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USDA Business Loans vs SBA Loans


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.

USDA Business Loans vs SBA Loans

Loan AttributeUSDA Business and Industry LoansSBA (Small Business Administration Loans)
Maximum Loan Size$10MM$5MM
Origination Fees2%Not allowed
Guaranteed Portion60% - 80%75%
Security of GuaranteeStrongOften Negotiated
Speed of Government Processing90 daysImmediate to 2 weeks
Collateral1:1 discountedNo regulatory requirement
Equity10% - 20% Tangible Net WorthNo regulatory requirement
Interest RatesLender determinedLender determined
Average Default Rate3%17%
Prepayment PenaltyLender determinedFixed at 5/3/1
Repayment TermsUp to 30 yearsMaximum of 25 years
Owner OccupancyNo restrictionsOwner required to occupy the property

For strategic resource for rural investment...