USDA Financing and Grant Monitor, Fall 2026: Rural Development Capital, Credit Risk and Project Feasibility

The White House asked Congress to zero out the Business and Industry guarantee. The House answered with $2 billion. In between, USDA removed ten lenders it says hold half of the program's delinquency, the budget office raised its loss assumptions, prime fell while long rates rose, and construction costs ran ahead of both. This is our quarterly read of where Rural Development capital stands and what it does to the feasibility of a rural project.

Three numbers frame the quarter that ended September 30, 2026. The fiscal 2027 budget request eliminates appropriated authority for the Business and Industry guaranteed loan, the largest federal credit program for rural business, against $1.43 billion enacted the year before (1). The House appropriations bill passed on June 4 restores it at $2.0 billion (4). And on May 12, USDA revoked the approved-lender status of ten institutions it says hold about $620 million of delinquent guaranteed loans, roughly 47% of Rural Development's delinquent book (11).

Those three facts belong in the same sentence because together they describe a program under two kinds of pressure at once. Washington is arguing about whether the money should exist. The agency is arguing with its own lenders about who lost it. And underneath both arguments the cost of building and financing a rural project has moved in ways that no appropriations bill will fix.

This monitor is the research edition of a quarterly series we publish for USDA lenders, project sponsors and the investors who stand behind them. It covers June through September 2026. Rather than list announcements, it follows the money: how much capital each program has, what it costs, where it is going bad, and what a feasibility study has to show to get a share of it. The multifamily programs, which changed more than any other area this quarter, get a summary here and a full report of their own.

The Monitor at a Glance

The table below compresses the quarter into one view. "Capital in FY2027" shows the President's request against the House bill; the Senate had not reported a bill by September 30, and a continuing resolution holds every program at fiscal 2026 levels through December 11 (7). "Credit signal" is our reading of the budget office's own loss assumptions and the agency's enforcement actions. Dollar figures are program levels, the authority each program may commit; the budget office expects actual commitments to run lower in several programs, for example about $208 million of Section 538 guarantees and $450 million of Community Facilities guarantees in fiscal 2027 (5).

Program	FY2026 enacted	FY2027 request	FY2027 House	Credit signal	Effect on feasibility work
Business and Industry guaranteed loans	$1,429M	$0	$2,000M	Subsidy rate 1.09% now, 1.93% to 2.95% projected; ten lenders removed	Lender diligence and sector risk now belong in the study
Community Facilities direct loans	$1,250M	$1,250M	$1,250M	Cohort reestimates of $622M on 2019 to 2022 loans	Rate cut to 4.750% is real but small against cost inflation
Community Facilities guaranteed loans	$650M	$650M	$650M	Negative subsidy, stable	Unchanged, 80% guarantee at a 1.25% fee
Community Facilities grants and earmarks	$18M plus $659M	$0	$19.5M plus $398.5M	Grant money is the target of the request	Grant-dependent stacks carry political risk
Water and Waste Disposal grants	$386M	$144M	$213.5M	Grants cut in both versions	Grant share of utility projects shrinks
REAP grants	$43M plus $200M IRA	Same, but awards halted	Not specified	Frozen pending a rule rewrite	Model without the grant
REAP guaranteed loans	$100M mandatory	$100M	$50M	2026 subsidy revised from -1.16% to 4.54%	Open, but the budget office now expects losses
Section 538 multifamily guarantees	$400M	$500M	$400M	Default assumption falling; program uses half its authority	Loan-to-cost raised to 80%, DSCR to 1.11 in the pilot
Rural Business Development Grants	$35M	$0	$18M	Second year of a zero request	Small and indirect
Value-Added Producer Grants	$8M	$0	$6.5M	Mandatory LAMP money continues	Producer-owned processing only

Two patterns stand out. Where the government guarantees a loan that someone else makes, the money survives, because guarantees cost little or nothing in budget terms. Where the government writes a check, the request cuts it. That is the shape of the quarter, and it is the shape of the next several years unless Congress keeps overriding the request line by line.

Grants Are Leaving the Toolkit

The fiscal 2027 request would turn Rural Development into something close to a pure loan and guarantee agency. It eliminates appropriated authority for B&I guarantees, Rural Business Development Grants, the Intermediary Relending Program, Value-Added Producer Grants and discretionary Community Facilities grants, including $659 million of congressionally directed projects, and it cuts Water and Waste Disposal grants from $386 million to $144 million (1). It holds Community Facilities direct loans at $1.25 billion and guarantees at $650 million, and raises Section 538 multifamily guarantees from $400 million to $500 million (1)(3).

