USDA B&I Guarantees Under 7 CFR 5001: What the Agency Tests and How a Study Answers

A lender that asks USDA Rural Development to guarantee a Business and Industry loan is asking a federal agency to carry most of the loss if the borrower fails, and the Agency reads the application against one regulation, 7 CFR part 5001. For a B&I file the rule reduces to a sequence of tests: location, borrower and purpose, the study trigger, the credit evaluation, coverage and equity, loan size and fees, and collateral. This article takes them in the order a reviewer meets them and sets beside each the evidence a feasibility study supplies and the decision it leaves to the lender and the Agency.

The method matters because the rule is easy to paraphrase wrongly. Several numbers that circulate as USDA requirements appear nowhere in the regulation, and several real requirements are triggered by facts that only a market and operating analysis can establish: whether a borrower counts as a new business, whether a project adds capacity a local market cannot absorb, whether the cash flow supports the loan requested or a smaller one.

The Rule, the Statute and Who Decides

Part 5001 names B&I as the guaranteed loan program authorized by 7 U.S.C. 1932, section 310B of the Consolidated Farm and Rural Development Act, administered by the Rural Business-Cooperative Service ^[1]. It governs every complete application received on or after October 1, 2020 ^[2], the day Rural Development began operating the unified platform ^[3] that the July 2020 rule created for B&I, Community Facilities, Water and Waste Disposal and the Rural Energy for America Program ^[4]. The Agency revised the rule in a final rule published September 30, 2024 to strengthen oversight of the four guarantee portfolios ^[5], effective November 29, 2024 ^[6], and issued technical corrections in December 2025 ^[7]. A study should name the edition it read. This article reads the 2026 edition of title 7 as printed by the Government Publishing Office, and every citation of part 5001 below is to that copy.

The statute frames the program more broadly than the regulation's checklists suggest. Its list of purposes reaches business, industry and employment, working capital included, and the rural economic and environmental climate ^[8]. It also does something that changes how a B&I study is argued: loans originated, held and serviced by other lenders may be guaranteed without regard to paragraphs (1) and (4) of 7 U.S.C. 1983 ^[9]. Paragraph (1) of that section is the credit elsewhere certification, the statement that an applicant cannot get sufficient credit elsewhere at reasonable rates and terms ^[10]; paragraph (4) is the Secretary's supervision of the borrower's operations ^[11].

The regulation follows the statute. Community Facilities ^[12] and Water and Waste Disposal ^[13] borrowers must each certify that they cannot finance the project from their own resources or through commercial credit without a guarantee, and at closing a lender in those two programs certifies that it would not make the loan without the guarantee ^[14]. The B&I paragraphs carry neither statement. For a feasibility study the consequence is practical: a B&I study does not have to argue that the borrower could not borrow conventionally. It has to show that the project repays.

Who decides is equally plain. The lender prepares the credit evaluation, the Agency may review it and ask for more, and the lender's approval is not the Agency's approval ^[15]. A lender may hire outside help, but contracting for services does not relieve it of its duties under the part ^[16], and if it fails to comply the Agency may reduce any loss payment under the lender's agreement and the loan note guarantee ^[17]. The study informs the eligibility determination, the credit decision and the guarantee; it makes none of them.

Test One: A Rural Facility, Read From the Census and the Map

The location test comes first because nothing else matters if it fails. The definition counts people before it draws lines. A rural area begins with "any area of a State not in a city or town that has a population of more than 50,000 inhabitants" ^[18]; certain populations are excluded under 7 U.S.C. 1991(a)(13)(H), the count is the latest decennial census, and the urbanized area next to such a city or town is left out as well ^[19]. Two carve-outs then return some urbanized land to eligibility. One is an area the Under Secretary finds rural in character, a route open only inside the two kinds of urbanized area the definition names: one whose boundary has two points at least 40 miles apart and that touches no city of more than 150,000 people or its urbanized area ^[20], and one adjoining a city of more than 50,000 that lies within a quarter mile of a rural area ^[21]. The other covers places tied to a big city's urbanized area only by a thin corridor, in the rule's words "a contiguous area of urbanized census blocks that is not more than two census blocks wide" ^[22]. The B&I project itself must be located in a rural area, with narrow exceptions for certain cooperative and local food projects ^[23], and where an eligible project straddles the line the Agency guarantees only the amount needed to finance the portion in the eligible rural area ^[24].

