USDA Business and Industry financing are loans provided through a government program specifically targeted to rural small businesses to help bolster lending to creditworthy borrowers. The purpose of the program (administered by the Rural Business and Coop Program — part of the USDA’s Rural Development) is to improve economic health in rural areas with populations less than 50,000 people by having the government guarantee loans originated by private commercial lenders (federal or state chartered banks, savings and loans, farm credit banks and credit unions). By using the USDA business and industry guarantee, lenders are able to offer borrowers better rates and longer repayments terms because the lenders’ risk is reduced. USDA B&I financing must be fully-amortized term loans, as lines-of-credit are not offered. Borrowers are allowed to be headquartered in a larger area, provided the particular business project is located in a rural area, whereas the USDA lender may be located anywhere. If the borrower should default on their loan, the government agrees to cover lender losses up to $25 million dollar. Loan guarantees are structured as such:

80% for loans of $5 million or less
70% for loans between $5 – $10 million
60% for loans over $10 million
USDA Uses
Most types of rural small businesses meet USDA eligibility requirements, including for-profit and nonprofit corporations, manufacturing companies, wholesale traders along with the retail and service industries. Use-of-funds can be used for virtually any business activity except for owner-occupied housing, golf courses, churches, lending organizations and a few other restrictions. Eligible businesses may use USDA Business and Industrial Loans for the following:

Startup costs
Business repair, modernization and development
Purchase and development of land, buildings and/or facilities in rural communities
Equipment purchases
Leasehold improvements
Machinery purchases
Purchase supplies
Purchase inventory
Refinance business debt (if it creates jobs)
Business and industrial acquisitions