USDA Business and Industry (B&I) loans are rural business loans that are majority guaranteed for the lender by the U.S. federal government. This is handled by the United States Department of Agriculture (USDA) in an effort to boost small business ownership in rural areas. The Business and Industry loan program, established in 1972, has played a key role in fostering the growth and development of rural businesses across the country.
B&I loans are available in values up to $25,000,000, giving them a broad usability for business and industry. They’re offered and funded by banks and other lenders (just like conventional loans), but as long as the lender follows USDA guidelines, the USDA will guarantee most of the value of the loan for them (80% guaranteed for loans <$5 million, 70% for loans $5-10 million, and 60% for loans >$10 million in value), regardless of the loan’s outcome. The USDA taking on the majority of the loan’s risk greatly reduces the risk for the lender, allowing them to provide loans to a wider array of borrowers.
Loan Amount
Up to $25,000,000
Down Payment
Minimum (and typical) down payment of 10%
Interest Rate
Either variable or fixed, with rates usually between prime + 1 and Prime + 3
Term
30 years for loans involving real estate, 15 years for loans not involving real estate
Collateral
Must be fully collateralized
Personal Guarantee
A full personal guarantee is required
Amortization
Fully amortized
Prepayment Penalty
Treated the same as a conventional loan, can vary
Fiscal Year 2023
800+
B&I Loans Approved
$2.5 Billion+
Total Value of Approved B&I Loans
Valid Uses of Proceeds
A B&I loan can be used in a variety of ways, with valid uses of proceeds including:
– Real Estate purchase
– Business purchase
– Construction
– Equipment purchase
– Debt refinance
B&I loans can’t be used for real estate investment, either commercial or residential. If a B&I loan is used to purchase real estate, it must be with the primary purpose of operating a business on the premises. However, the owner may still rent out up to 49% of the property.
Business Eligibility
B&I loans can be used for almost any kind of business, including both for- and not-for-profit businesses. Some common industries for B&I loans include:
– Retail Stores
– Restaurants
– Hotels/Motels/B&Bs
– Gas Stations
– Convenience Stores
– Storage Facilities
B&I loans are meant for business and industry use only, and as such can’t be used for farming/agricultural purposes. However, they can be used for businesses that process/use agricultural products.
Location Eligibility
USDA B&I loans are eligible in “rural” areas. But what does that mean?
For the purposes of B&I loans, the USDA defines “rural” as “any area of a State other than a city or town that has a population of greater than 50,000 inhabitants and any urbanized area contiguous and adjacent to such a city or town”, with limited exceptions. This means that B&I loans aren’t only available for use in rural areas, but also towns and small cities not part of larger metropolitan areas.
The USDA has an interactive map showing exactly where B&I loans are eligible vs. not eligible.