The USDA Rural Development Business and Industry Loan Program provides loan guarantees to eligible lenders for the financing of rural businesses. The program aims to support the development and growth of rural economies by providing access to capital for small and medium-sized businesses in rural areas. Borrower can have both an SBA loan and USDA loan. These two powerful loan programs are frequently used together when a borrower with an SBA loan needs more than $5M in funding. As with SBA loans, SBALenders.com can provide you with a list of banks that may provide your business a USDA loan. Just contact us and we will be glad to help at no cost to you.
For your convenience, we have highlighted a few of the major differences between the USDA bank loan program and the SBA’s 7(a) loan program in the following table:
|USDA Loan||SBA 7a Loan|
|U.S. Business Location||Populations < 50,000||Anywhere|
|Guarantee fees||3%||2 - 3.75%|
|Maximum Loan Term||30 years - Real Estate|
15 years - Equipment
7 years - Working Capital
|25 years - Real Estate|
10 years - Everything but RE
|Business net worth||10% tangible net worth; 20% for startups.||None|
|Interest Rate||Negotiated with lender||SBA sets a max rate|
Top Benefits of USDA Business and Industry (B&I) Loans
With a USDA Business and Industry Loan, you can consolidate multiple funding needs into a single loan. Whether you require capital for real estate acquisition, equipment refinance, or other eligible project costs, this loan option covers them all.
Extended Loan Terms
Longer loan terms offered by USDA B&I Loans can significantly reduce monthly payments for borrowers. Real estate loans can extend up to 30 years, equipment loans can have terms of 15 years, and working capital loans offer a repayment period of 7 years.
Generous Loan Amounts
USDA loans offer higher loan limits compared to many other financing options. You can access loan amounts of up to $25 million.
Flexible Real Estate Options
Unlike many loan programs, USDA Business and Industry Loans do not impose a minimum owner occupancy requirement. This means that borrowers can acquire or refinance real estate without the obligation to occupy the property. Even investment properties, such as retail or office lease facilities, are eligible for financing.
Versatile Interest Rate Options
Lenders have the freedom to choose the interest rate structure that suits their borrowers’ needs. Whether they prefer variable or fixed rates, with or without ceilings or floors (as long as it adheres to legal rates), they can tailor the loan terms accordingly. Lenders also have the option to include prepayment penalties, although USDA does not require them.
Broad Applicant Eligibility
USDA Business and Industry Loans do not impose size standard criteria on applicants. This means that businesses of various sizes, ranging from individual proprietorships to publicly traded companies, can qualify for this financing opportunity.
Choosing a USDA Business and Industry Loan ensures a comprehensive, flexible, and financially favorable solution to support your business’s growth and development.
Top USDA Business and Industry Lenders
Top USDA B&I lenders have extensive experience working with USDA B&I loans. They are familiar with the application process, documentation requirements, and specific criteria that need to be met. Their expertise can help streamline the loan process and increase the likelihood of approval. The top USDA B&I lenders per the USDA’s most recent commercial lending report are:
|Lender Name||# Loans||Total Loans||Avg Loan|
|LIVE OAK BANKING COMPANY||24||$121,750,000||$5,072,917|
|NORTH AVENUE CAPITAL, LLC||20||$131,245,000||$6,562,250|
|GREATER NEVADA CREDIT UNION||12||$117,886,000||$9,823,833|
|CRESTMARK, A DIVISION OF METABANK||7||$46,099,353||$6,585,622|
|BANK OF SPRINGFIELD||7||$5,331,978||$761,711|
|UNITED COMMUNITY BANK||6||$47,438,000||$7,906,333|
|WEST TOWN BANK AND TRUST||6||$23,122,000||$3,853,667|
|TOUCHMARK NATIONAL BANK||5||$33,282,000||$6,656,400|
|PACIFIC PREMIER BANK||5||$19,857,000||$3,971,400|
|OLD WEST FEDERAL CREDIT UNION||5||$8,320,735||$1,664,147|
|FIRST INTERSTATE BANK||4||$12,856,000||$3,214,000|
|LEGACY BANK AND TRUST COMPANY||4||$6,268,000||$1,567,000|
|OLD MISSOURI BANK||3||$20,668,600||$6,889,533|
Comparison of SBA 7(a), SBA 504, and USDA B&I loans
With out Lender Connect tool, we can match you with lenders who underwrite USDA B&I loans, SBA 7a, and/or SBA 504 loans. Some lenders in our network will actually combine loans together, such as a 7a with a B&I loan, or a 7a with a traditional commercial and industrial loan.
