Business & Industry Guaranteed Loans

About the Program
The purpose of the Business and Industry (B&I) Guaranteed Loan Program is to improve, develop, or finance the city's business, industry, and employment. The program also seeks to improve the economic and environmental climate in rural communities. This purpose is achieved by bolstering the existing private credit structure through the guarantee of quality loans which will provide lasting community benefits. It is not intended that the guarantee authority will be used for marginal or substandard loans or for relief of lenders having such loans.

What Types of Projects Qualify?
  • Business start-ups or existing businesses
  • Ground up construction and/or rehabilitation
  • Real estate development, equipment purchases, and/or working capital
A borrower may be a(n):
  • Cooperative organization, corporation, partnership, or other legal entity organized and operated on a profit or nonprofit basis
  • Indian tribe on a federal or state reservation or other federally recognized tribal group
  • Public body
  • Individual
Borrower Requirements
A borrower must be engaged in or proposing to engage in a business that will either:
  • Improve the economic or environment climate
  • Promote the conservation, development and use of water for aquaculture
  • Provide employment
  • Reduce reliance on nonrenewable energy by encouraging the development of renewable systems
Eligible Individuals
  • B&I loans are normally available in rural areas, which include all areas other than cities or towns of more than 50,000 people and the contiguous and adjacent urbanized area of such cities or towns.
  • Corporations or other nonpublic body organization-type borrowers must be at least 51% owned by persons who are either citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence. 
  • Individual borrowers must be citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence.
Fund Use Requirements
Loan purposes must be consistent with the general purpose contained in the regulation. They include but are not limited to the following:
  1. Business acquisitions when the loan will keep the business from closing, save jobs, or create jobs.
  2. Improve the economic or environment climate.
  3. Promote the conservation, development and use of water for aquaculture.
  4. Reduce reliance on nonrenewable energy by encouraging the development of renewable systems.
Guarantee Percentage
The percentage of guarantee, up to the maximum allowed, is a matter of negotiation between the lender and the Agency. The maximum percentage of guarantee is:
  • 80% for loans of $5 million or less
  • 70% for loans between $5 - $10 million
  • 60%  for loans exceeding $10 million
Loan Amounts
The total amount of agency loans to 1 borrower must not exceed $10 million. The administrator may at the administrator’s discretion grant an exception to the $10 million limit for loans of $25 million under certain circumstances. The secretary may approve guaranteed loans in excess of $25 million, up to $40 million, for rural cooperative organizations that process value-added agricultural commodities.

Loan Terms
The maximum repayment for loans on:
  • Machinery and equipment repayment will not exceed the useful life of the machinery and equipment purchased with loan funds or 15 years, whichever is less.
  • Real estate repayment will not exceed 30 years.
  • Working capital repayment will not exceed 7 years.
Interest Rates
The interest rate for the guaranteed loan will be negotiated between the lender and the applicant and may be either fixed or variable as long as it is a legal rate. Interest rates are subject to agency review and approval. The variable interest rate may be adjusted at different intervals during the term of the loan, but the adjustments may not be more often than quarterly.

Collateral Requirements
Collateral must have documented value sufficient to protect the interest of the lender and the agency. The discounted collateral value will normally be at least equal to the loan amount. Lenders will discount collateral consistent with sound loan-to-value policy.

Annual Renewal Fee
The annual renewal fee is paid once a year and is required to enforce the guarantee as to the lender. The rate of the annual renewal fee is established by Rural Development in an annual notice published in the Federal Register, multiplied by the outstanding principal loan balance as of December 31 of each year, multiplied by the percent of guarantee. The rate is the rate in effect at the time the loan is obligated, and will remain in effect for the life of the loan.

Due Dates
Annual renewal fees are due on January 31. Payments not received by April 1 are considered delinquent and, at the agency’s discretion, may result in cancellation of the guarantee to the lender. Holders’ rights will continue in effect as specified in the Loan Note Guarantee and Assignment Guarantee Agreement. Any delinquent annual renewal fees will bear interest at the note rate and will be deducted from any loss payment due the lender.

For loans where the Loan Note Guarantee is issued between October 1 and December 31, the first annual renewal fee payment will be due January 31 of the 2nd year following the date the Loan Note Guarantee was issued.

Filing Applications
Complete applications should be sent to the USDA Rural Development State Office for the project location. A list of offices and additional information may be found on the Rural Development website.