Two procedural sentences in the definition shape what a study should carry. An application cannot be approved on condition that it later meets the rural test, and areas contiguous and adjacent to an urbanized area appear as non-eligible on the Rural Development Property Eligibility Map ^[25]. That map is maintained by another government agency and is oriented through census tract data ^[26]. A rural in character finding begins with a petition from a unit of local government, sent through the Rural Development State Director ^[27], or with a request a State Director starts ^[28], and it is project specific: it does not carry over to the next request in the same area ^[29].

A study answers this test with evidence: the parcel, the census tract and the eligibility map result with the date it was read, since a map built on census tracts can change with the census. It should also keep the facility's location apart from the market area, which may reach into a metropolitan area without any defect. Where part of the project lies outside the rural boundary, the cost basis should split the budget so the lender can see which dollars the guarantee can reach.

Test Two: An Eligible Borrower With an Eligible Purpose

The borrower test is short. A B&I borrower may be a cooperative, corporation, partnership or other legal entity run for profit or not, an Indian Tribe, a public body, or an individual ^[30], and it must be engaged in or proposing to engage in a business, which may include manufacturing, wholesaling, retailing, services or other activities that provide employment or improve the rural economic or environmental climate ^[31]. An individual must meet the citizenship or residence requirement before approval, because neither approval nor a conditional commitment can be made subject to it ^[32]. The borrower must also show that loan funds will stay in the United States and that the project will primarily create new or save existing jobs for rural residents ^[33]. Affiliation, which decides whose finances are read together, follows the principles of 13 CFR 121.301(f) ^[34].

The purpose test does more work. The purposes 5001.105(a) allows include building rural business, industry and employment and bettering the economic and environmental climate of rural communities ^[35]. The list of eligible project types then turns on facts a study measures. Start-ups, expansions and acquisitions are eligible on condition that jobs are created or saved; an acquisition has to take the entire business rather than part of its stock ^[36]. The exception is a buyout among existing owners, which qualifies when the remaining owners have held their interest and worked in the business for at least the past 24 months and the seller keeps no ownership interest, direct or indirect ^[37]. Hotels, motels, bed and breakfasts, resort trailer parks and campgrounds run as commercial enterprises are eligible tourism and recreation facilities ^[38], although where an owner lives on the property the pro rata value of the living quarters, measured by floor area, comes out of the use of proceeds ^[39]. A mixed-use property qualifies only if at least 50 percent of the business's projected revenue will come from business use ^[40], which makes the revenue build in the study the evidence of eligibility, not just of repayment. Nursing homes and assisted living facilities with constant onsite medical care qualify, while independent living on its own does not ^[41], so a senior housing study has to describe the care model and the resident mix with enough precision for the Agency to classify the project.

The exclusions matter as much. The rule bars "Properties to be used for primarily commercial rental when the borrower has no control over tenants and services offered", industrial-site infrastructure aside ^[42], and, in its list of housing exclusions, any project "where the primary purpose is independent housing" ^[43]. Where a project has any rental component, the study should therefore say who controls the tenants and the services, and in what share of revenue.

The most demanding eligibility rule is the one most often overlooked, because it is written as a jobs test but works as a market test. A B&I project over $1 million is ineligible if it would likely transfer jobs from one area to another and increase direct employment by more than 50 employees ^[44]. That limit does not stop an existing business from expanding through a new branch, affiliate or subsidiary ^[45], provided the new unit will not raise unemployment where the business started or anywhere else it operates ^[46], and unless there is reason to believe the new unit is meant to close down the existing operations ^[47]. A project of that size is also ineligible if it would add more than 50 direct employees and raise output or service capacity in an area where demand is not sufficient to employ the efficient capacity of existing competitive enterprises ^[48], unless the assistance will not have an adverse effect on those competitors ^[49]. When the guaranteed loan exceeds $1,000,000 and direct employment will rise by more than 50 employees, the Agency must also send project information to the Department of Labor for its concurrence ^[50].

