Finding funding for your business can be a hurdle—especially if you operate in a rural area. Luckily, rural businesses that can’t secure financing from traditional sources may be eligible for the United States Department of Agriculture (USDA) Business and Industry (B&I) loan program. These are the steps to take if you’re ready to pursue government-guaranteed funding.
USDA B&I funds have a broad range of applications, so long as eligible borrowers use them to create or save jobs in rural America. To apply for a B&I loan, you must meet these criteria:
- Operate as a for-profit business, nonprofit organization, cooperative, Federal Tribe, or public body in the United States. Individuals who conduct or plan to conduct business may also be eligible.
- Plan to use funds in a city or town with fewer than 50,000 residents.
If your organization is headquartered in a non-rural area, you can still apply for funding for projects in an eligible area. However, you must use funds for specific applications that support economic growth. These include:
- Business acquisition
- Business establishment
- New construction or repair, expansion, or modernization of existing facilities
- Building or land purchases
- Debt refinancing or consolidation
- Equipment financing
- Working capital
The USDA prohibits certain loan uses, including lines of credit or financing rental housing. Churches, golf courses, fraternal organizations, and investment companies are also ineligible for a B&I loan.
Whether you know you’re eligible or are still unsure if you fit the criteria, your next step is to consult a professional.
While the USDA guarantees a portion of your B&I loan amount, you need to work with a commercial lender to apply for the program and secure funding. These third-party lenders help you determine your eligibility, identify your loan needs, and submit your application.
If you’re unsure which lender is right for your business, a local B&I service center representative can help you explore your options. Your chosen lender doesn’t have to be local; you can work with any eligible credit union, bank, or loan association within the U.S. Keep in mind that each lender has qualifications their borrowers must meet. Lenders will evaluate your business to determine eligibility before proceeding with your B&I loan application.
Before you submit an application, you need to work with your lender to identify the right loan amount and terms for your project. The USDA guarantees loans up to $25 million, and interest rates are negotiated between borrowers and lenders. You can work with your lender to decide if a fixed or variable interest rate will work best for your business in the long term. Compared to other non-conventional loan options, you can typically secure a much lower interest rate with a USDA loan.
While B&I loan terms can be as long as 30 years, some loans are limited to shorter periods. For example, equipment financing loan terms can’t exceed 15 years, and working capital loans can’t exceed seven. Your lender will explain your term options and how they can impact your future monthly payments and cash flow. Regardless of your loan, you won’t have to worry about a large balloon payment due at the end of your term—USDA B&I loans are fully amortized.
Once you know what you need from your B&I loan, your lender will help you gather all necessary documentation (like tax returns, cash flow statements, and other financial documents), assemble an application, and submit it to the USDA for approval. Your lender also has to sign off on the loan conditions.
The USDA accepts applications year-round, so you can get started with a lender anytime.
Madison One CUSO understands how frustrating it can be to put your project plans on hold while you wait for funding. That’s why we expedite and simplify the B&I application process.
- The USDA B&I loan program offers loan funds for rural businesses or projects located in rural areas.
- To be eligible, you must plan to use the loan funds to save or create rural jobs.
- If you meet the USDA’s requirements, a third-party lender can help you determine your loan needs, gather documentation, and create an application.
- You can work with any lending partner in the country, but you may need to meet specific borrowing requirements to work with your preferred institution.
- You can apply for up to $25 million in funding, and your loan term is determined by how you use the funds.
- Interest rates may be variable or fixed, and all USDA B&I loans are fully amortized.
- You can submit a USDA B&I loan guarantee program application at any time.
If you have a project in mind that will help create economic growth in a rural area, but you can’t secure funding from traditional lenders, it may be time to pursue alternative financing. With reasonable interest rates, long loan terms that maximize cash flow, and a government guarantee, USDA B&I loans are one of the best options available for eligible borrowers.
At Madison One CUSO, we’re a top-four B&I lender serving borrowers in all 50 states. Our government lending experts work with deserving organizations to expedite the loan process and secure the most favorable terms, so you can finance long-term growth without limiting your cash flow today. Our team works with several credit unions to offer loans that rival big banks while providing the attentive customer service of a local branch.
Get in touch today to schedule a quick loan consultation and learn if the USDA B&I program is right for your project.