Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Federal Credit Assistance and Grant Programs
for Rural Businesses: In Brief
February 27, 2023
Congressional Research Service
https://crsreports.congress.gov
R47438

link to page 3 link to page 4 link to page 4 link to page 4 link to page 5 link to page 5 link to page 6 link to page 6 link to page 6 link to page 6 link to page 7 link to page 8 link to page 8 link to page 8 link to page 9 link to page 9 link to page 10 link to page 10 link to page 11 link to page 12 link to page 12 link to page 12 link to page 12 link to page 7 link to page 7 link to page 9 link to page 11 link to page 13
Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Contents
Introduction ..................................................................................................................................... 1
USDA Programs .............................................................................................................................. 2
Revolving Loan Funds .............................................................................................................. 2
Intermediary Relending Program ........................................................................................ 2
Rural Economic Development Loan and Grant Program ................................................... 3
Rural Microentrepreneur Assistance Program .................................................................... 3
Loan Guarantees........................................................................................................................ 4
Business and Industry Loan Guarantee Program ................................................................ 4
Grants ........................................................................................................................................ 4
Value-Added Producer Grant Program ............................................................................... 4
Healthy Food Financing Initiative ...................................................................................... 5
Small Business Administration Programs ....................................................................................... 6
Loans and Loan Guarantees ...................................................................................................... 6
7(a) Program ....................................................................................................................... 6
504/Certified Development Company Loan Program ........................................................ 7
Microloan Program ............................................................................................................. 7
Other Credit Assistance Programs ................................................................................................... 8
Economic Development Administration ................................................................................... 8
Appalachian Regional Commission .......................................................................................... 9
Considerations for Congress.......................................................................................................... 10
Federal Role in Rural Business Credit Assistance .................................................................. 10
Farm Bill ................................................................................................................................. 10
Management and Business Technical Assistance .................................................................... 10

Tables
Table 1. Selected USDA Rural Business-Cooperative Service Credit Assistance and Grant
Programs....................................................................................................................................... 5
Table 2. SBA Credit Assistance Programs ....................................................................................... 7
Table 3. Selected EDA and ARC Grant and Credit Assistance Programs ....................................... 9

Contacts
Author Information ......................................................................................................................... 11

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Introduction
More than 377,000 businesses are located in rural areas across the United States, employing more
than 4.6 million workers according to the U.S. Census Bureau’s 2020 Economic Survey.1 Many
rural entrepreneurs face challenges accessing capital to help start, expand, and modernize their
businesses.2 A decline in the number of banks located in rural areas has limited access to capital
for many rural businesses.3 The decline in rural banks also has led to an increased use of nonbank
alternatives for business loans, such as payday loans, that tend to charge high fees and interest
rates.4
Federal agencies administer credit assistance and grant programs to help fill the private market
capital gap for rural businesses, including for-profit and not-for-profit businesses (e.g., rural
cooperatives). Credit assistance programs use three strategies to help rural businesses access
capital:
1. provide capital directly to businesses through loans,
2. provide capital to intermediary lenders that issue loans to businesses, and
3. guarantee loans provided by intermediary lenders.
Many federal credit assistance programs require businesses to certify that they are unable to
obtain credit elsewhere.5 This requirement attempts to ensure that federal credit assistance
programs do not compete with local banks but instead fill a gap that is unmet by local banks. A
limited number of federal programs provide grants to for-profit businesses in certain industries.
This report provides an overview of selected federal credit assistance and grant programs that
support rural businesses. The report focuses on programs administered by the U.S. Department of
Agriculture (USDA), U.S. Small Business Administration (SBA), and the U.S. Department of
Commerce’s Economic Development Administration (EDA), as well as the Appalachian Regional
Commission (ARC), a federal regional commission. In recent years, Congress has authorized
one-time funding for some credit assistance initiatives that supported rural and agricultural
businesses during the Coronavirus Disease 2019 (COVID-19) pandemic, but these efforts are
beyond the scope of this report.6