A snapshot of the various features of each of the three major government-assisted loan programs in America:
|Feature||SBA 7(a) Loan||SBA 504 Loan||USDA B&I Loan|
|Loan Purpose||Broad range of business uses||Acquisition or improvement of fixed assets (including real estate)||Business development, including real estate projects|
|Loan Maximum||$5 million||Generally $5 million but $5.5 possible for certain projects||Generally $10 million but $25M possible for “high priority” projects|
|Use of Funds||Real estate purchase, construction, refinancing, working capital, equipment, and more||Acquisition, renovation, or construction of fixed assets (land, buildings)||Real estate acquisition, construction, refinancing, equipment, working capital, and more|
|Equity Requirement||10% – 20% traditionally. SBA lenders may go lower starting in August 2023||10% – 20% depending on business age and property type||10% tangible equity for existing biz. 20% for new biz|
|Lender Involvement||SBA Lender works directly with the borrower||Loan split between a Certified Development Company (CDC), and SBA Lender||USDA Lender works directly with the borrower|
|Loan Structure||Single loan||Two loans: First mortgage from an SBA lender and a second mortgage from a CDC||Single loan|
|Loan Terms||Up to 10 years; 25 years for real estate||10 years for equipment; 25 years for real estate||7 years working capital; 15 years for equipment; 30 years for real estate|
|Interest Rates||Negotiated between lender and borrower, subject to SBA maximum interest rate||Fixed or variable rates set by the CDC, below-market rates for the CDC portion||Negotiated between lender and borrower|
|Borrower Requirements||Satisfy SBA eligibility criteria, demonstrate repayment ability, good credit history||Satisfy SBA eligibility criteria, owner-occupancy required, create or retain jobs||Satisfy USDA eligibility criteria, demonstrate repayment ability, collateral, good credit history|
|Job Creation/Retention||Not a specific requirement||Must create or retain jobs based on SBA job creation targets||Must create or retain jobs in rural areas (population under 50,000)|
|Application Process||Done through an SBA-approved lender||CDC and SBA lender collaborate in the application process||Done through an approved USDA lender|
|SBA/USDA Guarantee||Up to 85% guarantee on loans||Typically 40% – 50% guarantee on the CDC portion||60% – 80% depending on loan size|
|Guaranty Fee||2% for loans of $125K – $150K, 3% for loans $150K – $700K, and 3.5% for loans > $700K. Fee waived for veterans||Borrower paid CDC fees included in loan||3% of guaranteed portion of loan|
|Renewal/Servicing Fee||N/A||N/A||.5% for B&I; .25% for energy loans|
|Borrower Guarantee||Personal guarantee >=20% owners||Personal guarantee >=20% owners||Personal guarantee >=20% owners|
FAQs related to USDA Rural Development Business & Industry Loans
What is considered an eligible area?
Eligible areas include any area other than a city or town with a population of 50,000 or more. However, there are some exceptions to this rule, and it’s best to check with the USDA to determine if a specific location is eligible by inputting the project’s address at the USDA site here.
What type of organizations may qualify?
For-profit businesses, nonprofit organizations, cooperatives, federally recognized tribes, and public bodies may qualify for the program. The businesses must be located in a rural area, which is defined as any area other than a city or town with a population of 50,000 or more.
What are the borrowing restrictions?
Borrowers may receive up to 80% of the total project cost, with a maximum loan amount of $25 million. There is no minimum loan amount.
What are the eligible uses of loan proceeds?
Loan proceeds may be used for a variety of purposes, including the acquisition, construction, conversion, expansion, repair, or modernization of a business or project. The funds may also be used for the purchase of equipment, machinery, or inventory.
What are the ineligible uses of loan proceeds?
Loan proceeds cannot be used for certain purposes such as a line of credit, owner-occupied and rental housing, golf courses or golf course infrastructure, racetracks or gambling facilities, churches or church-controlled organizations, fraternal organizations, lending, investment, and insurance companies, or distribution or payment to a beneficiary of the borrower or an individual or entity that will retain an ownership interest in the borrower.
What are the loan terms?
Loan terms are negotiated between the borrower and lender but typically range from 7 to 30 years. The loan terms cannot exceed the useful life of the assets being financed.
What are the interest rates?
Interest rates are negotiated between the borrower and lender but are subject to USDA approval. Interest rates may be fixed or variable, and the maximum interest rate is based on the lender’s cost of funds.
What are the applicable USDA guarantee fees?
There is an initial guarantee fee of 3% of the guaranteed amount, which may be financed as part of the loan. There is also an annual renewal fee of 0.5% of the outstanding loan balance.
What are the underwriting standards?
The program uses the same underwriting standards as commercial banks. Borrowers must have a reasonable assurance of repayment, and lenders must be able to demonstrate that they have performed adequate due diligence. The USDA will also review and approve the loan guarantee before it can be issued.
Can a USDA B&I loan be combined with an SBA loan?
Yes. Because the SBA loan limit is $5M, some borrowers in rural markets will combine an SBA loan with a USDA loan or a commercial loan.
What is the tangible net worth requirement?
TNW is calculated as All Assets – Intangible Assets (e.g., goodwill and/or intellectual property) – All Liabilities divided by All Assets – Intangible Assets. TNW is not a requirement for SBA loans.