Complementing Your Grant With a USDA B&I Loan

While you may not realize it, grants and loans go hand-in-hand. And for owners of small-to-medium-sized businesses in rural areas, funding is especially difficult to come by. Many companies opt for rural business development grants to fund things like expansion, renovations, and new equipment, but often, these resources aren’t enough to cover these costs.

By combining these grants with government-guaranteed loans like those offered through the USDA Business & Industry (B&I) loan program, you and many other small business owners in rural areas can increase your chances of success and growth. Keep reading to learn how these two programs can work together to create a powerful funding solution for rural entrepreneurs.

The Significance of USDA Rural Business Development Grants

The USDA Rural Business Development Grant program is designed to provide non-repayable funds to rural small business owners for technical assistance, training, and other developmental improvements. To qualify as small, the business must have fewer than 50 new workers and less than $1 million in gross revenue.

These grants can be a game-changer for rural businesses, helping them fund various aspects like transportation improvement, acquisition or development of land, feasibility studies, marketing campaigns, and employee training.

Common Challenges Faced by Small Rural Businesses in Grant Funding

While business development grants are an excellent funding option, securing them can be a competitive and uncertain process and frequently fund only a portion of the business needs.. Many businesses face challenges like:

Limited Grant Availability – Grants are often subject to availability and specific eligibility criteria, making it difficult for all businesses to secure them.
Partial or Non-Approval – Businesses may receive partial grant approvals where the awarded amount falls short of the required funds. In some cases, grants may not be approved at all due to high competition or limited funding.
Time Constraints – Grant application processes can be time-consuming, causing delays in funding, which can hinder business operations and expansion plans. RBDG application deadlines happen only once a year – usually in the spring.

The Role of Government-Guaranteed Loans

Alternatively, government-guaranteed loans are financing options provided by financial institutions and backed by the government to support small businesses. These loans mitigate the risks for lenders, making them more accessible and affordable for businesses. One prominent example is the USDA B&I loan program.

Understanding USDA B&I Loans

The USDA B&I loan program aims to enhance rural economic development by providing affordable financing options for eligible profit and non-profit businesses.

Small businesses operating in rural areas with populations of up to 50,000 residents are eligible to apply. As long as they plan to use their loan funds in a rural area, they can be awarded up to $25 million at low interest rates for seven to 30 years. Additionally, these loans are not limited to any specific industry and can benefit a wide range of businesses.

USDA B&I loans can be used for relatively the same purposes a grant would, but with much fewer strings including working capital, real estate and equipment purchases, and more. Plus, the USDA guarantees a portion of the loan amount, reducing the risk for lenders.

Stuck trying to appeal to a commercial lender that won’t provide the funding you need? A B&I loan may be the perfect solution.

USDA Business and Industry Loans

A Winning Strategy for Pairing Grants With USDA B&I Loans

As both business development grants and B&I loans are valid financing methods, figuring out how to pair them and maximize funding is a valuable skill.

For some of the aforementioned common issues, like partial grant approval or non-approval, businesses can turn to a B&I loan as an alternative funding source. Due to their low interest rate and lengthy terms, they can be just enough to help the enterprise get on its feet.

And when time constraints occur, these loans can be obtained relatively quickly, unlike grants that often involve lengthy application and approval processes. This allows companies to proceed with their growth plans without significant delays.

The USDA Rural Economic Development Loan and Grant Program

Along with these methods, the Rural Economic Development Loan and Grant Program offers funding for rural projects through local utility organizations. The utility coop in your area may have this existing revolving loan program and it could provide a valuable opportunity for rural businesses to combine loans and grants, addressing their financial needs more comprehensively and supporting their development efforts. Not all rural areas may qualify and some utility coops may not want to participate, but the B&I loan program is available in all rural areas.

One of the biggest draws of this initiative is that businesses can receive interest-free loans and grants for various projects, ultimately reducing the strain on cash flow and increasing the ability to invest in business expansion and development initiatives. For those unsure of their eligibility for certain grants, this is a great alternative action that comes with more certainty.

The Benefits of Pairing Grants With Loans

By pairing these financing options, businesses can take advantage of the following benefits:

Enhanced Funding Capacity – By combining grants and USDA B&I loans, small rural businesses can access a more substantial pool of funds. This increased financial capacity enables them to undertake larger-scale projects and accelerate their growth.
Diversification of Funding Sources – Relying solely on grants can be risky, as the availability and approval rates vary. By diversifying funding sources with a government-guaranteed loan, businesses reduce their dependence on grants and improve their overall financial stability.
Improved Business Viability – The combination of grants and loans allows businesses to address multiple financial needs, such as equipment upgrades, marketing initiatives, and employee training. This, in turn, enhances their competitiveness, productivity, and overall strength in the market.

Need a B&I Loan Application? We’ll Help You Get Started

If you’re the owner of a small rural business, consider leveraging the power of grants and loans to take your business to new heights. At Madison One CUSO, we’re a top USDA B&I Lender with the necessary experience to help fellow business members navigate the application process.

Explore your options and schedule a consultation today.