1 Data compiled by the Congressional Research Service (CRS) from the U.S. Census Bureau’s 2020 Economic Survey:
Business Dynamics Statistics: Establishment Age – 1978-2020.
2 SCORE, “Rural Small Businesses Seek Talent, Technology to Succeed in Digital Age,” September 27, 2022, at
https://www.score.org/headline/rural-small-businesses-seek-talent-technology-succeed-digital-age.
3 “Consumers and small business owners in communities experiencing considerable bank branch closures are finding
local substitutes for some, but not all, of the services they used to access at the local bank branch. However, they
generally report doing so at increased cost and reduced convenience, and these challenges appear to be exacerbated for
certain groups, such as those with lower incomes, older individuals, and small business owners” (see Board of
Governors of the Federal Reserve System, Perspectives from Main Street: Bank Branch Access in Rural Communities,
November 2019, p.11, at https://www.federalreserve.gov/publications/files/bank-branch-access-in-rural-
communities.pdf).
4 Ibid.
5 Credit elsewhere is defined in 15 U.S.C. §632(h) as the “availability of credit on reasonable terms and conditions to
the individual loan applicant from non-federal, non-state, non-local government sources.” Businesses may be unable to
obtain credit from local banks for a number of reasons, including poor credit history, poor cash flow, or lack of
collateral. For more information, see Matthew Gillman, “7 Reasons You May Have Been Denied Business Financing,”
America’s Small Business Development Center, blog post, April 18, 2022.
6 For example, Congress provided $100 million in budget authority for the Food Supply Chain Guaranteed Loan
Congressional Research Service

1

link to page 7 Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

USDA Programs
USDA administers six credit assistance and grant programs through the Rural Business-
Cooperative Service (RBCS) that help expand access to credit and capital for rural businesses.
These programs use revolving loan funds, loan guarantees, and grants to support rural businesses.
Table 1 provides a summary of these USDA programs, including the type of services provided
and the statutory authority.
Revolving Loan Funds
USDA administers three programs that provide credit assistance to rural businesses through
revolving loan funds. Revolving loan funds are structured so that loans are issued to businesses,
businesses repay their loans, lenders use the payments to replenish the funds, and then lenders
issue more loans to businesses from the funds.7 USDA provides loans and grants to intermediary
lenders to capitalize revolving loan funds.
One advantage to using the revolving loan fund structure is that USDA issues a single loan or
grant to a lender, which then may be used to issue multiple rounds of loans to businesses over
time. The USDA programs that can be used to support revolving loan funds are the Intermediary
Relending Program, Rural Economic Development Loan and Grant Program, and Rural
Microentrepreneur Assistance Program (RMAP).
Intermediary Relending Program
The Intermediary Relending Program provides loans to eligible intermediary lenders to capitalize
revolving loan funds for qualified rural businesses.8 Rural businesses may use the loans to pay for
eligible expenses only, such as construction, repair, and equipment. Lenders can issue loans of up
to $400,000 to businesses.9 Lenders set the interest rates, terms, and payment structure of the
loans they issue to rural businesses; fees must cover the costs of operating and sustaining the
revolving loan fund. The loans issued by USDA to the lenders to establish revolving loan funds
have a fixed interest rate of 1% and a maximum repayment term of 30 years. The maximum
USDA loan amount for lenders is $1 million. Eligible lenders include private nonprofit
corporations, public agencies, federally recognized tribes, and cooperatives. Lenders may provide
interest-only payments to USDA for the initial three years of the repayment period.

Program through §1001(b)(4) of the American Rescue Plan Act of 2021 (P.L. 117-2) for loan guarantees for food
supply activities, such as aggregation, processing, manufacturing, and the transportation of food. For more information,
see CRS In Focus IF11491, Supplemental Appropriations for Agriculture and Related Agencies Due to COVID-19, by
Jim Monke.
7 For more information about revolving loan funds, see CRS In Focus IF11449, Economic Development Revolving
Loan Funds (ED-RLFs), by Julie M. Lawhorn.
8 7 U.S.C. §1936b lists the entities that are eligible to apply to the Intermediary Relending Program. Businesses eligible
to receive the loans issued through the revolving loan funds must certify that they were unable to obtain credit
elsewhere (7 C.F.R. §4274.340(a)(11)) and be located in a rural area. A rural area is defined as “any area other than-
(i) a city or town that has a population of greater than 50,000 inhabitants; and (ii) an urbanized area contiguous and
adjacent to a city” with a population of greater than 50,000 inhabitants (7 U.S.C. §1991(a)(13)).
9 Lenders can issue loans through the Intermediary Relending Program of $400,000 or up to 50% of the loan they
received from the U.S. Department of Agriculture (USDA), whichever is less.
Congressional Research Service

