 years). Maturities of loans used for real estate are 25 years, plus any additional period needed to complete the construction of improvements. When a loan is used for mixed purposes, the maximum maturity may be a blended maturity based on the maximum maturities of the asset classes being funded.

Use of funds

• To provide long-term working capital to use to pay operational expenses, accounts payable and/or to purchase inventory
• Short-term working capital needs, including seasonal financing, contract performance, construction financing and exporting
• Revolving funds based on the value of existing inventory and receivables, under special conditions
• To purchase equipment, machinery, furniture, fixtures, supplies or materials
• To purchase real estate, including land and buildings
• To construct a new building or renovate an existing building
• To establish a new business or assist in the acquisition, operation or expansion of an existing business
• To refinance existing business debt, under certain conditions