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USDA Business And Industry (B&I) Guaranteed Loans

Financial Resources For Northwest & West Central Ohio Entrepreneurs


Purpose of Program

The purpose of the B&I Guaranteed Loan Program is to improve, develop, or finance business, industry, and employment and 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 be used for marginal or substandard loans or for relief of lenders having such loans.

Eligible Businesses

A borrower may be a cooperative organization, corporation, partnership, or other legal entity organized and operated on a profit or nonprofit basis; an Indian tribe on a Federal or State reservation or other Federally recognized tribal group; a public body; or an individual. A borrower must be engaged in or proposing to engage in a business that will:

1. Provide employment;

2. Improve the economic or environmental climate;

3. Promote the conservation, development, and use of water for aquaculture; or

4. Reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems and other renewable energy systems.

Individual borrowers must be citizens of the United States (U.S.) or reside in the U.S. after being legally admitted for permanent residence. Corporations or other nonpublic body organization-type borrowers must be at least 51 percent owned by persons who are either citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence. 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.

Eligible Use of Funds

Loan purposes must be consistent with the general purpose contained in the regulation. They include but are not limited to the following:

1. Business and industrial acquisitions when the loan will keep the business from closing, prevent the loss of employment opportunities, or provide expanded job opportunities.

2. Business conversion, enlargement, repair, modernization, or development.

3. Purchase and development of land, easements, rights-of-way, buildings, or facilities.

4. Purchase of equipment, leasehold improvements, machinery, supplies, or inventory.

Loan Amounts

The total amount of USDA guaranteed loans to one borrower must not exceed $10 million. The USDA Administrator may, grant an exception to the $10 million limit for loans of $25 million under certain circumstances. The USDA Secretary may approve guaranteed loans in excess of $25 million, up to $40 million, for rural cooperative organizations that process value-added agricultural commodities.The percentage of guarantee, up to the maximum allowed, is a matter of negotiation between the lender and the USDA. The maximum percentage of guarantee is 80 percent for loans of $5 million or less, 70 percent for loans between $5 and $10 million, and 60 percent for loans exceeding $10 million.

Repayment Term

The maximum repayment period for loans on real estate cannot exceed 30 years; equipment repayment period cannot exceed the useful life of the machinery purchased with loan funds or 15 years, whichever is less; and working capital repayment cannot exceed 7 years.

Interest Rates

The interest rate for the guaranteed loan is 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 USDA review and approval. A 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.


An annual guarantee renewal fee is paid once a year and is required to maintain the enforceability of the guarantee as to the lender. The rate of the annual renewal fee (a specified percentage) 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. Annual renewal fees are due on January 31.


Collateral, Security

Each lender has its own lending and credit requirements. Generally, they require some type of collateral and personal guarantees of significant owners. The type and amount of collateral is determined by lender and government regulations, and risk characteristics of the loan. Collateral must have documented value (which may require third party appraisal) sufficient to protect the interest of the lender and the USDA in the event of loan default.


Participation Requirements

Additional Considerations

USDA does not extend financial assistance to businesses when the financial strength of the individual owners or the company itself is sufficient to provide all or part of the financing. Both business and personal financial resources are reviewed as part of the eligibility criteria. If these resources are found to be excessive, the business will be required to use those resources in lieu of part or all of the requested loan proceeds.

Program Funding Source

How to Apply

USDA itself does not make loans, but rather guarantees a portion of loans made and administered by commercial lending institutions. A small business applies directly to a lender for financing. Many American banks participate in the program. The lender reviews the application and decides if it merits a loan on its own or if it requires additional support in the form of a USDA guaranty. If the lender is not willing to provide the loan, even with an USDA guaranty, USDA cannot force the lender to do so. So it is important for applicants to be prepared when they approach a lender; they should know and meet the lender’s criteria and requirements as well as those of the USDA. To be considered for an USDA guaranteed loan, the applicant must be both eligible and creditworthy. The program is administered at the state level by Rural Development State Offices.

Links to Loan Application and/or Specific Information

USDA Rural Development
Ohio State Office
Federal Building, Room 507
200 North High Street
Columbus, Ohio 43215

Useful Information

Interest Rate Links

Business Management Links

Glossary of Important Financial Terms You Should Understand

How To Prepare A Business Plan to Obtain Money

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