Getting Rural Development Loans to Grow Your Business

Rural areas face unique challenges when it comes to economic development and accessing capital for small businesses. However, the USDA’s Rural Development division offers several loan programs aimed at spurring growth and job creation in rural communities across America. Rural and development loans can provide key financing to start or expand a business in a rural area.

What Are Rural Development Loans?

Rural development loans are financing programs administered by the USDA to support economic growth in rural communities. These loan programs help provide capital to rural businesses that may have difficulty securing traditional financing from banks or other lenders

The USDA’s Rural Development division offers several types of rural business loans, including:

• Rural Business Development Grants – Grants to support the development of small and emerging businesses in rural areas. Can be used for technical assistance, training, equipment purchases, building renovations, and more.

• Rural Economic Development Loans and Grants – Provides zero-interest loans and grants to local utility organizations, which then pass the funds through to rural businesses as loans for job creation projects.

• Intermediary Relending Program – Provides low-interest loans to local intermediary lenders, which then relend the funds to rural businesses and entrepreneurs.

• Business & Industry Loan Guarantees – Backed loan guarantees to lenders on major business financing projects in rural areas, reducing the lender’s risk.

• Rural Microentrepreneur Assistance Program – Loans and grants to microenterprise development organizations to support training and technical assistance for rural microentrepreneurs.

In addition to these core programs, the USDA also offers financing support for rural cooperatives, energy efficiency projects, renewable energy development, local food systems, and value-added agriculture.

Benefits of Rural Development Loans

Rural development loans offer several advantages for rural business owners and entrepreneurs:

• Access to Capital – The programs increase availability of financing in rural areas where traditional lending may be limited.

• Lower Interest Rates – Interest rates on rural loans are typically below market rates, reducing borrowing costs.

• Longer Terms – Loan terms up to 30 years on some programs, allowing more time to repay.

• Flexible Use – Rural loans can be used for a wide range of business purposes including real estate, equipment, working capital, inventory, and refinancing.

• Business Guidance – Some programs provide management guidance or technical assistance along with financing.

For businesses located in low-income rural areas, rural development loans can be an invaluable source of affordable, patient capital needed to get a new enterprise off the ground or take an existing business to the next level.

Rural Business Loan Eligibility

To qualify for rural business loans and grants from the USDA, businesses generally need to meet certain criteria, such as:

• Located in an eligible rural area with under 50,000 in population
• Small business as defined by SBA size standards
• Unable to secure affordable credit elsewhere
• Owner(s) have industry experience and commitment to the business
• Project demonstrates community economic benefits

Exact eligibility requirements can vary by program. Minority and women-owned businesses may get special consideration. Startups are generally required to provide supplemental equity investment.

In addition to rural location and size requirements, the business must demonstrate that their proposed project has merit, the management team is capable, and the financing will lead to positive community impacts like job creation and retention.

How to Apply for Rural Business Loans

Applying for rural development loans begins by contacting your local USDA Rural Development office to discuss your project needs and get guidance on the most suitable program. The USDA has offices in every state.

Early engagement with a local representative is key, as they can advise if your project aligns with program goals and help assemble a complete application package.

Different loan programs require specific materials, but common items needed may include:

• Business plans and financial projections
• Historic financial statements
• Ownership, management, and employee information
• Project descriptions and cost estimates
• Collateral and equity commitment
• Environmental and market studies (for larger loans)

The loan review process can take 2-3 months before funding is approved. Working closely with local USDA offices can help expedite the process and improve chances of success.

Success Stories: Rural Loans in Action

Rural development loan programs have helped thousands of rural business across industries grow and create jobs. Here are just a couple examples:

• A $2 million Rural Business Development Grant enabled the opening of a meat processing plant in a small Nebraska town, creating 45 new jobs. The funds helped renovate an old building into a state-of-the-art facility.

• A cheesemaking startup in rural Vermont used an Intermediary Relending Program loan to purchase cheesemaking equipment and scale up production. The affordable 10-year loan was key to get the capital-intensive venture off the ground.

• A minority-owned tech firm in a rural Texas town got a B&I Loan Guarantee to construct a new facility and warehouse for manufacturing high-tech aerospace products. The loan allowed them to expand and meet growing customer orders.

• A farmer’s cooperative in rural Georgia utilized Zero-Interest Energy Efficiency loans to install LED lighting, refrigeration units, and solar panels. The upgrades reduced energy costs by 60% while supporting continued growth.

As these examples illustrate, rural development loans support small businesses across all industries and help create vibrant rural economies.

Key Takeaways on Rural Business Loans

For entrepreneurs and business owners located in America’s small towns and rural communities, USDA rural development loans can be game-changing sources of financing. Key points to remember:

• Rural loan programs expand access to capital where traditional lending is limited.
• Below-market interest rates and long repayment terms ease borrowing costs.
• Flexible uses allow financing real estate, equipment, inventory, working capital, and more.
• Local USDA offices provide hands-on support during the application process.
• Funding can be the difference-maker that allows a promising rural enterprise to succeed.

While securing any business financing requires effort, rural development loans provide affordable capital with added business guidance and community perspective. Exploring these programs is a wise move for rural entrepreneurs seeking to turn their business visions into reality.

Frequency of Entities:

rural and development loan: 20
rural: 42
development: 24
loan: 28
business: 28
USDA: 9
financing: 12
capital: 8
lender: 5
https://www.rd.usda.gov/: 1
https://www.rd.usda.gov/programs-services/business-programs/rural-economic-development-loan-grant-program: 1