The USDA’s Best-Kept Financing Secret

Unlocking Big Opportunities for Arkansas Businesses

When most Arkansans hear “USDA loan,” it’s not unusual to envision endless rows of rice or industrial poultry farms, but here is the reality: The U.S. Department of Agriculture Business and Industry Guaranteed Loan Program is one of the most versatile, underutilized and impactful financing tools available for rural economic development, and it is not for agricultural operations.

For business owners and developers looking to fund a project, whether it is expanding a manufacturing facility, acquiring a competitor or building a hotel, do not overlook the USDA B&I program. The financing terms can be more flexible, the guarantees stronger and the possibilities broader than one might expect. Through its B&I lending program, the USDA has transformed communities, funded ambitious projects and created jobs right here in Arkansas. Yet too many business owners and even bankers are unfamiliar with the program or the up to $25 million in funding that accompanies it. That is why we call it the “hidden gem” of government guaranteed lending.

The USDA’s B&I loan program focuses on rural communities with populations of less than 50,000. The goal is simple: stimulate economic growth in rural communities by funding projects that create jobs, improve infrastructure and support local economies. One of the most common misconceptions is that USDA loans are reserved for agriculture or housing. They are not. In fact, with some farm exceptions, the program is open to most for-profit businesses, nonprofits, cooperatives, tribes and public bodies. With “no restrictions on the size of the business, owner occupancy or net worth,” the B&I program seeks to reduce the number of obstacles standing in the way of rural investments.

The USDA Rural Development Guaranteed Lending Programs make it possible to finance projects that would otherwise be too risky for conventional bank lending. B&I loans can go up to $25 million with an 80-percent federal guarantee, and funds can be put toward a variety of eligible uses, including business acquisitions, expansions, debt refinancing, and the purchase of machinery, equipment or real estate. Most interestingly, eligibility is determined by geography and population density, not perception.

Using the USDA’s online mapping tool often yields surprising results. A water park in Kissimmee, Florida? Eligible. Some parts of suburban areas one might never think of? Also eligible. The point is rural is not always as rural as one might imagine. While Arkansas is rich in rural communities that have big potential, they still face unique financing challenges. Large projects in these areas often struggle to attract bank financing because of perceived risk or lack of comparable deals. The USDA’s guarantee changes that equation, enabling banks such as Stone Bank to say yes when they might otherwise have to say no.

The result? Access to capital that drives real change. Earlier this year, the Arkansas Center for Health Improvement noted that “Arkansas leads the nation in the percentage of rural hospitals vulnerable to closure,” with nearly 50 percent of current rural hospitals at risk. Meanwhile, Stone Bank has processed B&I loans to fund medical facilities in communities where critical lifesaving resources are hours, not minutes, away. B&I loans have also made manufacturing plants, hotels and even technology companies viable in rural towns. The projects do not just help the borrower; they ripple outward, bringing jobs, boosting local tax revenue and improving quality of life.

The USDA program can appeal to both local owner-operators and large-scale investors, including billion-dollar private equity funds. In fact, the program can be leveraged for projects up to $100 million through participation with other banks and lenders. The truth is USDA loans are not something borrowers want to “figure out as they go.” Success requires a lender with deep program knowledge, established contacts in Washington, and the ability to structure deals that meet both the borrower’s and USDA’s requirements. Without that expertise, projects can stall or fail to get approved.

The USDA B&I loan program is not a niche curiosity. It is a strategic tool for building rural prosperity. The biggest challenge is not convincing people it works. It is letting them know it exists in the first place.

Here is a challenge to business leaders in the Natural State and beyond: Think bigger about rural investment. Look past the stereotypes, and the next time you hear “USDA loan,” do not picture a farm. Picture your next growth opportunity.

Cara Lank is the chief credit officer at Stone Bank, which she has served since 2016. Lank has also served as chairman of the National Rural Lenders Association Government Relations Committee.