The logic is visible in the credit supplement. A Community Facilities guarantee carries a subsidy rate of negative 0.98% for fiscal 2027, and a Section 538 guarantee negative 2.16%, meaning the fees are projected to exceed the losses (5). A grant costs its face value. A budget that has to show savings cuts the grants and keeps the guarantees, and that is what this one does.

The House disagreed on the business side. Its bill, passed 213 to 210 on June 4, puts B&I at $2.0 billion supported by $38.6 million of budget authority, funds Rural Business Development Grants at $18 million, keeps Water and Waste Disposal loans at $1.015 billion direct and $50 million guaranteed with $213.5 million in grants, and provides $19.5 million in Community Facilities grants plus $398.5 million in earmarks (4). This is the second year running that the request has zeroed the rural business programs and Congress has put them back; for fiscal 2026 the appropriation was $82 million against a request described as duplicative of SBA and Commerce programs (8).

What makes the B&I argument odd is that demand has been running at or above the appropriation. Obligations were $1.86 billion in fiscal 2023, $1.83 billion in 2024, $2.11 billion in 2025 and an estimated $2.09 billion in 2026 (2)(9). In the last two of those years they exceeded the enacted program level, $1.66 billion in 2025 and $1.43 billion in 2026, with the difference met from carried-over authority (1)(2). Whatever the mechanism, the program has been using every dollar it can find. An independent assessment prepared for the rural lenders' trade association put allotment use at 98% in 2024, up from 81% in 2019 (9). Zeroing a program that is oversubscribed is a policy choice, not a response to weak demand.

REAP shows the opposite picture. Guaranteed loan obligations fell from $478 million in fiscal 2024 to $178 million in 2025 and an estimated $100 million in 2026, and $536 million of loan authority lapsed in 2024 and $171 million in 2025 (2). With grants halted since March 31 and the funding notice rescinded on April 15, the loan side is now the only REAP channel, and it is barely used (32).

The Government Is Repricing Rural Credit

Every federal loan program carries a subsidy rate: the net cost to the government of a dollar of lending, after fees and expected recoveries, over the life of the loan. The Office of Management and Budget publishes these rates every year and re-estimates them for older loans as their actual performance comes in. They are the closest thing to a public credit rating for a federal program, and for Rural Development they moved this year.

The B&I guaranteed loan rate was 0.20% for fiscal 2025. It was set at 0.89% for fiscal 2026 and revised to 1.09% (5)(6). For fiscal 2027 the budget office shows 1.93%, a rate that applies only to carried-over authority because the request contains no new B&I level, while the Rural Business-Cooperative Service's own April letter projects 2.95% (5)(17). Behind the budget office figure, the default assumption rises from 7.91% to 9.02% of the 2027 cohort and the recovery assumption falls from 20.72% to 19.57% (5). Either way, the government now expects to lose more on each B&I dollar than it did a year ago, and the appropriators will price the program that way.

REAP's guarantee rate moved further. The fiscal 2026 rate was published at negative 1.16%, meaning fees would more than cover losses, and was revised to positive 4.54% (5). The default assumption for REAP guarantees is 7.29% with a recovery rate of 8.73%, the lowest recovery of any program in the group, which fits a portfolio of solar arrays and energy equipment whose collateral value is uncertain (5).

The starkest numbers are in the Community Facilities direct loan reestimates. When the 2019 through 2022 cohorts were booked, they carried subsidy rates between negative 4.96% and negative 7.61%, meaning the government expected to earn money on them. As of the fiscal 2027 supplement, those same cohorts carry current rates of 2.04%, 13.88%, 15.91% and 11.10%, and their combined net lifetime upward reestimate is about $622 million (5). Loans made to rural hospitals, schools and municipal facilities during and after the pandemic are performing far worse than the government expected when it made them. That is a fact the credit supplement states in tables and no press release has mentioned.

Section 538 is the exception in the other direction. Its default assumption falls from 7.18% to 4.80% and its recovery assumption rises from 38.95% to 53.79%, which is why the request adds $100 million to the program while cutting almost everything around it (5).

