When most people think of USDA loan and grant programs they think of farm subsidies and agricultural related programs. While providing financial assistance to farmers and ranchers has been the primary mission of the USDA since it was established, in recent years, Congress has allocated Federal funds for loans made to businesses in designated rural communities.
When the USDA began its small business lending program for rural areas, it essentially adopted the rules currently in place by the SBA, with the one exception being the location of the business or enterprise being financed. In my article about SBA 7(a) programs, I provided detail about eligibility, cost and lenders for SBA 7(a) loans. The USDA basic rules are so similar I am not going to repeat them here. Simply click on the link above and you can read about the SBA programs. A summary of the USDA Business and Industry Loan Program (B&I) is available on the USDA
Differences between the SBA and USDA Programs:
Just as the SBA has designated lenders who share in the risk of SBA 7(a) loans, so does the USDA. However the USDA list of lenders is considerably smaller. To find a USDA approved lender, go to the USDA map and find the field office that serves your area. Each field office can provide a list of local lenders approved to make USDA loans.
My experience is that lenders that are very active in the USDA B&I loan program are also active in the SBA 7(a) program as well.
In my experience, the USDA loan program has several key advantages over the SBA 7(a) program if your business or enterprise is located in an approved rural area. The USDA loan programs have a much higher loan limit, and lenders who make USDA loans tend to be a little more aggressive when making USDA B&I loans over SBA 7(a) loans.
I have known a number of businesses and am currently helping several of them that are moving their manufacturing facilities to rural areas for a number of reasons. Real estate is cheaper and as long as you are close to a supply of workers who have the skills to work in your facility, labor can be cheaper than in metro areas. In one example, my client is moving a manufacturing operation from metro
If you are located in a USDA designated rural area, it is worth the time to get to know the local USDA finance professional as there are also other programs and grants that could be advantageous to small businesses.
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