The USDA’s Business and Industry (B&I) Guaranteed Loan Program is a pivotal initiative aimed at fostering economic development in rural areas. By guaranteeing loans, the USDA helps businesses establish, expand, or modernize their operations, thereby creating jobs, enhancing local economies, and promoting sustainable practices.
The B&I Guaranteed Loan Program is designed to support activities that:
This program is versatile, supporting not only general economic development but also innovative energy projects. The flexibility of the B&I program varies by state, so early engagement with state and federal officials is crucial.
The USDA guarantees loans up to $25 million, with potential increases to $40 million for cooperative organizations. In some cases, multiple B&I loans or a combination of B&I and Rural Energy for America Program (REAP) loans can be used, reaching a total of up to $65 million.
The guarantee percentage varies by loan size:
High-priority projects under $10 million may receive a 90% guarantee, though this is used sparingly.
Eligible lenders include federally or state-chartered banks, Farm Credit System institutions, savings and loan associations, credit unions, insurance companies, and the National Rural Utilities Cooperative Finance Corporation. Other lenders must pre-qualify with the USDA.
The designated lender sets the loan terms, disburses funds, and must retain at least 5% of the unguaranteed portion for the loan’s life. The guaranteed portion can be resold in the secondary market.
Projects eligible for B&I loans include:
All projects must be located in rural areas (population under 50,000) and use feasible, replicable technology.
Loans must be fully secured based on sound loan-to-value policies, with collateral and cash flow considered. Managerial ability can compensate for collateral deficiencies. Borrowers must demonstrate tangible balance sheet equity: 10% for existing businesses, 20% for start-ups, and 25-40% for energy projects.
Eligible costs include:
Eligible borrowers include cooperative organizations, corporations, partnerships, non-profits, Indian tribes, public bodies, and individuals. Corporations must be at least 51% owned by U.S. citizens or permanent residents.
Loan terms can extend up to 30 years for real estate, 15 years for equipment, and 7 years for working capital. Interest rates are negotiable between lenders and borrowers and can be fixed or variable. A one-time guarantee fee of 3% and an annual servicing fee of 0.25% apply.
Applications are prepared by borrowers in coordination with eligible lenders and submitted to the USDA State Rural Development Office. Required documentation includes business plans, cost estimates, financial statements, and, in some cases, technical reports and feasibility studies. Personal guarantees are generally required from major stakeholders.
Projects must comply with the National Environmental Policy Act (NEPA), and the USDA conducts environmental reviews. Early initiation of the environmental review process is recommended.
The USDA B&I Guaranteed Loan Program is a powerful tool for stimulating economic growth and sustainability in rural communities. By providing access to affordable financing, it helps businesses thrive, create jobs, and promote environmentally friendly practices. Engage with state and federal officials early to leverage this program for your rural business projects.
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