Only a supply and demand analysis can answer that rule: an inventory of competitors with their capacity and utilization, demand projected over the ramp-up, and a finding on whether the project fills unmet demand or takes share. The study also states the job estimate and its basis, including whether any jobs move from another location the borrower or an affiliate runs.

Test Three: When a Feasibility Study Is Required and What It Covers

Part 5001 defines the document before it requires it. Under 7 CFR 5001.3, a feasibility study is a report by independent qualified consultants that reaches an opinion or finding, covering five kinds of feasibility (economic, market, technical, financial and management) and judging the project by its expectation for success, as appendix A to subpart D outlines ^[51]. For the consultant the rule wants "an independent third-party person possessing the knowledge, expertise, and experience to perform the specific task required" ^[52]. Financial feasibility, a term the rule uses throughout, is "the ability of a project to achieve sufficient income, credit, and cash flow to financially sustain the project over the long term and meet all debt obligations" ^[53]. Nothing in the definition licenses a profession. It asks for independence, competence in the project's industry and a stated opinion.

The trigger depends on size and on whether the borrower is new. For a new business the rule is categorical, "For guaranteed loans greater than $1,000,000.00 to a new business, a feasibility study prepared by an independent qualified consultant acceptable to the Agency is required"; how far the study must reach is the Agency's call, a judgment that turns on the complexity of the project and of the borrower ^[54]. At $1,000,000 or less the study becomes discretionary for new and existing businesses alike: the Agency may call for one if the information in hand leaves technical feasibility or economic viability undetermined ^[55], or if the project will significantly affect an existing borrower's operations and historic cash flow ^[56]. Loans above $600,000 go through the fuller application ^[57], and there the Agency keeps a general power to ask for a study whenever the material in hand (lender's analysis, business plan or other project information) falls short of showing technical feasibility, market feasibility or economic viability ^[58].

The definition of a new business decides more files than the dollar threshold does. A business counts as new if it has operated for under a full year, or if it has operated longer but has not yet reached stable operations or full operational capacity in the Administrator's judgment ^[59]. Also new, in the definition's words, is "a new enterprise or new affiliate of an existing business moving or expanding into a new location involving new market or labor areas" ^[60]. So an operator with ten profitable years in one county that opens a second facility in another county can count as new under this rule. A study should state which branch of the definition it believes applies and why, because the answer also sets the equity minimum discussed below.

The general application rule adds a second route. Where the Agency finds itself "unable to determine a basis for successful repayment" from what the lender, the business plan or other project information shows on the five feasibility study components, or where existing operations will feel significant impacts from the project, it may require an independent study ^[61]. The elements it expects can vary with scope, and the author should be a qualified third party independent of the project ^[62]. A guaranteed loan of $600,000 or less may follow a shorter process if the Agency finds the lender's information sufficient to establish feasibility and viability ^[63]. A business plan showing how the project will operate and remain viable should be submitted unless the study or the credit evaluation already contains that information ^[64], and feasibility studies and business plans are an eligible use of B&I loan funds ^[65].

The five areas are a matter of method rather than headings. Economic feasibility places the project and its jobs in the regional economy; market feasibility tests demand at the projected price against named competitors; technical feasibility tests whether site, design, budget and any process technology can deliver on schedule; financial feasibility tests coverage under the rule's own definition; management feasibility asks whether the operators have run this kind of business at this scale. Each area should end in a stated finding.

The study then has two readers. The lender's credit evaluation must include a written evaluation of the feasibility study, the business plan and any technical, engineering and architectural reports ^[66], so the lender has evaluated the study in writing before the Agency reads it. A finding the lender cannot restate in its own memo has not done its job. The archived post on USDA feasibility study requirements by program compares the B&I trigger with the other Rural Development programs, and the post on why USDA feasibility studies get conditioned covers how reviewers grade the five components; this article stays with the B&I rule itself.