2

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Rural Economic Development Loan and Grant Program
The Rural Economic Development Loan and Grant Program provides loans and grants to eligible
utility companies to capitalize revolving loan funds, and the funds are then used to provide loans
to qualified rural businesses. Utility companies are eligible for the program if they are current or
former USDA Rural Utilities Service (RUS) electric or telecommunications loan borrowers or
eligible to apply to RUS electric or telecommunications loan programs. Rural businesses may use
the loans exclusively for
 business incubators,
 community development assistance,
 facilities and equipment to educate and train rural residents,
 facilities and equipment for medical care for rural residents,
 start-up venture costs,
 business expansion, and
 technical assistance.
Loans issued to the rural businesses can cover up to 80% of the project’s costs. The rural business
or the utility company must cover the remaining 20% of the costs. USDA issues grants of up to
$300,000 and loans of up to $2 million to eligible utility companies to establish the revolving
loan funds. The USDA loans have a 0% interest rate and a repayment term of 10 years or less.
Program regulations require utility companies that receive grants to contribute a 20% match of
the grant amount into the revolving loan funds.10 When the utility companies terminate the
revolving loan fund, they must repay the USDA grants they received.11
Rural Microentrepreneur Assistance Program
RMAP provides loans to eligible microenterprise development organizations (MDOs) to
capitalize revolving loan funds that provide loans to qualified rural microenterprises. Nonprofit
organizations, federally recognized tribes, and public institutions of higher education are eligible
to apply for RMAP loans. Businesses eligible to receive the loans issued through the RMAP
revolving loan funds must have 10 or fewer full-time employees and be located in a rural area.
The business headquarters may be based in a non-rural area, but the business project must be
located in a rural area. Rural microenterprises may use the loans to pay for
 working capital,
 debt refinancing,
 equipment and supply purchases, and
 real estate improvements.
Rural microenterprises may borrow up to $50,000. Loans are limited to a maximum of 75% of the
project’s costs and must have a fixed interest rate. USDA issues loans to eligible MDOs to
establish revolving loan funds ranging from $50,000 to $500,000. The maximum term for MDOs
to repay their USDA loans is 20 years.

10 7 C.F.R. §4280.19.
11 Grant funds must be repaid by the intermediary lender to USDA Rural Development if the revolving loan fund is
“unused for more than one year, misused, no longer needed for its intended purposes, or the Grant is terminated” (7
C.F.R. §4280.3).
Congressional Research Service

3

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Loan Guarantees
Business and Industry Loan Guarantee Program
USDA’s Business and Industry Loan Guarantee Program provides loan guarantees to eligible
lenders for their loans to rural businesses. The businesses’ headquarters can be based in a non-
rural area, but the location of the business project that the loan will pay for must be located in a
rural area. For-profit and nonprofit rural businesses are eligible for loans. Rural businesses may
use the loans to pay for
 enlarging, repairing, modernizing, or developing businesses;
 purchasing and developing land, buildings, and associated infrastructure;
 purchasing and installing machinery, equipment, supplies, or inventory;
 refinancing debt when refinancing improves cash flow and creates jobs; and
 acquiring businesses when the loan will maintain business operations and create
or save jobs.
The lenders and the rural businesses negotiate interest rates for the loans, and the rates can be
fixed or variable. The loan term cannot exceed 40 years. The percentage of loans to lenders that
the USDA will guarantee is published annually as a notice in the Federal Register. For example,
for FY2022 (the latest notice published in the Federal Register), USDA guaranteed 80% of the
loan amount for lenders participating in the program.12
Grants
USDA also offers grants to businesses in certain industries to pay for eligible business expenses.
Unlike credit assistance programs, these grant recipients are not required to repay funds. USDA
administers two such programs that provide grants to rural businesses: the Value-Added Producer
Grant Program and the Healthy Food Financing Initiative. These grant programs differ from the
loan and loan guarantee programs, described above, which require businesses or business projects
to be located in rural areas. Instead, the grant programs provide grants to qualified rural and non-
rural businesses in certain industries.
Value-Added Producer Grant Program
The Value-Added Producer Grant Program offers grants to agricultural producers to help them
generate new value-added agricultural products, expand their marketing for existing value-added
agricultural products, and improve the profitability of their businesses. Value-added agricultural
products are any agricultural commodities or products that have gained value through any of a
variety of processes, such as processing (e.g., berries turned into jam), growing techniques (e.g.,
sustainably grown), or being marketed as a locally produced product.13

