USDA Rural Development Business Loans are a critical component of community economic development in rural areas. These loans help small businesses in rural communities get the funding they need to start or expand their businesses, create jobs, and stimulate economic growth.
Rural communities face unique economic challenges compared to larger urban areas. Small businesses, and even larger ones, in rural areas, often struggle to access traditional financing options, such as bank loans or venture capital. Rural areas also tend to have fewer job opportunities and lower median incomes, making it more difficult for entrepreneurs to attract and retain employees, making it riskier for lenders and thus inhibiting access to capital.
USDA Rural Development Business Loans were established to help address these challenges. These loans are designed to support businesses in rural communities by providing access to affordable financing. The loans can be used to start a new business, expand an existing one, purchase land or buildings, or even refinance existing debt. The loans are available to a wide range of businesses, including agricultural producers, manufacturers, and service providers, among many others. Funding amounts are extremely generous, ranging from $2 million to $100 million.
Although the USDA’s “rural” designation might lead some to believe that these loans are limited to a very narrow geographic pool of borrowers, this is not an accurate assumption. The USDA defines “rural” as any town or community with a population of 50,000 or fewer residents. This represents approximately 97% of America’s total geographic territory. In addition, business headquarters can be based in large metro areas, as long as the actual branch, division, franchise, office, etc. is located within a qualifying area. Anyone can quickly check their geographic eligibility by using this interactive map.
Another key benefit of USDA Rural Development Business Loans is that they are offered at competitive interest rates. This makes the loans more affordable for small businesses in rural areas, which may have difficulty accessing affordable financing from other sources. Rates in most cases are set by the lender and are tied to the Wall Street Journal Prime Rate, +1-3%.
The loans also have longer repayment terms than traditional bank loans, which can help small businesses manage their cash flow and invest in long-term growth. Terms can range from seven years for working capital to 15 years for equipment, 30 years for real estate, and up to 40 years for some public facilities.
Because USDA Rural Development Business Loans are designed to support job creation in rural areas, the loans can be used to hire new employees, purchase equipment, or make other investments that can help grow a business. By creating new jobs, these loans help stimulate economic growth and reduce poverty in these areas.
One example of how USDA Rural Development Business Loans can facilitate this kind of impact can be seen in the growth and success of Texas Green Star, an organically-certified hydroponic farm located in Sanger, Texas. The company used a $15 million USDA Rural Development Business Loan to purchase important new equipment and gain access to working capital for its organically-certified hydroponic farm. The funding helped the company create 48 new jobs in a rural community while also providing locally grown agricultural products to consumers, helping drive economic activity in the region.
USDA Rural Development Business Loans also can be used to save businesses. In the case of Hidden Lake Winery located in the peaceful Silent Forest in Southern Illinois, the business required new ownership willing to cultivate its rich heritage and keep one of the region’s most beautiful wineries thriving. The 92-acre full-service facility includes the winery, five venues for weddings and events, a banquet center, and 10 cabins.
Retiring business executives and wine aficionados, Steve Gorazd and his wife, Angela, were up for the challenge, but were having trouble accessing the funding from traditional lenders with terms that worked for the business. The Gorazds then learned about the USDA Rural Development Loan Program and used one of the commercial loans to facilitate the acquisition of the winery, preserving many jobs and a long-standing legacy in this area of Illinois.
USDA Rural Development Business Loans are designed to be flexible to meet the unique needs of rural businesses. In addition to providing funding for business acquisition and new business launches, the loans also can be used for new equipment, energy efficiency upgrades, working capital, or refinancing, which help businesses reduce operating costs to become more sustainable.
The USDA Rural Development Business Loan program has been instrumental in promoting community economic development in rural areas. By providing access to affordable financing and supporting job creation, these loans have continued to help businesses in rural areas thrive, driving economic growth, reducing economic disparity and improving the quality of life for people living in rural communities.
More USDA Rural Development Business Loan success stories are available on North Avenue Capital’s website. North Avenue Capital is a USDA-approved commercial lender and a national leader for USDA business loans. We can answer all of your questions about USDA Rural Development loans, collateral requirements, and other qualifying factors, and walk you through the application process so you can benefit from this exceptional lending initiative. Contact us, today. We have offices in Northeast Florida, Arkansas, Georgia, Tennessee, and Texas, and partners for USDA loans in all 50 states. Contact us today.