Test Four: The Lender's Credit Evaluation and the Five Cs

The center of every B&I file is the lender's credit evaluation, and the rule tells the lender what it must contain: a written review of the five Cs of credit, which the regulation lists as character, capacity, capital, collateral and conditions ^[67]. Each of the five has a part a study can supply and a part only the lender can.

Character covers the historical performance and experience of ownership and management in the project and its industry ^[68]. The lender reads the credit history; the study documents the operating record: how long the sponsors have run comparable facilities, at what scale, and with what results that can be verified. Capacity is the borrower's ability to produce enough cash to repay as agreed, including the likelihood that the project produces enough revenue to service its debt over the life of the loan ^[69]. Within that factor the lender "must make all efforts to" secure adequate working capital and reserves and to "Structure or restructure debt so the borrower has adequate debt coverage" ^[70], with a cash flow analysis supporting the evaluation ^[71]. That cash flow analysis is the financial chapter of the study, built from the market chapter's demand and pricing. Capital requires an analysis of how much of the project cost the borrower funds against what the guaranteed loan and other public assistance fund ^[72], which a study answers with a sources and uses table tied to its cost basis.

Collateral belongs mostly to the lender and the appraiser; in judging adequacy and discounts the lender considers the collateral's type, quality, location, marketability and alternative uses ^[73], and a study can speak to the last two. Conditions are the factor a study feeds most. Among the conditions the lender must weigh are current and future market potential, off-take agreements, competition and the type of project ^[74], plus the difficulty of building it, the terms of each construction contract, and the builder's experience and balance sheet ^[75], and the rule says the lender should submit supporting documentation such as a feasibility study or market study where applicable ^[76].

The content rules for the evaluation read like a reviewer's checklist for the projection. Any break from the borrower's past results has to be substantiated and documented, and the rule expects projections to stay consistent with past performance ^[77]. Projected increases in revenue, margins or profitability should be reasonable and substantiated ^[78]. A borrower with seasonal or cyclical cash flow needs a quarterly projected operating cash flow analysis ^[79]. Applications with affiliated entities need a global credit evaluation and, where applicable, a global historical and projected coverage analysis ^[80], and each owner of 20 percent or more is ordinarily required to give an unsecured guarantee for the full loan term at least equal to its percentage interest times the guaranteed loan amount ^[81].

The application itself fixes the time frames a projection must cover. A complete application carries three kinds of historical statement (balance sheet, income and cash flow) for the last three fiscal years, or for every year of operation if there are fewer ^[82], and projected statements or a financial model from the current statements through at least two years of the project at full operational capacity or stable operations ^[83]. Behind the projections there must be a list of assumptions showing their basis, and among the projected statements must be a pro forma balance sheet as of guaranteed loan closing ^[84].

A study meets these rules by construction: it starts from the borrower's actual statements, ties every departure from history to a named driver, runs quarterly where demand is seasonal, carries the projection through the second full stabilized year, and prints its assumptions in one table, each sourced or labeled as an assumption.

Coverage: The Definition 5001 Writes and the Minimum It Leaves to the Lender

Conventions. This article follows the conventions of the Loan Analytics worked examples. Coverage is tested against the program floor the site's program page states, where the program has one, and against a stated 1.25x lender assumption, and the higher of the two binds. Equity is measured at the loan the cash flow supports, with fees recomputed on that loan. An acquisition is tested on the seller's historical earnings, not on projections.

Part 5001 defines coverage precisely and then, for a new loan, declines to set a minimum. The rule's coverage ratio takes EBITDA, subtracts the replacement capital expenditures the business can reasonably expect, and divides the result by annual principal and interest ^[85]. The deduction for replacement capital expenditures is the point of the definition: a hotel that must replace its case goods every few years, or a processing plant whose lines wear out, does not have its whole EBITDA available for debt service, and the rule says so.