12 USDA, “OneRD Annual Notice of Guarantee Fee Rates, Periodic Retention Fee Rates, Loan Guarantee Percentage
and Fee for Issuance of the Loan Note Guarantee Prior to Construction Completion for Fiscal Year 2022,” 86 Federal
Register 35262, July 2, 2021.
13 Value-added agricultural products include agricultural commodities or products that have experienced an increase in
value. This may occur through processing, such as heating, freezing, or chopping. It can also occur through specific
farming production or marketing processes. The definition of a value-added agricultural product is provided in 7
U.S.C. §1627c(a)(12).
Congressional Research Service

4

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

The program awards up to $75,000 for planning grants to pay for activities such as conducting
feasibility studies. The program also awards up to $250,000 for working capital grants to pay for
activities such as processing costs, marketing expenses, and some inventory and salary expenses.
The program requires agricultural producers to match 100% of the funds provided through the
federal grants. Eligible producers include farmers, ranchers, farmer-cooperatives, and rancher-
cooperatives.
Healthy Food Financing Initiative
The Healthy Food Financing Initiative provides grants to eligible food enterprises and food
retailers to increase access to healthy food in rural and urban communities that lack access to
healthy food retail outlets. The project must be located in an area deemed to be low-income and
have low supermarket access.14 Grants range from $20,000 to $200,000. The grants can pay for
activities related to business development, renovation, and expansion. These grants are meant to
be one-time capital infusions to help food retailers overcome financial hurdles in developing new
food retail outlets or expanding existing outlets in underserved, low-income communities. For-
profit businesses and cooperatively owned businesses are eligible to apply to the program.
Table 1. Selected USDA Rural Business-Cooperative Service Credit Assistance and
Grant Programs
Program
U.S. Code
Funding Mechanism
Program Description
Business and Industry Loan
7 U.S.C.
Loan guarantees to
Provides loan guarantees to eligible
Guarantee Program
§1932(g)
intermediary lenders.
lenders for lending to qualified rural
businesses.
Healthy Food Financing
7 U.S.C. §6953
Grants to eligible
Provides grants to food enterprises,
Initiative
businesses.
including retail food stores, to
increase access to healthy foods in
underserved areas.
Intermediary Relending
7 U.S.C.
Loans to intermediary
Provides loans to eligible lenders to
Program
§1936b
lenders.
capitalize revolving loan funds.
Lenders issue loans to rural
businesses from funds for qualified
business expenses.
Rural Economic
7 U.S.C.
Loans and grants to
Provides loans and grants to eligible
Development Loan and
§940c-2
intermediary lenders.
lenders to capitalize revolving loan
Grant Program
funds. Lenders issue loans to rural
businesses from funds for qualified
business expenses.
Rural Microentrepreneur
7 U.S.C.
Loans to intermediary
Provides loans to eligible lenders to
Assistance Program
§2008s
lenders.
capitalize revolving loan funds.
(RMAP)
Lenders issue loans to rural
microenterprises (i.e., businesses with
10 or fewer ful -time employees) from
funds for qualified business expenses.

