Access to capital is important for all small businesses, including those working to help get more locally and regionally produced food into rural communities, schools, and markets. Fortunately, there is a federal loan program that caters specifically to these types of local entrepreneurs. The Local and Regional Food Enterprise Provision of the Business and Industry (B&I) loan program helps guarantee loans to support and establish enterprises that process, distribute, aggregate, store, and market foods produced either in-state or transported less than 400 miles from the origin of the product.
Learn More About the B&I Loan Program!
USDA’s Rural Business Service administers the B&I program, which aims to develop or improve businesses and employment in rural areas by bolstering the existing private credit market through federal guarantees on business loans. Changes in the 2008 Farm Bill and reaffirmed in the 2014 Farm Bill ensure that a minimum of five percent of total B&I funding goes toward local and regional food enterprise development, including the construction of food processing, aggregation, and distribution facilities as well as food hubs.
Federal loan guarantees are available through the program year-round. The guarantee helps banks, credit unions, community development financial institutions, and other lenders provide loans to businesses that might not otherwise meet their underwriting standards because, for instance, it is an emerging and not fully tested market or the entrepreneur has a limited previous track record.
Priority within the Local and Regional Food Enterprise set-aside is given to projects that in some way benefit communities that have limited access to affordable and healthy foods and that have a high rate of hunger, food insecurity, or poverty. The recipient of the loan guarantee is required to inform consumers in some way of the locally- or regionally-produced attribute of the food products.
The maximum B&I loan guarantee is 80 percent for loans of $5 million or less, 70 percent for loans between $5 and $10 million, and 60 percent for loans exceeding $10 million. Generally loans to a single borrower are capped at $10 million, though several exceptions apply.
A borrower may be a cooperative organization, corporation, partnership, or other legal entity organized and operated on a profit or nonprofit basis; an Indian tribe on a Federal or State reservation or other Federally recognized tribal group; a public body; or an individual.
For B&I loan guarantees in general, a borrower must be engaged in or proposing to engage in a business that will provide employment and improve the economic or environmental climate.
Loans may be used for business conversion, enlargement, modernization, purchase and development of land, buildings, facilities, purchase of equipment, machinery, supplies, inventory, and similar purposes, and may also be used for business acquisitions when the loan will keep a business from closing or prevent the loss of employment or expand job opportunities. B&I loans are not made to farmers to purchase farmland or produce crops.
B&I loans are generally available in rural areas, which include all areas other than towns of more than 50,000 people and those contiguous or adjacent to urbanized areas. However, in 2014 USDA clarified that, in addition to strictly rural projects, food aggregation and distribution enterprises that are located in non-rural areas are also eligible to receive loan guarantees, so long as those entities meet certain criteria, including selling a portion of the product in underserved communities. This allows aggregation and distribution facilities to be located nearer to the ultimate consumer market, thereby improving the economics of the business and increasing economic returns to the farmers supplying the market.
This change addresses the concurrent goals of expanding markets for locally and regionally produced food and increasing rural and farm income. The option for a non-rural facility location also has a goal of increasing food access in low-income areas.
Since Congress established the B&I program in 2008, USDA has invested more than $240 million in local and regional food enterprise development through B&I loan guarantees. These loan guarantees have helped more than 100 businesses create hundreds of new jobs in rural America.
The B&I loan program has been used to:
Read more about how the B&I program has helped grow local food enterprises:
Loan applications are available from your local Rural Development state office.
Potential borrowers will work directly with their commercial lending source to develop a loan package that can then be submitted as a candidate for the federal guarantee to the USDA Rural Development state office where the business is located. USDA will then meet with all parties—the loan recipient and the lender—to determine project acceptability.
The 2014 Farm Bill continues the authorization for appropriations for the B&I program as a whole, including the Local and Regional Food Enterprise set-aside. In June of 2016, USDA published its final rule for the B&I program.
As a discretionary program, the funding level for the program is determined each year by Congress in the annual agricultural appropriations bill. Appropriations levels for the B&I program generally allow the program to guarantee between $800 million and $1 billion in loans, meaning no less than $40 million (5 percent) a year is generally available for local and regional food enterprise loan guarantees.
The chart below shows how much funding has been made available for local and regional food enterprise development through the B&I program in recent years. Future funding cannot be projected as funding levels will be determined a year at a time by Congress, though there is a strong expectation that significant funding will continue to be available each year.
Business and Industry Loan Guarantee Program’s Local and Regional Food Enterprise Provision’s Recent Funding
|Fiscal Year||Recent Funding Levels (millions)
Section 6010 of the Agricultural Act of 2014 amends Section 310B(a)(2)(A) of the Consolidated Farm and Rural Development Act, to be codified at 7 U.S.C. 1932(g).
Last updated in October 2016.