The refinancing paragraph holds the only number the regulation attaches to B&I coverage. When an existing business borrows mainly to refinance, it "must demonstrate historical debt service coverage ratios using proposed debt service requirements of not less than 1.1 times"; alternatively it can show from current performance that it has corrected or recovered from what hurt its past results ^[86]. That showing needs coverage of at least one to one on the current income statement ^[87]. Searched in full, the regulatory text of the 2026 edition sets no general coverage minimum for a new B&I loan; the appendices on study content are reproduced as images in that edition and could not be searched. What the rule does instead is list, among the loan agreement requirements a conditional commitment addresses, the item "Minimum debt service coverage ratio, when required by the lender or by this part" ^[88], beside a maximum debt-to-net worth ratio on the same terms. In the equity section it also points to an outside benchmark, allowing the Agency to reduce an existing business's equity minimum when guarantees are in place and every pro forma statement meets or exceeds the median quartile reported in RMA's Annual Statement Studies (the rule names that publication or a similar one) on four ratios: liquidity (current and quick), leverage (debt-to-worth) and debt service coverage ^[89].

So the number a B&I study tests against is the lender's. The site's methodology page places the usual threshold between 1.15x and 1.25x, depending on which program applies and how large the loan is ^[90]; for B&I the program contributes the definition and the refinancing floor, and the worked examples published on this site test a new loan against a stated 1.25x lender assumption, which then binds. The archived post There Is No 1.25x Rule in USDA B&I makes the same point at length; the illustration below shows the arithmetic the conventions imply for an assumed project.

The project is hypothetical and every project number in it is an assumption, labeled as one: total eligible project cost, the loan requested, stabilized EBITDA and replacement capital expenditures. The rate is bank prime for November 2 to 6, 2026 ^[91] plus a spread that is assumed, in the National Prime plus a margin form the rule uses as its example of a variable rate ^[92]. The guarantee percentage and fee rates are the fiscal 2026 rates for a B&I loan of $5 million to $25 million ^[93], and the investment minimum is the one for a new business that is not building with an early loan note guarantee ^[94].

Rounded as shown; lines may not foot by one unit in the last place.

Read across Table 2, the definition costs coverage before any shock. On EBITDA alone the requested loan covers 1.44x at the base rate; after replacement capital expenditures it covers 1.30x, which clears the 1.25x lender assumption with little room. A rise of one point in prime takes coverage under the definition to 1.19x, and the loan the cash flow supports at the lender assumption falls to $6,434,728, so the borrower's investment rises from $2,250,000 to $2,565,272. Two points take coverage to 1.10x and the supported loan to $5,942,550. An EBITDA shortfall of a tenth does about the same damage as one and a half points of rate, cutting coverage to 1.15x.

Two lessons carry beyond this example. The base request was sized so the borrower invests exactly the minimum, so any cut in the supported loan comes straight out of equity, as the margin line in Table 2 shows. And coverage on the requested loan is a different question from the loan the cash flow supports: the first says whether the request passes, the second what to offer when it does not, with equity and fees recomputed on that loan as in Table 4.

Test Five: Balance Sheet Equity at Closing

The equity rule is written in balance sheet terms, which a projection built on income statements alone can miss. A B&I borrower must carry enough capital or equity to absorb the business's ongoing financial and operational risks, and it counts only in the form of cash or earning assets put into the business and recorded on the borrower's balance sheet ^[95]. The rule is blunt: "Equity cannot include appraisal surplus or bargain purchase gains" ^[96]. As for subordinated debt, it may be counted when it was given in exchange for cash put into the business that stays there for the life of the guaranteed loan ^[96], and only once its note or other evidence is submitted to the Agency ^[97]; for the minimums below it must also be "subject to a standstill agreement for the life of the loan" ^[98]. Balance sheet equity is measured on current and projected statements, and a closing balance sheet showing the new debt and use of proceeds is required ^[99]. The minimums must be met when the lender closes the guaranteed loan ^[100]. The operative term in the 2026 edition is balance sheet equity built from cash or earning assets; a checklist that uses another equity term should be reconciled to this text before a study relies on it.

The minimums depend on what kind of borrower the project is, which is why the new business question in Test Three matters.