For a lender, these numbers matter in a specific way. When the subsidy rate on a program rises, the same appropriation supports less lending, and the agency has less room for the marginal deal. When the budget office raises a default assumption, it is telling the program to expect more loss claims, and the program's reaction is closer review of the credits it approves. The feasibility study is where that review happens.

Ten Lenders, Half the Delinquency

The enforcement story began with a letter. On February 18, 2026, the Rural Business-Cooperative Service wrote to every approved lender in the OneRD guarantee programs. The portfolio had passed $12 billion of active guaranteed loans across more than 775 lenders, delinquent loans exceeded $1 billion, and the agency had paid about $300 million in repurchases and losses in the prior twelve months (10).

Put that against the program's history and the change is large. The assessment prepared for the rural lenders' association, using USDA data obtained under the Freedom of Information Act, found that USDA paid about $501.6 million in core B&I losses over the ten fiscal years from 2015 to 2024, and that annual losses in 2021 through 2024 averaged just under $30 million (9). The February figure is not directly comparable, since repurchases are not final losses and the letter covers every RBCS guarantee program, not only B&I. But a run rate ten times the recent average is not a rounding difference.

On May 12 the agency acted. It revoked or declined to renew the approved-lender status of ten institutions: Bank of Montgomery, Byline Bank, Celtic Bank, Community Bank & Trust of West Georgia, Genisys Credit Union, Greater Nevada Credit Union, North Avenue Capital, Optus Bank, U.S. Eagle Federal Credit Union and ReadyCap Commercial. USDA said their portfolios held about $620 million of delinquent loans, about 47% of Rural Development's total, and that more than 750 lenders remained in good standing (11). One of the ten, ReadyCap Commercial, was a non-renewal: USDA says its lender agreement expired in January 2026, and any of the ten can regain status only by reapplying (11). Taken at face value, the agency's figures imply a total delinquent book of about $1.3 billion, so delinquency grew between February and May, and about 1.3% of the lender base accounts for nearly half of it.

Two of the removed lenders have said publicly that they disagree. Genisys Credit Union told American Banker that it strongly disagrees with the allegations and the decision, and Greater Nevada Credit Union said it disputes the characterization and intends to appeal (12). Greater Nevada also said it had stopped originating new USDA-guaranteed loans in 2023 after evaluating the programs' risks, which suggests that at least some of the problem sits in older vintages rather than current underwriting (12). According to USDA, as reported by American Banker, Greater Nevada has 50 loans with about $500 million of unpaid principal on the OneRD books (12), and USDA's dashboard, as reported by a Reno television station, shows $165.9 million of that more than 90 days delinquent, about a third of its program loans and the second-highest amount of any lender (13). No appeal outcome or reinstatement had been announced by September 30. We report these figures as USDA's assertions and the lenders' responses; none of it has been adjudicated.

The regulatory basis for the removals is the OneRD rule itself, which requires a lender to have a portfolio delinquency rate below 6% over the prior five years to be approved, and lets the agency weigh delinquency and default history at renewal (15). What is new is the transparency. Since January 19, 2026, USDA's Lender Lens dashboard has published the OneRD portfolio at loan level: borrower and lender, program, close year, original amount, unpaid principal, the amount more than 90 days delinquent, guarantee percentage, note rate and project description (14). Any lender, borrower or consultant can now see the standing of a counterparty before a deal closes. We tried to export the full file for this report and could not; the dashboard does not offer a bulk download that a script can reach, so the lender-level tables in this monitor rest on USDA's published totals and press accounts rather than our own tabulation. That gap will close in the next edition.

The practical consequence for a borrower is that lender risk has become a feasibility input. A loan originated through a lender that is later removed does not lose its guarantee, but new guarantees through that lender stop, and a conditional commitment in process may not survive. Checking the originating lender on Lender Lens is now part of our scope.

Where the Losses Are: Two Sectors, Under $700 Million of Exposure

USDA has been unusually specific about where the guaranteed portfolio is failing. In January 2026, the RBCS Administrator paused new applications for two project types and gave the reason in numbers. Twenty-one loans for anaerobic biodigesters, totaling $386.4 million, were 27% delinquent, or $102.6 million. Controlled environment agriculture loans, meaning indoor and greenhouse farming, totaled $311.9 million and were 43% delinquent, or $135 million (16). In April the agency extended the pause from April 14 through December 31, 2026 and updated the rates to 28% and 40%, "on top of realized losses" (17).