14 The USDA Food Access Research Atlas is an online tool that indicates if an area is considered low-income and has
low supermarket access. See USDA, Economic Research Service, “Go to the Atlas,” at https://www.ers.usda.gov/data-
products/food-access-research-atlas/go-to-the-atlas/; and USDA, FY2021 Request for Proposals for the Healthy Food
Financing Initiative, p. 8.
Congressional Research Service

5

link to page 9 Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Program
U.S. Code
Funding Mechanism
Program Description
Value-Added Producer
7 U.S.C.
Grants to eligible
Provides grants to eligible agricultural
Grant Program
§1627c(b)
businesses.
producers to create new products,
expand marketing opportunities, and
increase producer income.
Source: Compiled by CRS from agency information, U.S. Code, and the 2023 U.S. Department of Agriculture
(USDA) Budget Request Notes for the Rural Business-Cooperative Service (RBCS).
Notes: Many of the USDA credit assistance programs administered by RBCS (above) require that businesses
served be located in rural areas. A rural area is defined as “any area other than- i) a city or town that has a
population of greater than 50,000 inhabitants; and ii) an urbanized area contiguous and adjacent to a city” with a
population of greater than 50,000 inhabitants (7 U.S.C. §1991(a)(13)).
Small Business Administration Programs
The SBA administers three loan programs that help small businesses access capital to start,
maintain, and expand operations. The programs partner with intermediary lenders who issue loans
to small businesses. Table 2 provides an overview of these programs, including the statutory
authority for the programs, funding mechanism, and how the programs support businesses.
SBA programs do not require that the businesses be located in rural areas. Instead, these programs
require that the businesses are small businesses, as defined by the SBA. The definition used by
the SBA to determine whether a business is a small business depends on the industry the business
operates in and is based on the firm’s average annual receipts or the average number of
employees.15 For example, a business in the charter bus industry is considered small and therefore
eligible for SBA programs if it has average annual receipts of $19 million or less. A business in
the cookie and cracker manufacturing industry is considered a small business if it has 1,250 or
fewer employees.16
Loans and Loan Guarantees
7(a) Program
The 7(a) Program is the SBA’s primary loan guarantee program.17 Typically, a prospective
borrower will work with a private lender (such as a bank or credit union) to obtain a business
loan. If the lender thinks that the business’s plan for the loan is sound but aspects of the
application are lacking (such as not having enough collateral to secure the loan), the lender can
ask the SBA to guarantee a portion of the loan (typically 50%-90%). The lender must repay the
guaranteed loan, which typically has an interest rate similar to those of non-SBA guaranteed
loans. SBA-guaranteed 7(a) loans can be up to $5 million per borrower (in either one or multiple
guaranteed loans). In FY2022, the average guaranteed loan was about $538,900.18 Proceeds from

15 See CRS Report R40860, Small Business Size Standards: A Historical Analysis of Contemporary Issues, by Robert
Jay Dilger, R. Corinne Blackford, and Anthony A. Cilluffo.
16 The list of Small Business Administration (SBA) size standards by industry is at 13 C.F.R. §121.201.
17 For more information about 7(a) loans, see CRS Report R41146, Small Business Administration 7(a) Loan Guaranty
Program, by Robert Jay Dilger and Anthony A. Cilluffo.
18 SBA, “Weekly Approvals Report with data as of 09/30 for each FY,” at https://www.sba.gov/sites/default/files/2022-
10/WebsiteReport_asof_20220930.pdf.
Congressional Research Service