The Agency can move these lines. When it judges a loan higher risk it may raise the requirement, looking among other things at "the strength of the feasibility study and experience of management" alongside the borrower's credit rating and its contracts with suppliers and buyers ^[105]. It may lower the minimum for an existing business that provides guarantees and whose projections reach at least the median quartile on the ratios described above ^[89]. The first of those sentences is the only place in the equity rule where the study itself is named as a risk factor: a weak study can cost the borrower equity.

Closing is where the equity is proved. The lender certifies that the conditional commitment's equity requirement was met, shown by a balance sheet at the closing date that counts the whole loan whether or not it is fully advanced ^[106], a certification the 2024 rule moved into the closing certifications from the equity paragraph, where it had stood as 5001.105(d)(6) ^[107], in the same rule that revised the equity paragraph's treatment of the balance sheets used ^[108]. If the lender wants the guarantee issued while the project is still being built, the borrower must have signed a fixed-price construction contract, firm in its terms, with a general contractor independent of the project, and must put its equity in before any guaranteed loan funds are drawn ^[109].

The study's part is the cost basis and the sizing. Total eligible project cost is the investment test's denominator, so understated soft costs, contingency or working capital understate the equity needed. And because the conventions measure equity at the supported loan, the investment to report is the one in Table 2: $2,250,000 at the base rate and $3,057,450 if prime is two points higher. A study should print the projected closing balance sheet beside the investment test and name the branch of the table it used.

Test Six: Loan Size, Guarantee Percentage, Fees and Terms

The limits are set in two places. The statute caps any loan made, insured or guaranteed under subsection 1932(a) at $25,000,000 in principal ^[110]. The regulation caps the total of B&I guaranteed loans to one borrower at $25 million, with a higher Secretary-approved amount for some cooperatives ^[111], and adds a guarantor loan limit of $100 million ^[112]. The guarantee itself may reach 90 percent of eligible loss, with the Agency setting the annual percentage by program in the Federal Register ^[113] and taking current Federal credit policy into account ^[114].

For fiscal 2026 the notice sets two tiers. Below $5 million the guarantee is 85 percent ^[115]; loans of $5 million up to $25 million carry an 80 percent guarantee ^[93]. In both size tiers the up-front guarantee fee is 3.0 percent and the yearly retention fee 0.55 percent ^{[115] [93]}. A loan that qualifies for the reduced fee pays 1.0 percent up front and 0.50 percent a year, with an 80 percent guarantee ^[116]. The Agency may grant the reduced fee on the lender's request, within annual limits, when the project meets any one of its criteria ^[117]. The grounds include a local unemployment rate of 125 percent or more of the national rate, a distressed community, a persistent poverty county and a recent disaster area ^[118]. The notice's fees took effect October 1, 2025, although it was published March 9, 2026 ^[119], and on scope it reads "Unless precluded by a subsequent FY 2026 appropriation, these rates will apply to all guaranteed loans obligated in FY 2026" ^[120].

The mechanics are in the rule. In its words, "The onetime guarantee fee is calculated by multiplying the total loan amount by the percentage of guarantee by the guarantee fee rate" ^[121]. It is nonrefundable and must be paid at or before closing, before the loan note guarantee issues ^[122]; the rate in force when the guarantee is obligated stays in place even if the published rate changes before issuance ^[123], and "The lender may pass the guarantee fee on to the borrower" ^[124]. Each year the lender also owes a retention fee, computed on the guaranteed share of the principal still outstanding at December 31 at the notice's retention rate ^[125]; paying it keeps the guarantee valid, and a lender that recovers it from the borrower still may not hold back payment to the Agency while it collects ^[126]. A lender that wants the guarantee in place before the building is finished pays an extra 0.50 percent ^[127], a charge that falls only on loans requesting that early issuance and not on construction loans in general ^[128].

One comparison deserves a sentence in any study that cites the fee. The statute allows a one-time fee of up to 2 percent of the guaranteed principal portion ^[129], the regulation's fee table caps the B&I rate at 5 percent ^[130], and the fiscal 2026 notice charges 3.0 percent ^[93] under part 5001, other applicable authority and the current appropriated authority ^[131]. A study should use the notice's rate for the fiscal year of obligation, cite the notice, and leave the authority question to the Agency.