Those two sectors together carried $237.6 million of delinquency on $698.3 million of exposure. That is about 34% delinquent, about a quarter of the more than $1 billion delinquent book reported in February, on about 6% of the more than $12 billion active portfolio (10)(16). No other sector has been called out by name, and the agency's own budget assumptions for the core program have moved less than the headline suggests: OMB's default assumption for B&I, net of recoveries, rises from 5.60% to 6.48%, an increase but not a collapse (5).

The composition of the core B&I book has been steady for a decade. Accommodation and food services, mostly hotels, took 36.5% of core obligations in fiscal 2023 and 32.1% in 2024, about $577 million; manufacturing including food processing took 15% to 18%; utilities and energy 10.5% in 2024; health care about 7% (9). Over fiscal 2015 through 2024, accommodation and food services accounted for about $4.0 billion of $13.4 billion in B&I guarantees, manufacturing $2.3 billion (9). Hotels are the program's largest concentration and the one whose delinquency has not been published. Lender Lens carries the NAICS field that would allow the calculation, and we intend to run it.

One sector is next in line for scrutiny. The Inspector General's fiscal 2026 work plan includes an audit of delinquencies and defaults in the Section 9003 Biorefinery, Renewable Chemical and Biobased Product Manufacturing program, and the July 9 final rule for that program bars debt write-downs where the same owners keep control and bars parties who caused a loss from remaining involved (18). Between the biodigester pause, the REAP recovery assumption and the biorefinery audit, the agency's problem loans cluster around new-technology energy and agriculture projects that were underwritten on projected rather than demonstrated cash flow. A feasibility study for any project in that family should now assume the reviewer starts from skepticism.

The Cost of Capital Split

The cost of rural debt moved in two directions this quarter, and which direction a project feels depends on how its loan is priced.

On September 16 the Federal Open Market Committee raised the federal funds target range by 25 basis points to 3.75% to 4.00%, its first increase since 2023, with all twelve members voting for it, and the prime rate moved to 7.00% the next day (19)(20). The committee's projections put the median rate at 4.1% at the end of both 2026 and 2027, which implies one more increase this year and no cuts until 2028 (19). Long rates moved more. The 10-year Treasury closed at 5.24% on September 28, its highest level since 2007, up from about 4.4% in June (20).

For a borrower with a variable-rate B&I or Community Facilities guaranteed loan, the relevant number is prime, and prime is 150 basis points below where it stood in January 2024 (20). For a borrower locking a fixed rate, or a Community Facilities direct loan borrower whose rate is set quarterly off municipal bond yields, the relevant number is the long end, and that has gone the other way. The Community Facilities direct market rate was 4.250% in the April to June 2025 quarter, 5.250% from July through September 2025, and 4.750% from April through September 2026, with the poverty rate fixed at 4.500% and the intermediate rate at 4.625% (21). Water and Waste Disposal rates for the same period were 2.875% poverty, 3.750% intermediate and 4.750% market (22). The October 1 notices had not posted when this report closed, and the 50 basis point rise in long Treasury yields since August points toward an increase.

Guaranteed loan pricing is not regulated. Under 7 CFR 5001.401 the rate is negotiated between lender and borrower, may be fixed or variable, must be tied to a published base rate if variable, and may adjust no more often than quarterly; the rule sets no cap on the spread (23). Market convention prices B&I loans at roughly prime plus 1.25% to 1.50%, which is consistent with the budget office's 8.38% borrower-rate assumption for the 2026 cohort against a 6.75% to 7.00% prime (5). The fees sit on top: for fiscal 2026, a 3.0% initial guarantee fee on the guaranteed portion and a 0.55% annual retention fee, with an 85% guarantee on loans under $5 million and 80% from $5 million to $25 million (31). On a $4 million loan the initial fee is $102,000 and the first-year retention fee about $18,700.

The table shows what the rate split does to debt service and to the net operating income a project needs at 1.25 times coverage, per $1 million borrowed, with level monthly amortization and fees excluded.

