The USDA Rural Development Loan program, also known as the OneRD Guarantee Loan Initiative, offers help to small and large businesses in rural communities across America. Launched by the U.S. government through the Department of Agriculture, this versatile loan program was developed to support lending for rural business owners with the goals of saving and creating jobs in rural areas and improving economic opportunity. The Rural Development Loan program works by providing USDA-backed loan guarantees to lenders to encourage them to make commercial loans to credit-worthy rural borrowers.
The USDA offers several individual lending programs under the “OneRD” umbrella, including Business & Industry (B&I) Loans, Community Facilities (CF) Loans, Rural Energy for America Program (REAP), and Water & Waste Disposal Program (WWD), among others. North Avenue Capital is America’s #1 USDA Rural Development Business & Industry Loan lender.
USDA Rural Development Loans Offer Broad-Based Eligibility Requirements
Many attributes make the USDA Rural Development program so attractive to rural entrepreneurs, none more exciting than the wide range of businesses that can benefit from the loans due to the broad-based eligibility requirements. This starts with the wide geographic availability of the loans. While the word, “rural” might initially lead one to believe that geographic eligibility is somewhat limited and restrictive, the USDA defines rural as “any town or city with 50,000 or fewer residents.” This represents more than 97% of all American towns. In addition, companies with headquarters in larger metro areas are also eligible, as long as the actual branch, division, or franchise is located within a rural area.
All kinds of small and large businesses are eligible to apply for USDA Rural Development loans. These include:
- For-profit businesses
- Nonprofit organizations
- Existing businesses
- New Businesses / Startups
- Individuals, partnerships, and co-ops
- Franchises
- Publicly traded companies
- Public bodies and essential community facilities
- Federally recognized Native American tribes
Qualifying uses for Rural Development loans also are extremely broad. They include:
- Business development
- Business acquisition
- Business expansion
- Business conversion
- Business repair
- Business modernization
- Land acquisition and development
- Acquisition and development of buildings and infrastructure for commercial and industrial properties
- Renewable energy systems and/or energy-efficient improvements
- Equipment purchase
- Inventory and supplies purchase
- Working capital, if anchored by real estate purchase or refinance
- Debt refinancing of any kind
Many people are also surprised to learn that Rural Development Business & Industry loans are not restricted to agricultural uses. Almost any kind of small or large business can apply for funding.
Types of Businesses Eligible to Apply for USDS Rural Development Loans:
- Automotive dealers, parts, and repairs
- Business services
- Business supplies
- Computer programming, support, and electronics
- Commercial construction
- Contracting companies
- Educational learning facilities
- Entertainment (movie theaters, theme parks, etc.)
- Food and dining
- Grocery stores
- Health and medical facilities
- Home goods and furnishings
- Home and Garden and flower shops
- Hospitality businesses (hotels, motels, etc.)
- Industrial plants
- Landscape and lawn services
- Legal and financial services
- Manufacturing facilities
- Merchants (i.e. retail – general, department stores, clothing, cards and gifts, etc.)
- Packing and shipping
- Personal care services (beauty shops, fitness studios, nail salons, dry cleaners)
- Travel and transportation
- …and so much more!
Only a very few business types of any size are not eligible for Rural Development B&I Loans or funding from one of its sister programs under the OneRD umbrella, including churches, casinos, rental housing, and a handful of others. But for the most part, the wide geographic availability and a broad range of eligible business types and uses provide for a vast universe of potential borrowers.
Whether a small existing mom-and-pop business, a medium-sized startup, or a large corporation seeking to expand, acquire or launch a new division in a rural area, all are eligible to apply for funding, provided they meet other qualifying criteria. This includes creditworthiness (credit score of 680 or higher and good payment history), sufficient collateral (cash, real estate, or other tangible assets set at a discounted value on a 1:1 basis to the requested amount of the loan), and the capacity to repay the loan, among a few other requirements.
Wide Range of Available Loan Amounts for Small or Large Businesses
The versatility of Rural Development Loans for businesses of all kinds and sizes is also reflected in the wide range of available loan amounts – one of the most eye-popping features of the program. Funding can range from as low as $1 million up to $25 million for B&I Loans ($40 million for certain rural co-ops), $25 million for REAP Loans, and $50 million for WWD Loans, and $100 million for CF Loans. By contrast, SBA 7(a) loans max out at just $5 Million.
Loan terms are dependent upon intended use but generally range from seven years for working capital to 15 years for equipment, 30 years for real estate, and up to 40 years for Community Facilities Loans. Interest rates also are highly competitive, tied to the Wall Street Journal Prime Rate. Maximum loan guarantees are set by the individual lender. Most B&I Loans approved by North Avenue Capital in the fiscal year 2021 received an 80% guarantee.
Regardless of whether you are a small or large business, a new or existing one, for-profit or nonprofit, the USDA Rural Development Loan Program offers an exceptional opportunity for your commercial funding needs.
For more information on obtaining a OneRD Loan to assist with your business, contact a team member at North Avenue Capital. As the nation’s #1 provider of USDA Business & Industry Loans, we have offices in Northeast Florida, Nevada, Arkansas, Georgia, Tennessee, and Texas and partners in all 50 states to help facilitate loans. Get started, today!
