The U.S. Department of Agriculture Rural Development Loan Program (USDA RD) provides commercial business financing for a wide range of business types across rural America. The program was developed to support lending for rural business owners with the objective of creating jobs and improving economic opportunities in rural areas. It works by the USDA’s backing portions of commercial loans for lenders so they will be encouraged to make more of them to credit-worthy rural borrowers. These loans are similar to SBA 7a Loans, but with far greater loan limits. Funding amounts range from $2 million to $100 million with terms 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. Competitive interest rates are tied to the Wall Street Journal Prime Rate.
There are several different lending programs that are part of the RD initiative including USDA Business & Industry (B&I) Loans, Community Facilities (CF) Loans, and Rural Energy for America Program (REAP) Loans, among others. Each of these is targeted to different types of businesses. Between them, there are very few ineligible business types. There are some basic eligibility requirements that all prospective borrowers must meet, however, even these are quite broad.
Geographical Eligibility Requirements for USDA RD Business Loans
The most fundamental requirement is geographical. To be eligible for an RD commercial loan, a business must be located in a “rural” area. The USDA defines this as “any town or city with 50,000 or fewer residents.” While this may seem to be limiting, it represents 97% of America’s entire geographic territory. In addition, companies with corporate headquarters in larger metro areas also are eligible as long as the actual division, branch, or franchise is physically located within a rural area. You can quickly check your geographic eligibility using this interactive map.
Eligible Business Types for USDA RD Commercial Loans:
• For-profits
• Nonprofits
• New and existing businesses
• Individuals, partnerships, and co-ops
• Public bodies
• Federally-recognized Native American tribes
• Franchises
• Publicly traded companies
Credit Requirements for USDA RD Business Loan Borrowers
USDA RD commercial loans are collateral-backed loans for credit-worthy borrowers. Eligible applicants should be able to back loan requests with sufficient collateral (cash, real estate, or other tangible assets), set at a standard discounted value on a 1:1 basis to the amount requested. Borrowers also need to possess a credit score of 680 or above and a good payment history, along with a few other requirements.
Types of Businesses Eligible to Apply for USDA RD Loans
The USDA’s Business & Industry Loan Program (B&I) is its primary offering for the widest range of business types. Types of Businesses Eligible to Apply for USDA B&I Loans include:
• Auto dealers
• Business services
• Business supplies
• Computer programming and IT support
• Commercial construction
• Contracting companies
• Educational facilities
• Electronics
• Entertainment facilities and event venues (movie theaters, theme parks, water parks, bowling alleys, etc.)
• Food processing, wholesaling, distributing, storage, and transportation
• Fuel refineries including oil & gas
• Gas stations
• Grocery stores
• Healthcare and medical facilities (doctors, dentists, clinics, labs, pharmaceuticals)
• Home goods and furnishings
• Home and garden and flower shops
• Hospitality (hotels, motels, and RV parks)
• Industrial facilities
• Landscape and lawn services
• Legal and financial services
• Manufacturing facilities
• Packing and shipping
• Parts and repairs businesses
• Personal care services (beauty shops, fitness studios, nail salons, dry cleaners)
• Restaurants and bars
• Retail stores (general, department stores, clothing, cards and gifts, etc.)
• Timber farms and lumber manufacturing
• Travel and transportation
• Wineries and vineyards
• …and more
USDA Community Facilities Loans (CF) are designed exclusively for community-based nonprofit organizations and essential community facilities. There are more than 100 kinds of businesses that can apply for CF loans. These include:
• Child care centers
• Community support services
• Cultural facilities
• Dental clinics
• Doctor offices
• Educational facilities
• Emergency services and public safety equipment (fire trucks, police vehicles, public works vehicles, etc.)
• Fire departments
• Healthcare facilities
• Hospitals
• Medical clinics
• Public and social facilities (community centers, courthouses, town halls, etc.)
• Libraries
• Local food systems (community kitchens, community gardens, food banks, food pantries, greenhouses, etc.)
• Medical labs
• Museums
• Nursing homes
• Pharmacies
• Physical therapy centers
• Police stations
• Prisons
• Private schools
• Recreational facilities (activity centers, community parks, etc.)
• Transitional housing
• Transportation projects (airports, bridges, ports, roads, streets, etc.)
• Utility projects
• Telecommunications projects that involve public safety
• …and more
The USDA Rural Energy for America Program (REAP) is designed for businesses in the renewable energy space, as well as for businesses to acquire renewable energy systems or make energy-efficiency improvements. Examples include:
• Biomass systems (anaerobic digesters, biodiesel, ethanol, solid fuels)
• Geothermal for electric generation or direct use
• Hydropower
• Hydrogen
• Ocean energy generation (current, thermal, tidal)
• Solar power generation
• Wind turbine farm loans
• …and more
Energy-Efficiency Improvements for All Businesses:
• Cooling and refrigeration units
• Electric, solar, or gravity pumps for sprinkler pivots
• Energy-efficient doors and windows
• High-efficiency HVAC systems
• Insulation
• Lighting
• Replacement of energy-inefficient equipment
• Switching from diesel to electric irrigation motor
• …and more
As you can see, USDA RD Loans are available for a wide range of commercial businesses across many industries and market segments. Our team at North Avenue Capital can help you identify which RD loan program makes the most sense for your individual business and walk you through the application process. We’re the nation’s only lender dedicated exclusively to USDA Rural Development Loans and have offices in Florida, Arkansas, Georgia, Tennessee, and Texas with partners in all 50 states. Contact us today to get started!