Scenario	Rate	Term	Annual debt service	NOI required at 1.25x
Community Facilities direct, market rate, April to June 2025	4.250%	40 years	$52,034	$65,043
Community Facilities direct, market rate, July to September 2025	5.250%	40 years	$59,864	$74,831
Community Facilities direct, market rate, April to September 2026	4.750%	40 years	$55,891	$69,864
B&I variable, January 2024 (prime 8.50% plus 1.50%)	10.00%	25 years	$109,044	$136,305
B&I variable, September 2026 (prime 7.00% plus 1.50%)	8.50%	25 years	$96,627	$120,784
B&I fixed, January 2024 (10-year near 4.0% plus 3.25%)	7.25%	25 years	$86,737	$108,421
B&I fixed, September 2026 (10-year 5.24% plus 3.25%)	8.50%	25 years	$96,627	$120,784

A prime-based B&I borrower needs about $15,500 less NOI per $1 million than in early 2024. A fixed-rate borrower needs about $12,400 more. Each further 25 basis point increase adds about $2,000 of annual debt service per $1 million on a 25-year loan, and the committee's own projection contains one.

Lender appetite is the other half of the cost of capital, and the Federal Reserve's loan officer surveys describe a market that is easing at the top and cautious below. In April, banks tightened standards on commercial and industrial loans to firms of all sizes and held commercial real estate standards unchanged, with large banks easing and smaller banks tightening on construction and multifamily (24). In July, standards on commercial and industrial loans were unchanged, large banks eased on nonresidential and multifamily property, and demand for construction loans was weaker for a second straight quarter (24). The community and regional banks that originate most USDA guarantees are the ones reporting weaker demand and tighter construction terms. Since Community Facilities direct loans do not fund construction and require a private interim lender, construction-period financing is the binding constraint on more rural projects than the permanent loan is.

Construction Costs Outweigh Rate Relief

The Community Facilities rate cut from 5.250% to 4.750% lowered the annual payment on a 40-year loan by 6.6%, from a constant of 5.99% to 5.59%. In the same twelve months, the cost of the buildings those loans finance rose by more than that.

The producer price index for inputs to new nonresidential construction rose 8.9% between August 2025 and August 2026, according to the contractors' association's analysis of Bureau of Labor Statistics data, with steel mill products up 23.4%, aluminum mill shapes up 27.3% and copper and brass mill shapes up 20.9% (25). The final demand index for construction rose 5.3% over the year and diesel fuel 77.8% (25). The drivers are the ones the tariff schedule would predict: Section 232 duties on steel and aluminum went from 25% to 50% in June 2025, were applied to the full customs value of covered products from April 6, 2026, and were extended to further derivative articles in August, while agricultural equipment and certain residential HVAC moved from June 8 to a temporary 15% rate, or 10% where the equipment uses at least 85% U.S.-melted metal (26). Smaller builders reported the steepest increases; in the home builders' July survey the median builder who started five or fewer homes in 2025 reported material costs up 9.1% year over year (25).

The arithmetic for a rural project is direct. If the loan grows with the 8.9% rise in input costs, the 6.6% rate saving turns into a 1.7% increase in annual debt service. If the loan grows with the 5.3% rise in the final demand index, debt service falls 1.7% net. Either way the rate cut has been spent before the project reaches the closing table, and for metal-intensive buildings, which is to say processing plants, cold storage, greenhouses and pre-engineered metal buildings of every kind, the cost side wins by a wider margin. A construction budget prepared this fall for a fiscal 2027 closing should carry hard-cost inflation at the high end of the reported range, not at the headline rate.

Multifamily in Brief

The Rural Housing Service published the quarter's most consequential rule change on September 25. It raised the maximum loan-to-cost on Section 538 guaranteed loans under Option 3, the continuous construction-to-permanent guarantee, from 70% to 80% of total development cost, and it opened a two-year preservation pilot, running October 9, 2026 to September 25, 2028, that sets the debt service coverage floor at 1.11 for the first 200 Section 538 loans closed, with the agency able to go lower on the strength of the lender's market analysis (27). The pilot also introduces risk-tiered underwriting by rental assistance, tax credit equity, operating history and market strength, though the tiers themselves have not been published.

