Rural Business and Industry Loan Guarantee Program
Put the Weight of the Department of Agriculture Behind Your Business
Blackwater, Missouri. Photo by Frank Thompson.
There are many challenges to opening or expanding your rural business, such as securing the capital you need to make your venture successful. The USDA Business and Industry (B&I) Guaranteed Loan program helps rural businesses and entrepreneurs like you access a line of credit with your bank by guaranteeing your loan.
This page offers ideas, links, tips and strategies to help you uncover the potential of this program for your business. This program is very broad, allowing for lots of creativity. Can you see where B&I could help your business or another in your town?
- In Hallam, Nebraska, Prairieland Foods, LLC was selected to receive a $650,000 loan to enable the locally owned and operated dairy processing facility to meet the growing demand for a local, source-verified, sustainable supply of dairy foods and ingredients. This project saved four jobs and created three new jobs.
- In Holly Springs, N.C., My Way Tavern, a local family-owned restaurant, has been selected to receive a $204,000 loan to help with start-up costs of their neighborhood restaurant. The restaurant plans to purchase at least 10 percent of its produce from local farmers.
- In Pawnee City, Nebraska, SchillingBridge Winery and Microbrewery received a $81,707 guaranteed loan to purchase a new bottling machine and bottle labeler that expanded its marketing into the small bottle packaging for its hand-crafted brews. It employs seven workers.
- In Indiana, a B&I loan was made to a manufacturer of auto parts used in transmissions and drivetrains by the major auto manufacturers. This loan was used for the refinancing of debt and purchase of machinery and equipment. It created 24 jobs and saved 116 jobs.
- In Illinois, B&I loan funds were used to construct an assisted living facility and to provide working capital. The facility will have 78 units and will create 58 new jobs for the local community.
- In Louisiana, a guaranteed loan was used to refinance existing debt and construct a hospital. The facility, a one-story structure, will grow to 32,485 square feet after expansion. It currently has 44 acute care beds. After the expansion, it will also include a geriatric-psychiatric unit with 12 beds Twenty-five new jobs will be created and 93 jobs saved as a result of this loan.
The Rural Business and Industry (B&I) Loan Guarantee Program "provides loan guarantees to improve, develop, or finance business, industry, and employment and to improve the economic and environmental climate in rural communities. The program does this by bolstering the existing private credit market with a guarantee."
In essence (and in English), the Department of Agriculture acts as a co-signer to a business owner, saying that if the business defaults on a loan from a bank, the government will repay the bank 80% of the remaining principal. This kind of guarantee is attractive to a bank, which is why this public-private partnership is quite popular. Having the guarantee lowers the risk to the lender and often lowers the interest rates for the business owner.
In 2008, the program was modified slightly - it emphasized that local and regional food enterprises are eligible for loan guarantees and reserves 5% of program funds for local and regional food enterprises. Priority is given to food enterprises that benefit low-income or food insecure communities with limited access to affordable and healthy foods.
For the B&I program individuals, cooperatives, cooperative organizations, businesses, and other entities are eligible for these loan guarantees.
Loans may be used for business conversion, enlargement, modernization, purchase and development of land, buildings, facilities, purchase of equipment, machinery, supplies, inventory, and for many other uses too. Your business could even buy another business with this loan guarantee.
Milk bottles line up in a grocery store. Photo by Liz West and used here under Creative Commons.
An example of using the B&I program for local and regional food enterprises is Prairieland Foods LLC in Hallam, Nebraska.
Prairieland is a locally-owned and operated dairy processing facility. The facility meets the growing demands for a local, source-verified, sustainable supply of dairy foods and ingredients as well as diversifies the market exposure for milk produced at local dairies, including partner company Prairieland Dairy, LLC. The processing facility provides several fluid milk products to the area.
Prairieland Foods received a $650,000 loan through First State Bank of Cortland, NE, and this loan refinanced existing debt, purchased real estate and provided additional working capital needed to meet the growing demand for its products.
Since the loan, Prairieland has improved the efficiency of its operations, increased milk production and expanded its markets. The salaries of the workers have also increased. As mentioned above, this project saved four jobs and created three new jobs.
- Fact sheet on the B&I Program (opens PDF) - Great facts about the details of the program, such as eligible borrowers and loan purposes, maximum loan amounts, repayment terms and much more. This particular one is for Nebraska, but other states have specific fact sheets for rural residents in their state too.
- USDA's page on the B&I program - Has frequently asked questions as well as whom to send a completed application.
- Various forms for the B&I program can be found on this page and searching "Business and Industry Direct" or "Business and Industry Guaranteed" under the "Program Name."
- Presentation from Health and Human Services on the B&I program, including some useful links.
- National Center for Appropriate Technology also has a page with some good information, including the examples listed above.
For more information on the Rural Business and Industry Loan Guarantee Program, contact Steph Larsen at StephL@cfra.org or call 402-687-2100
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