Together, America Prospers

Rural Economic Development Loan and Grant Programs

What do these 

programs do?

Rural Economic Development 

Loan (REDL) and Grant (REDG) 

programs provide funding to 

rural projects through local 

utility organizations. Under the 

REDL program, USDA provides 

zero-interest loans to local 

utilities. In turn, the utilities 

pass the loans through to local 

businesses (“ultimate recipients”) 

for use in projects that create 

and keep employment in rural 

areas. Ultimate recipients repay 

the lending utility directly, and 

the utility is then responsible for 

repaying USDA Rural Development. 

Under the REDG program, 

local utility organizations use 

USDA-awarded grants to establish 

revolving loan funds (RLFs), 

which help support projects 

that create or keep rural jobs. 

When the RLF is exhausted 

or ends, the grant is repaid to 

USDA Rural Development. 

Who can apply? 

• Any former Rural Utilities Service 

(RUS) borrower that pre- or repaid 

an insured, direct, or guaranteed loan

• Nonprofit utilities eligible 

to receive assistance from 

Rural Development Electric or 

Telecommunication Programs

• Current Rural Development 

Electric or Telecommunication 

programs borrowers

What is an eligible area?

Intermediaries can use REDLG funds 

to lend for projects in rural areas or 

towns with populations of 50,000 

or fewer. 

How much funding is available 

to intermediaries?

• Up to $300,000 in grants can be 

requested for establishment of an RLF

• Up to 10 percent of grant funds 

can be applied toward operating 

expenses over the life of the RLF 

• Up to $2 million in loans can 

be requested

The intermediary applies to USDA 

for funding on behalf of specified 

local projects. Projects can begin after 

application submission, but there 

is no guarantee of approval. USDA 

funds are issued to the intermediary 

at project completion.

What are the terms for 

the intermediary? 

• 10 years at 0 percent

• Grants require a 20 percent match 

from the intermediary

• Grant funds must be repaid to USDA 

upon exhaustion or termination of 

the RLF

How can funds be used? 

REDLG intermediaries pass funding 

to ultimate recipients for use on 

eligible projects. Examples include:

• Business incubators

• Community development 

assistance to nonprofits and public 

bodies (particularly job creation 

or enhancement)

• Facilities and equipment for education 

and training for rural residents to 

facilitate economic development

• Facilities and equipment for medical 

care to rural residents 

• Start-up venture costs, including such 

things as financing fixed assets like 

real estate, new or existing buildings, 

equipment, or working capital

• Business expansion

• Technical assistance

NOTE: 7 CFR, Part 4280.27 

(available at this link: https://tinyurl.

com/5y4hryeu) and 7 CFR, Part 

4280.30 (available at this link: 

https://tinyurl.com/4v25xefy) list 

ineligible uses.

How much funding is available 

to business and community 

borrowers (ultimate recipients) 

through the RLF? 

An ultimate recipient can request up 

to 80 percent of project costs using 

REDLG funds. The remainder must 

be provided by the ultimate recipient 

or intermediary.
Rural Economic Development 

Loan and Grant Programs

What are the terms on the RLF loan 

to the ultimate recipient? 

• Interest rate is 0 percent

• Maximum term is 10 years

• Up to 80 percent of project cost,

with 20 percent from either the

ultimate recipient or the intermediary

• The intermediary can incorporate

interest rates or administrative loan

fees after the funds have been

loaned out and revolved once.

The first time around, all loans are

zero interest.

• Repayment can be deferred up to

two years

How do we get started? 

Applications are accepted yearround through your local USDA 

Rural Development office. They also 

can answer your REDLG questions. 

You’ll find a state-based list at this link: 

https://go.usa.gov/xShSz. 

What governs these programs? 

• Basic program information: 7 CFR,

Part 4280, available at this link:

https://go.usa.gov/xMXrX

• Loan servicing - 7 CFR, Part 4280 

as listed above, plus 2 CFR Part 

200, available at this link:

https://go.usa.gov/xMXrV

• These programs are authorized by 

the Rural Electrification Act of 1936

Why does USDA Rural Development 

do this?

The REDLG programs provide 

financing to eligible RUS electric or 

telecommunications borrowers to 

promote rural economic development 

and job creation projects.

NOTE: Because information is subject to change, always consult official program 

instructions or contact your local Rural Development office for help. A list is available 

at this link: https://go.usa.gov/xJHPE. You will find additional resources, forms, and 

program information at https://rd.usda.gov. USDA is an equal opportunity provider, 

employer, and lender.

Last Updated October 2022