Together, America Prospers 

OneRD Guarantee Loan Initiative: 

Business & Industry Loan Guarantees 

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, 

fnancial strength and suffcient 

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 also be approved 

by the Agency under the criteria of 

the OneRD regulation. 

Who may qualify for these 

guaranteed loans? 

• For-proft or non-proft 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 fnanced 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 refnancing when such 

refnancing improves cash fow and 

creates jobs. 

• Business and industrial acquisitions 

when the loan will maintain business 

operations and create or save jobs. 

What 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. 

• Distribution or payment to a 

benefciary of the borrower or an 

individual or entity that will retain an 

ownership interest in the borrower. 
OneRD Guarantee Loan Initiative: 

Business & Industry Loan Guarantees 

What Collateral Is Required? 

Collateral must have documented 

value suffcient 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 

justifcation 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 2021 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 

fnanced 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 fxed 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 

outstanding principal balance, 

paid annually (2). 

• Reasonable and customary fees 

for loan origination are negotiated 

between the borrower and lender. 

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 fnancial 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 offces 

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 questions? 

Contact the local Rural Development 

offce 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. 

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 fnancing 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 local offce for assistance. USDA is an equal 

opportunity provider, employer, and lender. 

September 2020