6

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

the guaranteed loan can be used for a variety of business purposes, such as constructing buildings
and buying supplies.
504/Certified Development Company Loan Program
The 504/Certified Development Company (CDC) Loan Program is another SBA loan guarantee
program.19 To be eligible for this program, an individual project must have three sources of
funding: up to 40% from a CDC that is fully guaranteed by the SBA, at least 50% from an
unrelated private lender with no SBA guarantee, and at least 10% from the borrower’s own funds.
The SBA-guaranteed CDC loans must be fully repaid and typically have an interest rate similar to
those of non-SBA guaranteed loans. The maximum SBA-guaranteed CDC loan amount depends
on the project type. The maximum amount for the SBA-guaranteed CDC portion is $5 million to
each small business (in either one or multiple SBA-guaranteed CDC loans) for standard 504 loans
and loans made to advance certain public policy goals. The maximum amount for the SBA-
guaranteed CDC portion is $5.5 million for each project to small manufacturers and for projects
to reduce energy consumption or to generate renewable energy or fuels. In FY2022, the average
loan was about $995,000.20 The maximum loan term varies between 10 and 25 years depending
on the specific project. The loans are often used to buy land, buildings, or specialized machinery.
Microloan Program
The Microloan Program offers loans of up to $50,000 made by nonprofit intermediary lenders.21
The SBA makes direct loans to Microloan intermediaries, which use those funds to make
Microloans to individual small businesses. In FY2021, the average Microloan was about
$16,500.22 Microloan borrowers are required to attend management and technical training as part
of their loan terms. Microloan intermediaries can apply for SBA grants for the cost of providing
training. Funds can be used for buying materials, furniture, and equipment but not for buying land
or property.
Table 2. SBA Credit Assistance Programs
Program
U.S. Code
Funding Mechanism
Program Description
7(a) Loan Program
15 U.S.C. §636(a)
Loan guarantees to
Provides loan guarantees of
intermediary lenders.
up to 90% of loan amount to
eligible lenders to make
loans to qualified businesses
for business expenses.
504/Community Development
15 U.S.C. §696
Loan guarantees to
Provides loan guarantees of
Corporation (CDC) Loan
intermediary lenders.
up to 40% of loan amount
Program
for eligible lenders to make
loans to qualified businesses
for business expenses.

19 For more about 504 loans, see CRS Report R41184, Small Business Administration 504/CDC Loan Guaranty
Program, by Robert Jay Dilger and Anthony A. Cilluffo.
20 SBA, “Weekly Approvals Report with data as of 09/30 for each FY,” at https://www.sba.gov/sites/default/files/2022-
10/WebsiteReport_asof_20220930.pdf.
21 For more information about Microloans, see CRS Report R41057, Small Business Administration Microloan
Program, by Robert Jay Dilger and Anthony A. Cilluffo.
22 SBA, FY 2023 Congressional Budget Justification and FY 2021 Annual Performance Report, p. 36, at
https://www.sba.gov/sites/default/files/2022-04/FY%202023%20SBA%20Congressional%20Budget%20Justification-
508-2022-0413%20updated.pdf.
Congressional Research Service

7

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Program
U.S. Code
Funding Mechanism
Program Description
Microloan Program
15 U.S.C. §636(m)
Loans to intermediary
Provides loans of up to
lenders.
$50,000 to qualified
businesses for business
expenses through SBA-
approved nonprofit,
community-based
intermediary lenders.
Source: Compiled by CRS from agency information and U.S. Code.
Other Credit Assistance Programs
EDA and ARC also administer revolving loan fund programs that provide certain rural and non-
rural eligible businesses with access to capital. EDA and ARC program guidance requires
grantees (i.e., intermediary lenders) to submit revolving loan fund management plans to describe
how the revolving loan fund will address economic development goals and how the grantee will
administer the revolving loan fund throughout its lifecycle, among other matters. EDA and ARC
grantees are also required to provide nonfederal matching funds to the revolving loan fund
project.
Economic Development Administration
EDA funding supports approximately 500 revolving loan fund programs across the 50 states,
District of Columbia, Puerto Rico, Indian tribes, and U.S. territories. Through its Economic
Adjustment Assistance program, EDA makes grants to eligible recipients (i.e., intermediary
lenders) so that they may capitalize revolving loan funds. Eligible recipients include Indian tribes;
states, counties, cities, or other political subdivisions of a state, including special purpose units of
state or local government; EDA-designated economic development districts (EDDs);23 institutions
of higher education; and nonprofit organizations. The eligible recipients generally make loans to
businesses for expansion, startup, or operating expenses. The loans are designed to meet the
capital needs of businesses that cannot otherwise obtain traditional financing. The loans may also
help businesses grow and create and maintain jobs. Eligible recipients and revolving loan fund
borrowers (i.e., businesses) may be located in both rural and non-rural areas. Revolving loan fund
grant awards range from $50,000 to $2 million.24 The eligible recipient determines the interest
rate of the loan subject to EDA’s minimum requirements, which are outlined in EDA
regulations.25 EDA provides an online, searchable directory of revolving loan fund programs by
state.26

