Business 

and Industry

Guaranteed

Loan Program

Business 

and Industry

Guaranteed

Loan Program
A Guarantee Guarantee

To Help

Businesses Businesses

Save or Create Save or Create

Jobs

The Business and Industry (B&I)Guaranteed Loan Program

guarantees loans made by eligible lenders

to rural businesses.

The primary purpose of this program is

to create and maintain employment and

improve the economic and

environmental climate

in rural

communities. This

is achieved by

expanding the

existing private

credit structure

capability to

make and service

quality loans to

provide lasting

community benefits.

Administered by the Rural BusinessCooperative Service (RBS) of USDA Rural

Development, the program typically

guarantees losses of up to 80 percent of

the original loan amount. Inability to obtain

other credit is not a requirement. 
Benefits to Businesses

• Higher loan amounts, lower 

interest rates, and longer

repayment terms.

• Assists a business in providing

stability, growth, expansion, and

rural employment.

Benefits to Lenders

• Provides lenders with another tool

to expand their loan portfolio. 

• Enables lenders to increase earnings

through participation in the

secondary market.

• Reduces concerns regarding 

collateral/appraisal issues often

found in smaller communities. 

• Allows lenders to make loans above

their legal lending limits.

Eligible Areas

B&I loans can be made by commercial

or other authorized lenders in rural

areas including all areas other than

cities of more than 50,000 people and

their immediately adjacent urbanized

or urbanizing areas. Priority is given

to applications for loans in rural communities of 25,000 population or less.
Eligible Borrowers

Individuals; corporations,

cooperatives, partnerships, and other

legal entities, public and private,

organized and operated on a profit or

nonprofit basis; and Federally 

recognized Indian tribal groups.

Eligible Loan Purposes

• Business and industrial

acquisitions, construction, 

conversion, expansion, repair, 

modernization, or development

costs. 

• Purchase of equipment, machinery,

or supplies. 

• Start-up costs and working capital. 

• Processing and marketing facilities. 

• Pollution control and abatement. 

• Refinancing for viable projects,

under certain conditions.

How To Participate

For more information on the B&I

Guaranteed Loan Program, contact

any USDA Rural Development office

in your state.
Maximum Loan Amount

Loan guarantees are generally limited to a 

maximum of $10 million per borrower, although

the RBS Administrator, with concurrence of the

Under Secretary for Rural Development, may

approve up to $25 million.

Loan Guarantee Limits (maximum

percentage applies to the entire loan)

• 80% for loans of $5 million or less.

• 70% for loans over $5 million and up to and

including $10 million.

• 60% for loans exceeding $10 million and up to

and including $25 million.

Collateral - Appraisals

All collateral must secure the entire loan. 

Repayment must be reasonably assured. Personal

and corporate guarantees are required. Appraisal

reports prepared by qualified individuals are

required on property that will serve as collateral.

Loan-to-Appraised Market Value Ratios

Lenders will discount collateral consistent with

sound loan-to-value policy.

Maximum Repayment Terms

• Working capital – 7 years.

• Machinery and equipment – 15 years (or useful

life.)

• Real estate – 30 years.

Ineligible Loan Purposes

• Line of credit.

• Agricultural production which is not part of an

integrated business involved in the processing of

agricultural products.

• Any project likely to result in the transfer of

employment from one area to another.
• Any project involving transfer of ownership,

unless this will keep the business from closing,

prevent the loss of jobs in an area or provide

more jobs.

• Payment to owners, partners, shareholders, or

others who retain any ownership in the business.

• Corporations and businesses not at least 51

percent owned and controlled by U.S. citizens.

• Charitable institutions, religious organizations

and affiliated entities, and fraternal

organizations.

• Loans for golf courses, gambling establishments,

and race tracks.

Fees and Costs

A one-time guarantee fee of 2 percent of the

guaranteed principal amount is paid by the lender

and may be passed on to the borrower. A 1 percent

fee may be allowed if the loan is for a high-impact

business or is located in an economically distressed

community. Other typical lender costs may also be

incurred.

Borrower Equity Requirements

A minimum of 10 percent tangible balance sheet

equity is required at the time of issuance of the

Loan Note Guarantee. Twenty percent tangible

balance sheet equity is required for new businesses.

Equity is calculated from financial statements 

prepared in accordance with generally accepted

accounting principles. Feasibility studies may be

required.

Interest Rate

Interest rates for loans may be fixed or variable.

The rate is negotiated between the lender and 

borrower and is similar to those rates customarily

charged to other borrowers in similar

circumstances. Variable rates cannot be adjusted

more than quarterly.
The U.S. Department of Agriculture (USDA) prohibits discrimination in all its

programs and activities on the basis of race, color, national origin, sex, religion, age,

disability, political beliefs, sexual orientation or marital or family status. (Not all

prohibited bases apply to all programs.) Persons with disabilities who require

alternative means for communication of program information (Braille, large print,

audiotape, etc.) should contact USDA’s TARGET Center at 202-720-2600 (voice and

TDD).

To file a complaint of discrimination, write: USDA, Director, Office of Civil Rights,

Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington,

DC 20250-9410 or call 202-720-5964 (voice and TDD). USDA is an equal opportunity

provider and employer.

Credit Quality

Lender addresses the business adequacy of 

equity, cash flow, collateral, history, management,

and the current status of applicable industry in a

written credit analysis. 

Servicing/Liquidation

Annual financial statements prepared in 

accordance with generally accepted accounting

principles are required. Lenders will service and, if

necessary, liquidate the loans (with USDA Rural

Development concurrence).

For More Information

For more information contact the Rural 

Development State Office or any Rural

Development field office:

Call the Deputy Administrator, Business

Programs, Rural Business–Cooperative Service

(RBS) at (202) 720-0813 or visit our home page on

the Internet:

http://www.rurdev.usda.gov

PA-1565

Revised January 2002
U.S. Department of Agriculture

Rural Development

Rural Business–Cooperative Service