Qualifying for Rural Development Business and Industrial Loan with Bad Credit

A rural loan provided through the U.S. Department of Agriculture's (USDA) Rural Development program helps to create business and economic development opportunities in rural communities. The program is designed to make available loan guarantees to private lenders in order to provide incentives for business development. These loan guarantees can be up to the following amounts loaned to a business:

  • 80 percent for loans that are less than $5 million.
  • 70 percent for loans between $5 million and $10 million.
  • 60 percent for loans that exceed $10 million.

Additionally loans exceeding $10 million require approval by the USDA Secretary and may be as high as $40 million for certain special purposes and value-added agricultural concerns organized by a rural cooperative.

Qualifications for the Loan

To qualify for a loan from a private lender through this program, a borrower who is a cooperative organization, corporation or other business entity (whether for-profit or non-profit), American Indian tribe, governmental body or individual may apply for funding. The proceeds must be used to provide employment opportunities within a rural community, improve the present economic condition of the rural community, or promote conservation or energy independence.

Loan Terms and Conditions

The loans are for a period of no longer than 30 years and are based on applicable fixed or variable loan rates provided to other types of business. There is a collateral requirement for the loan that is based on a discounted loan-to-value amount that is equal to the amount of the loan. This collateral may include land, buildings and other real estate, equipment, investments and any other tangible asset.

Collateral Requirement

Having a collateral requirement reduced somewhat a lender's reliance on the credit rating of the borrower. The credit rating for an entity that is other than an individual tends not to be as important as it is for individual borrowers that are natural persons. A person with a bad credit rating but sufficient collateral may be deemed a sufficient borrower for the purposes of the program. This determination is up to the lender and any borrower that is seeking to receive funding under this program should inquiry as to the qualifications for individuals with bad credit.

Purpose of the Program

This loan program is designed to encourage economic development, regardless of an individual borrower's past history. The qualifying requirements for the loan, such as citizenship, being at least a 51 percent owner of the business, and be in areas that are no more than 50,000 residents or adjacent to a city or town with a population of 50,000 or more makes a credit requirement the lowest qualifying criteria. Nonetheless, a borrower should obtain additional information in order to determine their status and the necessity to acquire additional collateral or a co-signer in order to secure the funding.