General, USDA Business & Industry Loans, USDA Community Facilities Loans

Understanding What Qualifies as “Rural” in a USDA Rural Development Loan

The Definition is Larger Than You Might Think

When considering where to apply for a commercial business loan, the U.S. Department of Agriculture (USDA) is one of the last institutions many entrepreneurs might consider. After all, the USDA only exists to serve farmers, right? Wrong. That’s a false assumption, one people commonly make about the USDA and its Rural Development Loan program, also known as the OneRD Guarantee Loan Initiative. The program serves all kinds of businesses in rural areas. “That’s all well and good,” you might be thinking, “but I do not live in a ‘rural’ area.” Well, the USDA’s definition of a rural area is larger than you might think. In fact, it includes roughly 97% of the geographic U.S. That’s right! Read on to gain an accurate understanding of what qualifies as “rural” in the USDA Rural Development Loan program and why you may want to consider this extremely attractive option when applying for a commercial loan.

What is the USDA Rural Development Loan Program?

The USDA Rural Development Loan program was put in place by the U.S. Government to stimulate business formation, create jobs, and support economic development in rural areas. Instituted in May 2020 as part of the CARES Act, the program works by the USDA guaranteeing parts of loans for private lenders to help mitigate investment risks, encouraging them to lend more in rural communities. In September 2020, the program was updated and renamed the OneRD Guarantee Loan Initiative.

The Rural Development Loan program/OneRD was designed to support a broad range of largely non-agricultural businesses, as well as certain agricultural ones, including both existing rural businesses and startups, in both the for-profit and nonprofit sectors. Since the USDA already has many programs that support farmers and agricultural interests, this program was devised to help broaden that.

All kinds of entities are covered, everything from individuals, partnerships, and co-ops to franchises, public companies, governmental organizations, and federally recognized Native American tribes. From everyday commercial and industrial businesses to community facilities and service providers to borrowers whose efforts are focused on renewable energy and utilities, the list of eligible uses and borrowers is unbelievably extensive.

The loans feature several attractive benefits including high loan limits (up to $25 million or $40 million for some co-ops for Business & Industry Loans and up to $100 million for Community Facilities Loans); long loan terms (up to 40 years in some cases); and favorable interest rates tied to the Wall Street Journal Prime Rate. Qualified borrowers must be credit-worthy with a credit score of 680 or higher and with good payment history, and have sufficient assets to securitize their requested loan amounts on a 1:1 basis. Finally, the business must be in an area defined as “rural.”

Defining, “Rural” in a USDA Rural Development Loan

Perhaps, more than any other qualifying factor, it is this requirement that prospective borrowers use to mistakenly disqualify themselves from a USDA Rural Development Loan. But the USDA defines “rural” areas as any community, city, or town with 50,000 or fewer residents, according to the 2010 US. Census. This in turn represents approximately 97% of America’s geographical area. Based on this, many prospective borrowers who live just outside of large metropolitan areas, who might believe they are ineligible, may qualify for a rural development loan.

And there’s more.

Eligible borrowers may also include businesses headquartered in larger cities with populations of more than 50,000 if the project being funded is in a qualifying community. This potentially could apply to large public companies, franchises, and other types of businesses.

But there’s no need to guess. You can use North Avenue Capital’s interactive map to see if your business qualifies in seconds. Simply click the link, plug in your address, and see if you might be eligible for a OneRD Loan.

Why Choose North Avenue Capital?

Based in Ponte Vedra, Florida with offices in Northeast Florida, Nevada, Arkansas, Georgia, Tennessee, and Texas, North Avenue Capital is a deeply experienced direct lender that works with partners in all 50 states to facilitate USDA Rural Development Loans. We are America’s USDA Business & Industry Loan Lender and were awarded the Top 30% of the INC. 5000 list. If you are looking for funding to get your rural business up and running or to support and grow existing operations, we invite you to contact us by sending an email to [email protected], calling (904) 265-9249 or using this form. We can answer all your questions about the OneRD Loan program and help you confirm your eligibility.

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