23 For information about Economic Development Administration- (EDA-) designated economic development districts,
see EDA, “Economic Development Districts,” at https://eda.gov/edd.
24 EDA, “Revolving Loan Fund (RLF) Program Fact Sheet,” at https://www.eda.gov/rlf.
25 13 C.F.R. §307.15(b).
26 For a directory of EDA-funded revolving loan funds, see EDA, “Revolving Loan Fund (RLF),” at
https://www.eda.gov/rlf. Interested grant applicants are encouraged to contact economic development districts
(https://eda.gov/edd) or state or regional EDA representatives (https://www.eda.gov/contact).
Congressional Research Service

8

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Appalachian Regional Commission
ARC grants support approximately 46 revolving loan fund programs across the Appalachian
Region.27 Eligible grantees (i.e., intermediary lenders) may use ARC’s grant programs to
capitalize revolving loan funds. Similar to the EDA’s Economic Adjustment Assistance grant
program, the ARC Area Development grant program may be used to capitalize revolving loan
funds and is designed to facilitate economic development objectives, such as the creation and
retention of private sector jobs. Eligible borrowers include private for-profit firms that do
business within the Appalachian Region, nonprofit organizations, and government entities.
Borrowers can use loan funds to pay for machinery, equipment, new construction, repair of
existing facilities, land acquisition, acquisition of an existing business, refinancing of existing
debt, and other expenses.28 The revolving loan fund grantees (i.e., intermediary lenders) may
determine loan terms and interest rates subject to ARC’s requirements, which are outlined in ARC
revolving loan fund grant guidance.29
Grantees may design loan terms to assist businesses with credit problems. According to ARC’s
revolving loan fund program guidance, this option allows for loans that “may involve greater
risks and more lenient terms than commercial lenders may provide.” Eligible grantees include
states, local development districts (LDDs),30 and other nonprofit multicounty organizations.31
Table 3. Selected EDA and ARC Grant and Credit Assistance Programs
Program
U.S. Code
Funding Mechanism
Program Description
Appalachian Regional
40 U.S.C. §§14101-14704
Grants to intermediary
Provides grants to eligible
Commission (ARC), Area
lenders.
entities to capitalize or
Development Program
recapitalize revolving loan
(for business development
funds. Most revolving loan
revolving loan fund
funds make general
grants)
business loans focused on
creating and retaining
jobs.
Economic Development
42 U.S.C. §3149
Grants to intermediary
Provides grants to eligible
Administration (EDA)
lenders.
entities to capitalize or
Economic Adjustment
recapitalize revolving loan
Assistance Program (for
funds. Most revolving loan
revolving loan fund
funds make general
grants)
business loans focused on
creating and retaining
jobs.

27 The Appalachian Region is statutorily defined as 423 counties in Alabama, Georgia, Kentucky, Maryland,
Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia
(40 U.S.C. §14102(a)(1)).
28 The Appalachian Regional Commission (ARC) is statutorily obligated to designate counties according to levels of
economic distress each year. Loans using ARC revolving loan fund (RLF) sources may not be made in ARC-
designated attainment counties, which are designated as the best performing counties according to the ARC’s county
designations. See 40 U.S.C. §14526; and ARC, ARC Business Development Revolving Loan Fund Grant Guidelines, at
https://www.arc.gov/wp-content/uploads/2020/07/RLF-Guidelines-2020.pdf (hereinafter ARC RLF Grant Guidelines).
29 ARC RLF Grant Guidelines, p. 7.
30 For more information about ARC’s local development districts, see ARC, “Local Development District,” at
https://www.arc.gov/local-development-districts/.
31 See ARC RLF Grant Guidelines. Interested grant applicants can contact state program managers that are based in
state economic development agencies. For state program manager contact information, see ARC, “State Program
Managers,” at https://www.arc.gov/state_partner_role/state-program-manager/.
Congressional Research Service

