Using Your USDA Rural Development Loan Funds | North Avenue Capital

The USDA Rural Development Loan program is one of America’s most exciting commercial business loan programs. There are many benefits that make this versatile program attractive, ranging from its wide-ranging geographic availability to its high loan limits, and appealing terms. But, perhaps, most intriguing of all are the numerous ways that eligible borrowers can use their funds. Whether launching a new business, expanding an existing one, supporting operations with working capital or refinancing, USDA Rural Development Loans provide freedom and flexibility for rural entrepreneurs of every variety.

The OneRD Guarantee Loan Initiative: Creating Economic Prosperity Across America

The Rural Development Loan program, also called the OneRD Guarantee Loan Initiative, was established by the United States government through the U.S. Department of Agriculture to increase private investment in rural businesses and economic development projects. The ultimate goals are to help save and create jobs, increasing prosperity and improving quality-of-life in rural areas across America. The program works by providing USDA-backed loan guarantees to lenders to encourage them to make commercial loans to credit-worthy rural borrowers.

USDA Commercial Lending Programs for Businesses, Industries, Community Facilities & More

There are multiple lending programs offered under the larger “OneRD” initiative 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 Program Business & Industry Loan leader.

Across all categories, OneRD loans generally offer higher credit limits and longer loan terms than typical SBA 7(a) and 504 loans, as well as similarly competitive interest rates. Borrowers must be deemed “credit-worthy” (possessing a credit score of at least 680 with a good payment history) and be able to provide collateral (cash, real estate fixed assets) in an amount equivalent to their funding request.

Broad Geographic Availability

While many assume that any program offered through the USDA and directed toward “rural” businesses must be exclusively for agricultural enterprises or be limited in terms of geographic availability, the reverse is true. Because the USDA already has many lending programs in place for agricultural purposes, the OneRD program is primarily targeted for other kinds of businesses, including certain agricultural producers that are not eligible for USDA Farm Service Agency loans.

As for what qualifies as “rural,” the USDA defines it as, “any town or city with 50,000 or fewer residents.” The fact is, this represents more than 97% of all American towns! Even better, businesses headquartered in larger metro areas also are eligible, if the branch, division or franchise being funded is located within a rural area.

So, what kinds of businesses are eligible to apply for a Rural Development loan and how can borrowers use their funds?

Those eligible to apply include:

  • For-profit and non-profit organizations
  • Existing businesses and start-ups
  • Individuals, partnerships and co-ops
  • Franchisors and franchisees
  • Publicly traded companies
  • Public bodies and essential community facilities
  • Federally recognized Native American tribes

Eligible businesses include business services and supply companies, merchants, restaurants, medical facilities, manufacturing facilities, contractors, utility and transportation projects, community, social and public educational facilities, water and renewable energy projects, retail stores, hotels, automotive dealers, industrial plants… You name it, it’s likely somewhere on the list! A few exceptions include gambling facilities, churches, golf courses and residential (owner-occupied and rental) housing.

And what about the ways borrowers can use the funds? Once again, the possibilities are nearly unlimited.

Qualifying uses of USDA Rural Development Loan funds include:

New business development and start-ups – To support the launch of a new business from the ground up.

Land acquisition and development – To acquire and develop land for commercial and industrial business purposes.

Commercial property, building and infrastructure acquisition and development – To acquire and/or develop commercial buildings and other types of properties and infrastructure for commercial and industrial business uses.

Business acquisition – To facilitate the purchase of an existing business to help save or create jobs including the acquisition of capital shares, equity interests and assets including commercial property, equipment, supplies and inventory.

Business expansion – To support growth of an existing business including the addition of a new branch, division or franchise or simply to redevelop existing facilities to accommodate growth and expansion.

Business conversion – To convert a business from one commercial use to another.

Business repair – To fund the repair and restoration of a business to operating condition.

Business modernization – To repair or modernize a business with renewable energy systems and/or other energy-efficient renovations and commercial improvements.

Equipment, inventory and supplies purchase – To fund the purchase of machinery and other equipment, inventory and supplies required by the business.

Working capital – To provide operating capital to cover a company’s near-term expenses and get the business up and running.

Debt refinancing – To replace existing high interest loans with new financing that provides more favorable interest rates, terms and conditions.

Let North Avenue Capital Help with Your Commercial Funding Needs

Regardless of the type of rural business you are interested in funding or the ways you are considering using the funds, chances are there is an individual program that is right for you. North Avenue Capital is the nation’s #1 provider of USDA Rural Development Business & Industry (B&I) Loans. We have offices in Northeast Florida, Nevada, Arkansas, Georgia, Tennessee and Texas, and partners in all 50 states to help facilitate loans. Our loan representatives can provide more information about program specifics and eligibility requirements and walk you through the application process. Contact us today to help with your commercial funding needs.