If you have ever assumed USDA loans are only for farms, you are not alone. USDA Rural Development also supports business financing in eligible rural communities, often through loan guarantees that help lenders offer longer terms and larger loan amounts than might otherwise be available.
I interviewed Stephen Van Sickle, SVP, USDA National Sales Manager at First Bank of the Lake. Van Sickle has almost 20 years of experience in government-guaranteed lending and helps businesses across the country secure financing. Van Sickle shared practical information to help you understand the ins and outs of USDA Business and Industry loans, including straightforward insights on eligibility, common deal structures, how funds can be used, typical terms, and what to expect during the approval process, especially for those encountering USDA financing for the first time.
Rieva Lesonsky: Does USDA do business loans, or is it just for farms?
Stephen Van Sickle: Yes. USDA Rural Development offers business lending support for a wide array of business types through programs such as the Business & Industry (B&I) Loan Guarantee Program.
Lesonsky: What is the 20% rule for USDA?
Van Sickle: There isn’t a specific “rule”; however, a post-closing balance sheet equity of at least 20% for a new start-up business is required. For loans involving construction for new start-up businesses, a 25% post-closing balance sheet equity is required. If the applicant is an existing business, a 10% post-closing balance sheet equity is required.
Lesonsky: What disqualifies a business for a USDA loan?
Van Sickle: Common disqualifiers include:
- Ineligible location (for example, a project or collateral in an area that does not qualify under USDA eligibility mapping)
- Ineligible business types/activities. Examples of ineligible activities include, but are not limited to:
- Speculative real estate or investments
- Golf courses
- Racetracks
- For-profit zoos or safaris
- Certain publicly owned or nonprofit recreational facilities
- Movie theaters or theatrical productions
- Religious organizations/inherently religious activities
- Long-term residential housing (such as apartment complexes)
- Businesses with more than 15% of annual gross revenue from gambling activity.
Lesonsky: What credit score do I need for a USDA business loan?
Van Sickle: There is no specific minimum credit score requirement stated for USDA B&I.
Lesonsky: Why would a rural business owner choose a USDA B&I loan over one from the Small Business Administration (SBA)?
Van Sickle: One key reason is loan size: the SBA 7(a) loan is typically capped at $5 million, while USDA B&I can go up to $25 million per borrower. Additional reasons include longer terms that can improve cash flow compared with shorter conventional structures, and the ability to obtain a full-term commitment rather than periodic renewals or refinancings.
Lesonsky: How do I choose the right USDA lender?
Van Sickle: Look for a lender with deep experience in USDA B&I and with the expertise in navigating through the entire application and approval process with USDA.
Lesonsky: How much can I borrow?
Van Sickle: USDA B&I can support loans up to $25 million per borrower. Multiple guaranteed loans may be possible for a single borrower over time.
Lesonsky: What are the types of USDA loans?
Van Sickle: Examples of USDA Rural Development programs:
- Business & Industry (B&I) Loan Guarantee Program
- Community Facilities Loan Guarantee Program
- REAP (Rural Energy for America Program) Loan Guarantee Program
- Water and Waste Disposal Loan Guarantee Program
Lesonsky: How can the B&I loan funds be used?
Van Sickle: Common eligible uses include, but are not limited to:
- Purchase and development of land, buildings, or infrastructure for public or private commercial use
- Business acquisitions
- Business expansion projects
- Purchase and installation of machinery and equipment
- Working capital
- Debt refinance
Lesonsky: What are the terms for a USDA B&I loan?
Van Sickle: Typical term guidance includes:
- Real estate, up to 30 years
- A construction period may be added to the overall term (example: if the project construction is 2 years, then the term would be 32 years)
- Equipment, up to 15 years (subject to useful life)
- Working capital, generally up to 10 years (sometimes 12)
- If there are multiple purposes under one loan, a blended term is allowed in accordance with the use of funds.
Lesonsky: What is the USDA OneRD Guaranteed Loan Program Initiative?
Van Sickle: The One Rural Development (OneRD) Secured Loan Initiative (often called the OneRD Guarantee) is USDA Rural Development’s effort to standardize and streamline how several of its major guaranteed loan programs are delivered.
Instead of each program having its own separate set of forms and steps, OneRD establishes a single, consistent framework of requirements, processes, and forms to make it faster and simpler for lenders to originate and service USDA-guaranteed loans, and to encourage more private lending in rural areas.
Lesonsky: What are the benefits of a USDA B&I loan?
Van Sickle: Benefits include a larger guaranteed loan size (up to $25 million per borrower), longer terms that can improve cash flow compared with shorter conventional terms, and full commitment for the life of the loan/amortization period (elimination of renewal fees and uncertainty).
Lesonsky: What are the drawbacks of a USDA B&I loan?
Van Sickle: Drawbacks can include:
- Longer processing times compared to conventional financing.
- Costs associated with the guaranteed portion of the loan.
Lesonsky: Are there down payments required with USDA B&I loans?
Van Sickle: Down payments are not presented as a standard requirement; the structure is generally collateral-based. Examples of collateral-based requirements include 85% of fair market value for real estate and up to 75% of fair market value for equipment.
Lesonsky: What is the application process like for a USDA business loan?
Van Sickle: While individual lenders may have other steps, the process typically includes:
- Find a USDA lender
- Apply with the lender
- The lender completes internal underwriting and approval
- The lender submits the package to the USDA state office where the project is located
- USDA review times vary by size and complexity
- For loans less than $10 million, the approval authority remains at the USDA state office level. For loans over $10 million, the approval authority is at the USDA national office level.
Lesonsky: How does the USDA define a rural area for the USDA B&I program?
Van Sickle: For USDA Business and Industry loans, a rural area is generally defined as any town or city with a population of less than 50,000. In practice, USDA uses an address-based eligibility map to determine whether a specific location qualifies, and the boundaries can be very precise.
Lesonsky: Is there a map that shows the areas the USDA defines as “rural”?
Van Sickle: Yes. USDA provides an online eligibility map where you can enter an address to determine whether a location is eligible.
Lesonsky: I want to start a business in a populated area—can I still qualify for a USDA loan?
Possibly. Eligibility can depend on USDA’s mapping rules, and places near the roughly 50,000-population threshold may still be eligible, depending on the area and mapping boundaries.
Van Sickle’s Key Takeaways
“USDA Business and Industry financing can be a strong option for businesses operating in, or expanding into, eligible rural areas, particularly when longer repayment terms and larger loan sizes improve the overall project. It can also provide more stability by supporting a longer-term structure rather than frequent renewals.
“At the same time, USDA-backed financing often requires more documentation and a longer timeline than conventional loans, so planning ahead is important. A good next step is to confirm location eligibility using the USDA map, then speak with a lender who regularly works with USDA Business and Industry loans to determine whether the business type, location, and use of funds are a good fit.”
Rieva Lesonsky is the founder of Small Business Currents, a content company focusing on small businesses and entrepreneurship. You can find her on Twitter @Rieva, Bluesky @Rieva.bsky.social, and LinkedIn. Or email her at Rieva@SmallBusinessCurrents.com.
Photo courtesy Tom Fisk via pexels
