The USDA Business and Industry Loan program is designed to foster the flourishing of rural America. The USDA’s government-backed lending encourages economic development in America’s overlooked small towns by supporting commercial construction and development.
Despite the USDA name, the program is not designed for agriculture. Funds may be used for most types of commercial development in towns with fewer than 50,000 residents. Similar to the SBA 7a Loan Program, the program’s key differences are highlighted in the table below.
| Loan Attribute | USDA Business and Industry Loans | SBA (Small Business Administration Loans) |
|---|---|---|
| Maximum Loan Size | $10MM | $5MM |
| Origination Fees | 2% | Not allowed |
| Guaranteed Portion | 60% - 80% | 75% |
| Security of Gurantee | Strong | Often Negotiated |
| Speed of Government Processing | 90 days | Immediate to 2 weeks |
| Collateral | 1:1 discounted | No regulatory requirement |
| Equity | 10% - 20% Tangible Net Worth | No regulatory requirement |
| Interest Rates | Lender determined | Lender determined |
| Average Default Rate | 3% | 17% |
| Prepayment Penalty | Lender determined | Fixed at 5/3/1 |
| Repayment Terms | Up to 30 years | Maximum of 25 years |
| Owner Occupancy | No restrictions | Owner required to occupy the property |