We have covered this in a separate report. The short version is that the loan-to-cost headline changes little for most rural deals, because at a 7.0% note rate and 40-year amortization the coverage test sets the loan unless the project's net operating income yield on cost exceeds about 6.6%, and the older, smaller apartment stock that Section 538 finances trades almost exactly there. The 1.11 floor adds about 3.6% to proceeds, a 100 basis point rate move removes 10.6%, and the annual guarantee fee offsets most of the gain if the sizing model leaves it out. The fee itself is changing: on September 29 the Rural Housing Service filed a revised Section 538 initial and annual fee structure for publication on September 30, which replaces the 2022 schedule of 0.65% and 0.35% and should be read before any deal is sized (35). What the notice does change is the weight on the market study, which is now the document a lender's certification and a deal's risk tier both rest on.

Operating Conditions at the Agency

Rural Development has a new Under Secretary. Glen R. Smith was confirmed on August 7 by a vote of 51 to 47 and sworn in on August 21, ending Todd Lindsey's acting tenure (28). Smith chaired the Farm Credit Administration board from 2019 to 2022 and founded a farm management, appraisal and brokerage firm; his first actions, the multifamily pilot and a proposed rescission of the agency's construction regulation, are deregulatory in direction.

The agency is also moving. The department's reorganization consolidates loan origination, processing and servicing into a national framework and moves Washington-based program staff to regional hubs; field offices, which handle most B&I and Community Facilities files, stay where they are (28). Federal employee unions have sued. On September 14 a federal judge in the Northern District of California issued a brief administrative stay, running to October 2, that bars USDA from enforcing relocation deadlines or disciplining employees who do not move, including in the Rural Development mission area; the judge said it says nothing about the merits, and a preliminary injunction hearing was held September 29 with no ruling by the time this report closed (29). A separate court had allowed the reorganization to proceed on September 2. The workforce the reorganization is moving is already smaller: the Inspector General reported that Rural Development lost 1,745 of 4,910 employees, about 36%, between January and June 2025 (30).

¨

The money is on a short leash. The Continuing Appropriations and Extensions Act, 2027 funds the government at largely fiscal 2026 levels from October 1 through December 11 (7). Fiscal 2027 begins tomorrow with no full-year bill, no fiscal 2027 OneRD fee notice, and no published date for the REAP rule rewrite that Executive Order 14315 requires before grants can resume (31)(32). The farm bill sits between chambers: the House passed its version on April 30, the Senate Agriculture Committee advanced its bill on September 16, and the current extension of the 2018 law expires today, and the Senate committee chairman has said a conference will wait until after the election (33). Rural Development's lending authorities do not depend on the farm bill in the short term, since they run on appropriations, but program changes in either bill will not take effect before 2027.

One rule change deserves attention outside the housing programs. The August 19 proposal to rescind 7 CFR Part 1924, the construction and repair regulation, includes conforming amendments that redirect construction requirements for the business programs to the Community Facilities standards in Part 1942 (34). Comments are due October 19. A feasibility study delivered this fall should state which construction standard its cost estimate assumes, because the standard may change between the study date and the closing date.

What Changes in a Feasibility Study

A quarter like this one does not change what a feasibility study is. It changes what the reviewer is looking for, and we have adjusted our scope accordingly.

Check the lender. Before relying on a guaranteed-loan commitment, we confirm the originating lender's standing on Lender Lens and against the May 12 removal list, and we state the result in the study. A borrower should not learn that its lender has been removed from a press release.

Name the sector risk. Controlled environment agriculture and biodigester projects are not eligible for new RBCS guarantees through December 31, 2026, and the agency has said so in percentages. Any project in the new-technology energy and agriculture family should expect the reviewer to discount projected cash flow that has no operating history behind it, and the study should present sensitivity cases that survive that discount.

Price the debt both ways. A variable-rate loan gets a base case at current prime and a stressed case at plus 100 basis points, which is where the committee's own projection points. A fixed-rate loan gets sized at the current 10-year plus the lender's spread plus a buffer, because the long end has moved 80 basis points in a quarter. Community Facilities direct loans get modeled at no less than 4.750% until the October notice posts.

Carry the fees. The 3.0% initial guarantee fee belongs in sources and uses and the 0.55% retention fee in the operating projection. A B&I model that leaves them out overstates coverage on a $4 million loan by roughly $18,700 a year.

Stress the hard costs. Metal-intensive projects get hard-cost inflation at 9% or above year over year in the budget, and every study states the construction standard the estimate assumes.

