Navigating USDA REAP and B&I Loans – A Guide

InsightsNewsCommercial Finance
Published: 08 July 2024
Navigating USDA REAP and B&I Loans

Businesses operating in rural environments can face resource challenges for a variety of reasons. Financing is often vital, and to support these businesses, the United States Department of Agriculture (USDA) collaborates with local organizations and financial institutions by offering, among others, two key programs: Business and Industry (B&I) and Rural Energy for America Program (REAP) loans.

Understanding the details of these programs including eligibility, application procedures, and notable differences is valuable to successful loan acquisition.

Understanding USDA Business & Industry Loans

The USDA B&I loan program is intended to help stimulate and improve the economic and  environmental climate of rural areas by providing loan guarantees to businesses through commercial lenders. The USDA leverages existing credit structures (e.g., commercial lenders) to increase loan quality, support a wide range of business needs, and create sustainable partnerships between local borrowers and financial institutions.

B&I loan guarantees support financing up to $25MM for business use, including but not limited to:

  • Business Expansion: Acquisitions, Expansion, Mergers
  • Debt Refinancing: Replacing existing debt under certain conditions
  • Equipment: Purchasing, upgrading, and installation of equipment and machinery
  • Real Estate: Acquiring, developing, or improving land and buildings
  • Working Capital: Funds for operations and expansion – to create or save jobs


Understanding REAP Loans

REAP loan guarantees support financing for renewable energy systems (RES) and energy efficiency improvements (EEI) in rural areas. While narrower in focus than the B&I program, it plays a significant role in driving innovation and energy independence.

The REAP program provides financing up to $25MM for businesses and award grants up to $1M to agricultural producers, rural small for-profit businesses, co-ops, and tribal businesses to facilitate the purchase of the following:

  • Renewable energy systems like biomass, geothermal, hydrogen, solar, and wind
  • Energy efficiency improvements such as HVAC, insulation, lighting, windows, and doors


What are the key differences and similarities between B&I and REAP Loans?

While both programs mostly target rural businesses, they have unique eligibility requirements and scopes. A side-by-side comparison shows the key similarities and differences.


USDA Business Loans Eligibility





Must operate in rural areas (>50,000 or  fewer pop.)


Exception: Borrower’s HQ can be based in   larger city. Project must be in eligible rural   area.

Must operate in rural areas (>50,000 or fewer pop.)


Exception: Agricultural producers do not have a rural   population limit.


Cooperatives, For-Profit Entities, Federal  Tribes, Non-profits, Public Bodies

Agricultural producers and small businesses (as defined  by the federal code), including the following:


Cooperatives, Electrical Utilities, Private for-profit  entities, and Federal Tribes


Variable 10-20% project or balance sheet  equity depending on business type

  • Loan guarantees on loans up to 75% of total eligible project costs.
  • Grants for up to 50%of total eligible project costs.
  • Combined grant and loan guarantee funding up to 75% of total eligible project costs.


3% of guaranteed amount

.55% of outstanding principal balance per   year

1% of guaranteed amount, .25% percent of outstanding  principal balance per year

Personal/Corporate  Guarantees

Guarantee for all owners with more than  20% stake

Guarantee for all owners with more than 20% stake

Max USDA  Guaranty


Can cover up to 75% of total eligible project costs with  an 80% guarantee



Loan Purposes and Requirements




Primary Focus

General business purposes

Renewable energy projects and energy efficiency  improvements

Eligible Projects

  • Business Expansion
  • Debt Refinancing 
  • Equipment
  • Real Estate
  • Working Capital
  • Energy efficiency improvements
  • Renewable energy systems




Certain ineligible loan purposes, such    as churches or church-controlled  organizations, gambling, golf courses or  golf course infrastructure, and lines of  credit

 Projects must involve RES or EEI

Examples of Projects

  • Building a new facility
  • Purchasing new manufacturing equipment
  • Acquiring another business
  • Standalone battery storage projects
  • Anaerobic digesters that convert livestock manure into biogas for pipeline quality gas or electricity
  • Solar farms in rural areas

Additional  Requirements

  • Loans must be backed by sufficient collateral
  • Business must demonstrate ability to repay
  • Environmental assessments might be required
  • Projects must be technically feasible and commercially viable
  • Environmental assessments might be required


Loan Application

Both programs have specific application requirements, which can vary based on the scope and type of project. The following chart summarizes the primary requirements for each program to help you understand the key elements needed for a successful loan application.





Application  Components

Description of business, business plan  with financial projects, project scope,  and details of loan request

Description of business, business plan with financial  projects, project scope, and details of loan request

Financial  Requirements

  • Good credit history
  • Financial statements and projections
  • Creditworthiness
  • Financial statements, including balance sheet, income statement, and cash flow

Application  Submission

Must be submitted through approved lenders

Must be submitted through approved lenders


Approval Process

Reviewed by USDA staff in conjunction with approved lenders*

Reviewed by USDA staff in conjunction with approved lenders*

Processing Time

Approx. 60-90 days


Environmental assessments and audits  may be required, adding time to  processing.

 Approx. 60-90 days


Environmental assessments and audits may be required,  adding time to processing.


Loan Terms




Loan Terms*

Varies based on loan purpose:

  • Equipment – Up to 15 years
  • Real Estate – Up to 30 years
  • Working Capital – Up to 7 years

Varies depending on project type:

  • EEI Projects: Varies, depending on project
  • RES: Up to 30 years
  • Term and Amortization must match

Interest Rate

Determined by the approved lender, often variable rates tied to market rates (Lower rates available for businesses with strong credit)

Competitive rates, may be tied to market rates

*Note, loan terms can vary based on factors, such as loan size, type of project, risk profile, and current economic conditions.


USDA Loans with Pathward

Pathward has been financing rural development projects since 2016 .  Our team of industry veterans are experienced in financing commercial renewable energy systems, and we collaborate with the USDA to address compliance and eligibility issues before our clients submit their applications, ensuring a smooth and more efficient process.   This proactive approach minimizes delays and increases the chance of success for our clients.  


For more information on rural development funding and renewable energy financing, please reach out to our Structured Finance Team.




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