Two sizing points follow from Table 4. The guaranteed portion and the fees move with the loan, so a study that shrinks the loan to the amount the cash flow supports must recompute both, as the conventions require. And the tier boundary is a cliff in the guarantee, not in the fee: a loan just under $5 million keeps an 85 percent guarantee ^[115] while a loan just over it drops to 80 percent ^[93], which changes the unguaranteed exposure the lender holds by more than the loan difference suggests.

The terms rules shape the debt service line in every projection. Rates are negotiated, fixed or variable, with a ceiling set by what the lender would charge on a like loan carrying no guarantee ^[132]; a variable rate, tied to a published base rate, may be adjusted no more often than quarterly ^[133]. The term can run no longer than the justified useful life of whatever the loan finances or takes as collateral, with an outer limit of 40 years or any shorter limit in State statute ^[134]. The loan must amortize fully, with no balloon outside a servicing action ^[135]; both portions amortize over the same term ^[136]; and full payments of principal and interest have to begin within 3 years of the note date ^[137]. A study supports these terms with a useful life schedule by asset class and a ramp-up schedule showing when income can carry full amortization.

Test Seven: Appraisals, and Why a Study Is Not One

The collateral test runs through the appraisal rules, and a study should know them well enough to stay on its side of the line. A real estate appraisal is required once the collateral's value passes $250,000 or the current FIRREA threshold ^[138], and for a construction project it must obtain both the as is market value and the prospective market value at completion ^[139]. Real estate appraisals follow USPAP and FIRREA and, unless the Agency approves otherwise, are performed by a State Certified General Appraiser licensed where the property sits ^[140]. Before closing the lender sends the Agency its own technical review of the appraisal, written to USPAP Standards 3 and 4 ^[141], and no appraisal may be older than one year ^[142]. Where an appraiser has put a figure on the business or its going concern, "the business valuation or going concern value must be deducted from the reconciled market value prior to discounting" ^[143]. Separately, the statute lets the Secretary require a specialized appraiser using standards similar to those of the private sector ^[144].

A study offers no opinion of what the real property is worth. It asks whether the operation will earn enough to service the loan; the appraisal asks what the collateral would bring. Both rest on the same market, so a projected rate, rent or throughput that the appraiser's income approach contradicts is a question the lender should settle before closing. The going concern deduction sharpens the line: the value that depends on the business continuing, which is what the study is about, is removed from the collateral.

The Application Package, Construction and Priority Points

A preliminary eligibility review, if the lender asks for one, is informal, may change with later information and is solely advisory ^[145], so a favorable early comment is not a finding on feasibility.

Construction projects add their own evidence. When the lender wants the loan note guarantee before completion, a qualified independent consultant with experience in the project's industry, such as the architect or engineer, confirms the timetable and budget ^[146], and the lender must evidence enough cash to finish construction, with contingencies for overruns, plus working capital through start-up ^[147]. Those are not the study's findings, but its cost basis and start-up projection should agree with them line by line.

Priority scoring matters when applications compete for the same funds, and several of its points rest on facts a study documents. Scoring awards at most 100 points ^[148]. A project in an unincorporated area or a city under 25,000 people earns 5 points ^[149]; so does a loan priced at or below the Wall Street Journal Prime Rate plus 1.5 percent, and a guaranteed loan under 60 percent of total project cost ^[150]. Points also go to an industry not already present in the local community ^[151] and to a business that creates or saves at least five jobs averaging more than 150 percent of the Federal minimum wage ^[152]. A study that states the community's population, whether the industry is already present, and the wage schedule behind its job estimate gives those points support.