Treat grants as upside. The base case capital structure for a rural business project in fiscal 2027 is equity plus a bank loan with a USDA guarantee. A REDLG pass-through, an IRP loan, a Value-Added Producer Grant or a future REAP grant improves that structure if it comes; a project that only works with a grant is carrying a risk the reviewer will see and the appropriations calendar may realize.

Allow for time. A relocation in progress, a workforce a third smaller than in 2024 and a continuing resolution point in one direction. Complete applications move; incomplete ones wait.

What to Watch

October 2 is the date the administrative stay on the reorganization expires, and a ruling on the preliminary injunction may come before it. The October 1 Community Facilities and Water and Waste Disposal rate notices will show how much of the Treasury move reached USDA's direct programs. The revised Section 538 fee schedule publishes today. The fiscal 2027 OneRD fee notice, the REAP proposed rule, the Section 538 risk tiers and the Part 1924 final rule have no dates. December 11 is the next funding deadline, and the farm bill's floor prospects depend on what the November 3 election leaves of the calendar. The next edition of this monitor will carry the Lender Lens tabulation by lender and sector, and the fiscal 2027 terms if they exist by then.

Frequently Asked Questions

Is the USDA Business and Industry program being eliminated?

The President's fiscal 2027 budget requests no appropriated authority for B&I guarantees. The House bill passed on June 4 provides $2.0 billion. Until Congress enacts a full-year bill, a continuing resolution keeps the program at fiscal 2026 levels through December 11, 2026, and the program is open on fiscal 2026 terms.

What did USDA say about the ten lenders it removed?

That nine lost their approved-lender status and one was not renewed, that their portfolios hold about $620 million of delinquent loans, about 47% of Rural Development's delinquent total, and that more than 750 approved lenders remain. Two of the lenders have publicly disputed the characterization and at least one has said it will appeal. Loans already guaranteed through a removed lender keep their guarantee; new guarantees through that lender stop.

Which USDA-guaranteed project types are on hold?

New applications for anaerobic biodigesters and controlled environment agriculture are paused through December 31, 2026. USDA reported the two portfolios at 28% and 40% delinquent in April 2026. REAP grants are separately halted pending a rule rewrite; REAP guaranteed loans remain available.

Did USDA guarantee fees change for fiscal 2027?

No fiscal 2027 notice had been published as of September 30, 2026. The fiscal 2026 terms remain in effect: for B&I, a 3.0% initial fee, a 0.55% annual retention fee, and an 85% guarantee on loans under $5 million or 80% from $5 million to $25 million.

Are USDA loans cheaper or more expensive than a year ago?

Both. Prime-based guaranteed loans are cheaper, because prime is 7.00% against 8.50% in early 2024. Fixed-rate loans are more expensive, because the 10-year Treasury reached 5.24% in late September. The Community Facilities direct market rate is 4.750%, down from 5.250% a year earlier, but construction input costs rose 8.9% over the same period, which more than offsets the saving for most projects.

What is Lender Lens?

A USDA dashboard launched January 19, 2026 that publishes the OneRD guaranteed portfolio at loan level, including the holding and originating lender, unpaid principal and the amount more than 90 days delinquent. It lets borrowers and consultants check a lender's standing before closing.

September 30, 2026 by Michal Mohelsky, J.D., principal of MMCG Invest, LLC, a national SBA and USDA feasibility study consultancy

Request a Feasibility Study https://calendar.app.google/EJzWEz3GCqLY2jU86

Michal Mohelsky, J.D. | Principal | mmcginvest.com 

Contact: michal@mmcginvest.com

Phone: (628) 225-1125

Sources

1. U.S. Department of Agriculture, FY2027 Budget Summary, Rural Development tables

2. U.S. Department of Agriculture, FY2027 Budget Explanatory Notes, Rural Business-Cooperative Service

3. U.S. Department of Agriculture, FY2027 Budget Explanatory Notes, Rural Housing Service

4. House Appropriations Committee, Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2027 (H.R. 8646), full committee print and summary; House passage June 4, 2026

5. Office of Management and Budget, Federal Credit Supplement, Budget of the U.S. Government, Fiscal Year 2027

6. Office of Management and Budget, Federal Credit Supplement, Fiscal Year 2021 through Fiscal Year 2026 editions

7. Congressional Research Service, Overview of Continuing Appropriations for FY2027 (Division A of P.L. 119-103), R49353

8. Congressional Research Service, Federal Credit Assistance and Grant Programs for Rural Businesses, R47438

9. Summit LLC for the National Rural Lenders Association, USDA B&I Guaranteed Loan Program: Economic Assessment 2025, submitted to the House Committee on Agriculture, September 18, 2025

