Business & Industry Loan Guarantees

One RD Guarantee This program is streamlined under the OneRD Guarantee Loan Initiative. For more information, visit

What does this program do?

This program offers loan guarantees to lenders for their loans to rural businesses.

What lenders may apply for this program?

Lenders need the legal authority, financial strength, and sufficient experience to operate a successful lending program. This includes lenders that are subject to supervision and credit examination by the applicable agency of the United States or a State including:

Federal and State-chartered banks.

Savings and loans.

Farm Credit Banks with direct lending authority.

Credit unions.

Other non-regulated lending institutions may be approved by the Agency under the criteria of the OneRD Guarantee Loan Initiative regulation.

Who may qualify for these guaranteed loans?

For-profit or non-profit businesses.

Cooperatives.

Federally-recognized Tribes.

Public bodies.

Individuals engaged or proposing to engage in a business.

What are the borrowing restrictions?

Individual borrowers must be citizens of the United States, or reside in the U.S. after being legally admitted for permanent residence.

Private-entity borrowers must demonstrate that loan funds will remain in the U.S., and the facility being financed will primarily create new or save existing jobs for rural U.S. residents.

What is considered an eligible area?

Rural areas not in a city or town with a population of more than 50,000 inhabitants.

The borrower’s headquarters may be based within a larger city, as long as the project is located in an eligible rural area.

The lender may be located anywhere in the United States.

Projects may be funded in either rural or urban areas under the Local and Regional Food System Initiative.

Check eligible addresses for Business Programs.

How may guaranteed loan funds be used?

Eligible uses include (but are not limited to):

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

The purchase and development of land, buildings, and associated infrastructure for commercial or industrial properties.

The purchase and installation of machinery and equipment, supplies or inventory.

Debt refinancing when such refinancing improves cash flow and creates jobs.

Business and industrial acquisitions when the loan will maintain business operations and create or save jobs.

Guaranteed loan funds may NOT be used for:

Lines 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.

Agricultural production, with certain exceptions (1).

Distribution or payment to a beneficiary of the borrower or an individual or entity that will retain an ownership interest in the borrower.

What Collateral Is Required?

Collateral must have documented value sufficient to protect the interest of the lender and the Agency. Lenders will discount collateral consistent with sound loan-to-value policy with the discounted collateral value at least equal to the loan amount. The lender must provide satisfactory justification of the discounts being used. Hazard insurance is required on collateral (equal to the loan amount or depreciated replacement value, whichever is less).

What is the maximum amount of a loan guarantee?

The loan guarantee percentage is published annually in a Federal Register notice. B&I loans approved in Fiscal Year 2022 will receive an 80 percent guarantee.

What are the loan terms?

The lender, with Agency concurrence, will establish and justify the guaranteed loan term based on the use of guaranteed loan funds, the useful economic life of the assets being financed and those used as collateral, and the borrower’s repayment ability. The loan term will not exceed 40 years.

What are the interest rates?

Interest rates are negotiated between the lender and borrower.

Rates may be fixed or variable.

Variable interest rates may not be adjusted more often than quarterly.

What are the applicable fees?

There is an initial guarantee fee, currently 3 percent of the guaranteed amount.

There is a guarantee retention fee, currently 0.5 percent of the guaranteed portion of the outstanding principal balance, paid annually (2).

Reasonable and customary fees for loan origination are negotiated between the borrower and lender.

Qualifying projects may receive a reduced fee of 1 percent.

What are the underwriting requirements?

The lender will conduct a credit evaluation using credit documentation procedures and underwriting processes that are consistent with generally accepted prudent lending practices and, also consistent with the lender’s own policies, procedures, and lending practices.

The lender’s evaluation must address any financial or other credit weaknesses of the borrower and project and discuss risk mitigation requirements.

The lender must analyze all credit factors to determine that the credit factors and guaranteed loan terms and conditions ensure guaranteed loan repayment.

Credit factors to be analyzed include but are not limited to character, capacity, capital, collateral, and conditions.

How do we get started?

Applications are accepted from lenders through USDA local offices year-round.

Interested borrowers should inquire about the program with their lender.

Lenders interested in participating in this program should contact the USDA Rural Development Business Programs Director in the state where the project is located.

Who can answer my questions?

Contact the Contact the local Rural Development office that serves your area.

What law governs this program?

Code of Federal Regulations, 7 CFR 5001.

This program is authorized by the Consolidated Farm and Rural Development Act, 7 U.S.C. 1932.

Why does USDA Rural Development do this?

This program improves the economic health of rural communities by increasing access to business capital through loan guarantees. This enables commercial lenders to provide affordable financing for rural businesses.

NOTE: Because information on this page may change, please always consult the program instructions listed in the section above titled “What law governs this program?” You may also contact your Because information on this page may change, please always consult the program instructions listed in the section above titled “What law governs this program?” You may also contact your local office for assistance.

Credit and Finance

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Five Things to Know About SBA Financing When Buying or Selling a Business

If you’re looking to buy or sell a business, it’s worth considering if your change-of-business transaction qualifies for a Small Business Administration (SBA) loan. With SBA financing, the bank provides a long-term loan at reasonable rates and fees and the SBA guarantees it—typically up to 75 percent of the loan.

Why that matters: Compared to financing equipment or buildings—items that can be assessed in terms of actual dollars and how they will be used by the borrower—financing the purchase of a business is complicated. Most change-of-ownership transactions require many considerations: industry trends, the prospective owner’s experience, the business location, and the potential impact of changing consumer tastes, technology and competition, to name a few.

These transactions also tend to involve the transfer of a large amount of intangible assets (goodwill) to the buyer, adding an element of uncertainty. That’s where the SBA’s government guaranty comes in, mitigating the risk and making the loan more viable.

SBA financing offers other benefits, too. In many cases, working capital, equipment purchases and other uses of proceeds may be included in the loan. There’s no balloon payment, freeing the buyer from expending extra resources later. Plus, the SBA loan’s longer amortization—usually up to 10 years—helps with cash flow.

Here are five things to know when considering SBA financing for a change of ownership:

1. An SBA loan cannot be used to partially buy into a business

One owner can buy out another, or a new buyer can purchase an entire company. An existing business can even use an SBA loan to purchase another company, provided it’s for 100 percent of that entity.

2. The buyer needs a business valuation

If $250,000 or less is being financed and there isn't a close relationship between the buyer and seller, the bank can perform an internal valuation. Above that, an outside appraisal is required at the buyer’s expense. Most business valuations take a couple of weeks to complete and cost $1,500-$2,500, depending on the company’s revenue, location, industry and other key factors.

3. An SBA loan can finance up to 90 percent of the purchase price

This helps ensure the buyer is invested in, and committed to, the project.

4. The seller can carry part of the loan

If the seller is willing to carry a portion of the financing, the advantages may include favorable terms, a lower cash down payment for the buyer and potential tax savings for the seller.

5. The seller must exit, but may consult

The SBA allows the seller to enter into a consulting agreement for one year only.

As you consider this important transaction, it’s important to work with an SBA-Preferred Lender. Preferred Lenders have proven experience processing SBA loans, understand the nuances of this type of financing and can guide you through the transaction. Banner is proud to be recognized as an SBA Preferred Lender.