What the Public Record Shows About B&I Lending

The figures in Table 5, printed at the close of this section, come from USAspending, the only public route to B&I award records in the Loan Analytics dataset, and they describe the program, not any project. For fiscal 2025 the core B&I stream shows 256 ^[153] new awards with a gross face value of $2,382.6 million ^[153]. As reported by the December 31 after the year closed, the face value stood at $2,099.7 million ^[153], and net of every cancellation reported since it stands at $1,956.2 million ^[153]. The gap between the gross and the net figures is awards obligated and later cancelled, which USAspending dates back to the original award. For fiscal 2024 the net figure is $1,560.4 million ^[153] on 234 ^[153] new awards.

The subsidy cost recorded with each award, taken as a share of its face value, moves sharply from year to year: 2.29 percent ^[154] for core awards in fiscal 2024, 0.20 percent ^[154] in fiscal 2025 and 1.09 percent ^[154] so far in fiscal 2026, a year the extract does not yet hold in full. For scale, SBA's 7(a) program recorded 78,078 ^[155] gross approvals in fiscal 2025 for $37.29 billion ^[156], counting cancelled approvals as SBA does. B&I is a program of a few hundred large loans a year, set beside tens of thousands of 7(a) approvals. None of these figures is a loss rate or an approval-cohort floor: the extract records award actions, not loan performance, so no B&I charge-off rate can be drawn from it.

These figures show the program's annual scale, the volatility of its subsidy cost and how much obligated face value is later cancelled, and nothing more. The extract has no industry, lender, delinquency or loss field, so it yields no B&I default rate for any industry, state or project, and a national total is never evidence about one borrower's odds. The companion article on USDA B&I loans in public data sets out what USAspending records and what it omits, and the archived ranked index of B&I loans by state shows how the choice of measure changes a state's rank.

Loan Data Behind This Article

Every figure in this table comes from the Loan Analytics loan dataset, analytics-loan-data freeze-3 (commit 360c856), and carries its key. SBA rates are approval-cohort floors and are withheld when fewer than 30 loans stand behind them. USDA figures are USAspending award aggregates; a USDA rate in the dataset is a credit subsidy rate, not a loss rate.

A Reviewer's Checklist: Each Test and the Evidence That Answers It

The tests above collapse into one table; none of its rows is a decision the study makes.

For a borrower the practical advice is short: ask which branch of the new business definition applies, ask for coverage on the rule's definition and for the loan the cash flow supports at the lender's minimum, ask how the market evidence compares with the appraisal, and ask the lender early what minimum coverage and debt-to-net worth ratio it will write into the loan agreement. Worked examples that follow these tests for a glamping resort in Ohio, a hotel in Connecticut and an RV park in North Dakota show the same arithmetic on assumed projects, and the companion articles on the SBA 7(a) method and the conventional bank loan method set the B&I rule beside the other programs a rural project may consider.

Related Pages on Loan Analytics

• The Loan Analytics methodology series (all articles)
• How a feasibility study is done: the Loan Analytics methodology
• USDA feasibility studies
• Loan data by state
• Loan data by asset class
• Worked examples (case studies)
• Worked Example: USDA Business and Industry Loan Glamping Resort Feasibility Study in Ohio
• Worked Example: USDA Business and Industry Hotel Feasibility Study in Connecticut
• Worked Example: USDA Business and Industry Loan RV Park Feasibility Study in North Dakota
• There Is No 1.25x Rule in USDA B&I. What Replaces It Is Stricter.
• USDA Feasibility Study Requirements by Program: B&I, Community Facilities, REAP, FIELDS, and Section 538 in One Table
• Why USDA Feasibility Studies Get Conditioned: The Five Graded Components, and Where Files Actually Fail
• USDA Business and Industry Loans in Public Data: What USAspending Shows and What It Hides
• Conventional Bank Loan Method: Appraisal Rules, Supervisory LTV Limits and the Study a Bank Reads

Commission a Feasibility Study

Loan Analytics prepares lender-grade feasibility studies for SBA 7(a), SBA 504, USDA Business and Industry, conventional and EB-5 financing, built on the methods this series sets out. A study is not an appraisal: it tests whether a project's market, costs and cash flow can carry the debt a lender is asked to approve. To discuss a study for your project, contact Loan Analytics.

Daniel Smith, MAI, Loan Analytics