10. USDA Rural Business-Cooperative Service, letter to all OneRD lenders, February 18, 2026

11. U.S. Department of Agriculture, USDA Revokes Approved Lender Status of Ten Lenders, press release, May 12, 2026; Rural Business-Cooperative Service stakeholder announcement, May 13, 2026; and Frequently Asked Questions for OneRD Revocation of Lenders

12. American Banker, Citing bad loans, USDA bars a group of lenders from lending program, May 18, 2026

13. KOLO-TV, report on Greater Nevada Credit Union and the USDA lender dashboard, May 13, 2026

14. U.S. Department of Agriculture, USDA Launches Lender Lens Dashboard to Promote Data Transparency, press release, January 19, 2026, and Lender Lens data dictionary

15. Federal Register, OneRD Guarantee Loan final rule, 89 FR 79698, September 30, 2024, and technical amendment, December 11, 2025

16. USDA Rural Business-Cooperative Service, Unnumbered Letter, 90 Day Administrative Pause on Biodigesters and Controlled Environment Agriculture Applications, January 2026

17. USDA Rural Business-Cooperative Service, Unnumbered Letter, Extension of the Temporary Administrative Pause on Biodigester and Controlled Environment Agriculture Applications, April 2026, and stakeholder announcement

18. USDA Office of Inspector General, Audit Work Plan, Fiscal Year 2026; Federal Register, Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program final rule, effective July 9, 2026

19. Board of Governors of the Federal Reserve System, FOMC statement, implementation note and Summary of Economic Projections, September 16, 2026

20. Board of Governors of the Federal Reserve System, H.15 Selected Interest Rates, and FRED series DPRIME and DGS10, September 2026

21. USDA Rural Development, Community Facilities Direct Loan and Grant Program, interest rate letters and program page, April 2025 through September 2026

22. USDA Rural Utilities Service, Interest Rate Changes for Water and Waste Disposal Loans, April 2026, and program page

23. 7 CFR 5001.401, Interest rate provisions

24. Board of Governors of the Federal Reserve System, Senior Loan Officer Opinion Survey on Bank Lending Practices, April 2026 and July 2026

25. Bureau of Labor Statistics, Producer Price Index Detailed Report, August 2026; Associated General Contractors of America, analysis of construction input costs, September 10, 2026; National Association of Home Builders, Smaller Builders Report Higher Material Costs, August 26, 2026

26. Presidential proclamations on Section 232 steel, aluminum and copper tariffs, June 2025, April 2, 2026 (Proclamation 11021) and June 1, 2026 (Proclamation 11032, 91 FR 34085), and Federal Register implementing notices

27. Federal Register, Rural Housing Service, Multifamily Housing Preservation Pilot and Section 538 loan-to-cost percentage change, 91 FR 60930, September 25, 2026

28. USDA Rural Development, Glen Smith Sworn in as Under Secretary for Rural Development, news release, August 2026, and U.S. Department of Agriculture reorganization announcements

29. Government Executive, Federal News Network and Agri-Pulse, reports on the administrative stay of USDA relocations and the September 29, 2026 hearing

30. USDA Office of Inspector General, Rural Development staffing review, 2025, as reported by Agri-Pulse

31. Federal Register, 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 2026, 91 FR 11272, March 9, 2026

32. Federal Register, Notice of Rescission of Funding Opportunity for the Rural Energy for America Program, FR Doc. 2026-07332, April 15, 2026, and USDA stakeholder announcement of March 31, 2026

33. Congressional Research Service, The 2026 Farm Bill: Comparison of the House and Senate Bills with Current Law, R48918; House Committee on Agriculture and Senate Committee on Agriculture, Nutrition, and Forestry, September 2026; Farm Policy News, September 2026

34. Federal Register, Rescission of Rural Development's Construction and Repair Regulation, proposed rule, 91 FR 53540, August 19, 2026

35. Federal Register, Rural Housing Service, Revised Fee Structure for Section 538 Guaranteed Rural Rental Housing Program Initial and Annual Guarantee Fees, FR Doc. 2026-20022, public inspection September 29, 2026