USDA launches B&I CARES Act loan guarantee program

By Erin Voegele | May 28, 2020

The USDA announced on May 22 it is making available up to $1 billion in loan guarantees to help rural businesses meet working capital needs during the COVID-19 pandemic. Biofuel producers who meet eligibility requirements are among those who can apply.

The loan guarantees are being offered through the Business & Industry CARES Act Program provisions included in the Coronavirus Aid, Relief and Economic Security Act, which was signed into law by President Trump on March 27. 

B&I CARES Act Program loans must be used as working capital to prevent, prepare for or respond to the effects of the COVID-19 pandemic. The loans may be used only to support rural businesses, including agricultural producers, that were in operation on Feb. 15, 2020.

A notice posted in the Federal Register explains the program is similar, but different, than other federal relief programs, such as the Small Business Administration Economic Injury Disaster Loans and the Paycheck Protection Program. “The B&I CARES Act Program will focus assistance to rural businesses, including agribusinesses and agricultural producers, with financial needs unmet by other federal government programs to prevent, prepare for, and respond to the coronavirus pandemic,” the USDA said in the notice.

The agency explains that EIDL provides up to $2 million in working capital to help small businesses survive until normal operations resume after a disaster. EIDL assistance is available only to small businesses when SBA determines they are unable to obtain credit elsewhere. Currently, access to EIDL is limited, the USDA said, noting that SBA is accepting new EIDL and EIDL Advance applications on a limited basis only to provide relief to U.S. agricultural businesses. “Although loan purposes under the B&I CARES Act Program may overlap with loan purposes of EIDL, the B&I CARES Act Program will focus assistance to rural businesses that are ineligible to submit new EIDL applications or that are too large or otherwise not eligible for EIDL or have financial needs due to the coronavirus pandemic greater than EIDL assistance,” the USDA explained in the notice.

SBA also administers the PPP, which is designed to provide a direct incentive for small businesses to keep their employees on payroll. The PPP provides forgivable loans that can be used to payroll, rent, mortgage interest, or utilities.

While guaranteed loans provided under the B&I CARES Act program may overlap with some of the purposes of the PPP, the USDA explained B&I CARES Act guaranteed loans will cover a broader range of business operating expenses and will not be focused on payroll costs. According to the notice, the program will support funding for inventory, raw materials, supplies, and critical operating expenses for rural manufacturing businesses, including purposes that were not included in the allowable uses of PPP funds.

According to the USDA, B&I CARES Act guaranteed loan funds may be used by eligible businesses to finance business operating expenses incurred for a period of up to 12 months. The notice also indicates the maximum B&I CARES Act Program loan amount a business may receive will be reduced by  the amount of any SBA EIDL or PPP loans and other federal emergency assistance they receive in order to prevent duplication of program services.

The program can provide guarantees of up to 90 percent of the program loans. The USDA also said it has set the application and guarantee fee at 2 percent of the loan. The program will accept appraisals completed within two years of the loan application date. The program does not require discounting of collateral for working capital loans. In addition, the USDA has extended the maximum term for working capital loans to 10 years.

The USDA began accepting applications for B&I loan guarantees on May 22. The agency intends to consider applications in the order in the order they are received, but said it may assign priority points to projects if the demand for funds exceeds availability.

The application deadline is Sept. 15, 2021, or when funds are expended. Program funding expires Sept. 30, 2021.

The USDA held a webinar on the program on May 27. A second webinar is scheduled for June 3. Eligible applicants should contact their local USDA Rural Development State Office in the state where the project is located.

Additional information, including a link to the Federal Register notice, is available on the USDA website.