9

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

Source: Compiled by CRS from agency information and other sources, including 2 U.S.C. §661a(1) as noted in
CRS Report R44193, Federal Credit Programs: Comparing Fair Value and the Federal Credit Reform Act (FCRA), by Raj
Gnanarajah; and Economic Development Administration (EDA) “Revolving Loan Fund (RLF) Program Fact Sheet”
at https://www.eda.gov/rlf.
Notes: This table is not intended to be comprehensive. EDA is under the U.S. Department of Commerce.
Considerations for Congress
Federal Role in Rural Business Credit Assistance
The federal government’s role in providing credit assistance to rural businesses remains a topic of
debate. Some stakeholders suggest a reduced federal role in providing credit assistance and
instead recommend federal activity that would focus on building the capacity of local banks to
meet rural business needs. Stakeholders that advocate for an enhanced federal role in providing
credit to underserved and unserved markets may advocate for increasing the level of credit
assistance provided to businesses through federal programs. Congress may be interested in
examining whether federal credit assistance programs impact the amount or volume of loans
provided to rural businesses by traditional lenders and how rural businesses access capital from
federally supported lending programs compared with traditional lenders in rural areas and other
types of communities.
Farm Bill
Congress may consider a range of options related to USDA credit assistance programs through
the next farm bill (or other legislation). These may include amending the credit limits of USDA
credit assistance programs for rural businesses, creating new USDA programs that provide grants
to rural businesses, adjusting eligibility or other specifics of credit assistance programs, or
eliminating existing programs. In the past, Congress has used the rural development title of farm
bills to amend, create new, eliminate, and provide authorization for USDA Rural Development
programs that support rural businesses.32 For example, in the most recent farm bill, the
Agriculture Improvement Act of 2018 (P.L. 115-334), Congress amended the USDA Intermediary
Relending Program by limiting the maximum amount of loans made by intermediary lenders.
Congress may explore whether to adjust the loan limits of the current USDA credit assistance
programs in part to assess if assistance is in line with the current costs of starting businesses and
expanding businesses in rural areas. Congress may also explore establishing new USDA
programs that offer grants rather than loans to rural businesses. One drawback to Congress
creating new grant programs for rural businesses is that some stakeholders may suggest that
Congress would be unfairly helping certain rural businesses over other businesses. In addition,
Congress may decide to limit or eliminate these programs.
Management and Business Technical Assistance
Some USDA, SBA, EDA, and ARC programs fund technical assistance to help improve the
utilization of their lending programs, particularly for business owners who may not otherwise
have the skills to apply for or manage their loans. Congress may be interested in reviewing the
management and technical assistance services provided to rural business owners who become

32 See CRS In Focus IF12038, Farm Bill Primer: Rural Development Title, by Lisa S. Benson.
Congressional Research Service

10

Federal Credit Assistance and Grant Programs for Rural Businesses: In Brief

borrowers through federally supported credit assistance programs. Some research suggests that
management and technical assistance services complement business lending activities and that
these services may contribute to improved business outcomes, such as business survival and
growth.33 Many federal grantees currently provide such services in concert with business lending
programs. Congress may seek to evaluate the role and impact of such services and whether there
may be a benefit from expanding or changing technical assistance services to accompany loans to
rural businesses. Congress also may review whether there is duplication within existing business
technical assistance programs and the types of technical assistance needed by various types of
businesses and geographic areas.

Author Information

Lisa S. Benson, Coordinator
Julie M. Lawhorn
Analyst in Agricultural Policy
Analyst in Economic Development Policy

Anthony A. Cilluffo

Analyst in Public Finance

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

33 A study on the impact of technical assistance services indicated that the benefits to businesses may depend on the
size of the firm and other factors. See George T. Solomon et al., “Survival of the Fittest: Technical Assistance,
Survival, and Growth of Small Businesses and Implications for Public Policy,” Technovation, vol. 33 (August 2013),
pp. 292-301.
Congressional Research Service
R47438 · VERSION 1 · NEW
11