Why Half of USDA Business and Industry Loan Applications Get Rejected (and What That Means If You're Building Rural)

The USDA Business and Industry Guaranteed Loan Program just had its biggest year in history. It also rejected roughly one out of every two applications that crossed its desk. Both things are true at the same time, and the gap between them tells you almost everything you need to know about rural commercial lending in 2026.

The U.S. Department of Agriculture obligated $1.8 billion through the USDA Business and Industry Guaranteed Loan Program in fiscal 2024 — a record utilization rate of 98.24% against the program's $1.83 billion allotment (1). It then rolled into FY2025 with a $3.5 billion allotment, the largest in the program's 53-year history (2). At the same time, the share of B&I applications that actually received approval dropped from 89.1% in FY2021 to 52.7% by FY2023, the most recent year for which the Office of the Comptroller of the Currency has published throughput data (3).

That pattern is not contradictory. It is the program working exactly the way Congress designed it to work in a constrained-capacity environment, and it has specific consequences for anyone planning to build a hotel, a manufacturing facility, a healthcare campus, or an energy project in rural America. This piece walks through what the data actually says, where the money has gone, which states and industries dominate the portfolio, and what the structural shifts in FY2026 mean for borrowers and lenders.

The B&I program in one paragraph

B&I is a federal credit-enhancement program, not a direct lender. A bank or non-bank lender originates a commercial loan to a rural business, and USDA guarantees a portion of that loan against default. The current standard guarantee is 80% of the loan amount; for loans under $5 million obligated on or after October 1, 2025, the guarantee is now 90% (4). Eligible borrowers must be located in communities of 50,000 inhabitants or fewer, which you can verify against the USDA rural eligibility map. Loan amounts run from $200,000 to $25 million per borrower, with project totals frequently exceeding $50 million when stacked with conventional debt, tax credits, or PACE financing. For a complete breakdown of who qualifies for a B&I loan and what can be funded, the eligible-uses framework is wider than most sponsors expect. The program operates under 7 CFR Part 5001, the OneRD regulation that consolidated four USDA guarantee programs into a single rulebook in 2021.

That's the technical scaffolding. The interesting story is what's happened on top of it.

A program at peak scale, with peak rationing

Between 2015 and 2024, the B&I program obligated $13.4 billion across 2,821 individual loans (1). Sixty percent of that activity occurred in just the past five fiscal years. Average loan size more than tripled, from $2.75 million in 2015 to $8.1 million in 2024 (1).

Loan count went the other direction. The program made 354 loans in 2017 and 176 in 2024 — a 50% drop in deal count even as dollar volume nearly doubled. The story is fewer, larger projects, financed by a smaller stable of specialist lenders. The Summit/NRLA Economic Assessment, prepared as exhibit testimony to the House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development in September 2025, flagged this directly: "While B&I loan guarantee activity has increased, the number of participating lenders has decreased, which may lead to geographic risks" (1).

That concentration shows up in the approval data. The OCC's June 2025 Community Developments Insights report on B&I — the only public source that reports application throughput at all — laid out a brutal three-year sequence (3):

Fiscal Year	Submitted	Approved	Approval Rate
2021	414	369	89.1%
2022	590	367	62.2%
2023	596	314	52.7%

Submissions jumped 44% between 2021 and 2023. Approvals barely moved. The Agency was running into the ceiling of its budget authority, and it started saying no.

USDA published a Federal Register notice on December 7, 2023 establishing a minimum priority score of 20 points for FY2024 B&I applications (5) — a formal gate that effectively codified the squeeze. By 2024, the program was operating at 98.24% utilization, the highest on record (1). When you're using 98 cents of every available dollar, you turn down the marginal applicant. That is the mathematical reality of the past three years, and it is unlikely to reverse meaningfully under the FY2026 enacted authority of $1.8 billion (6) — about half the FY2025 allotment.

The OCC has not published FY2024 or FY2025 application data. Neither has USDA's new Lender Lens dashboard, which exposes obligation volume, sector mix, and delinquency rates but stops short of reporting submissions versus approvals (7). Until that data appears, the working assumption is that approval rates have stabilized somewhere in the 50–60% range and that the program's discretion has shifted decisively toward larger, better-collateralized projects with experienced sponsors and demonstrated cash flow. To estimate where a specific project sits on that spectrum, sponsors can run their numbers through the B&I loan calculator and compare against the priority scoring framework.

Where the money goes: hospitality first, manufacturing second, energy third

Hospitality has been the program's number one sector every year since 2015. In FY2024, accommodation and food services accounted for 32.06% of obligations — roughly $577 million in a single year (1). Manufacturing came in at 18.48%, utilities at 10.54%, healthcare at 6.73%, and mining/oil-and-gas at 5.66%. The remaining 26% spread across agriculture, retail, real estate, and 14 other NAICS sectors. Across the full 2015-2024 window, B&I has touched 21 NAICS sectors and 90 unique subsectors (1).

The hospitality concentration is a direct function of the rural-area definition. The 50,000-population cap pushes B&I-eligible projects into tourism corridors, ski communities, lake destinations, gateway towns to national parks, and small historic cities. These are the places where hotels can support institutional debt. The Inn at Bellefield in Hyde Park, New York — a 137-key Marriott Residence Inn anchored by a $25 million B&I loan from X-Caliber Rural Capital plus $11 million in C-PACE — is the prototype: a recognizable brand, a defensible market, a borrower with operating experience, and a capital stack that makes the project pencil at small-town room rates (1).

Manufacturing tells a different story. Summit's report featured Secure Semiconductor Manufacturing in Coffey County, Kansas — a chip fab that used B&I to grow "larger than planned" against the backdrop of U.S. semiconductor production having fallen from 4,000 manufacturers in the 1980s to a few hundred today (1). Westby Cooperative Creamery in Vernon County, Wisconsin closed a $15.5 million B&I loan in December 2025 with Security Financial Bank to modernize its cottage cheese plant (8). Stewart Glass, financed at $16.4 million by First Bank of the Lake, retooled a former GE lightbulb factory in Hocking County, Ohio into a solar glass production line (9).

The mining-and-energy spike in FY2023 — when that sector accounted for 15.76% of obligations, four times its historical share — is almost entirely a Louisiana and Oklahoma story. Champagne Energy and Environmental Solutions in Houma, Louisiana grew from $1.8 million in revenue in 2008 to $110 million by 2024 with B&I support, financed continuously through United Community Bank (1). The company lays oil and gas pipelines in the Gulf and is now bidding on offshore wind power-cable contracts. That single borrower trajectory — a small subsea construction firm scaling 60-fold across two decades on the back of a federal credit guarantee — is the cleanest illustration in the entire Summit report of what B&I is actually for.

State concentration: North Carolina, Louisiana, and Texas dominate

Ten states accounted for the bulk of cumulative B&I obligations between 2015 and 2024 (1):

State	Obligations ($M)	Loans	Avg Loan ($M)
North Carolina	957	200	4.79
Louisiana	926	122	7.59
Texas	838	97	8.64
Florida	762	143	5.33
Oklahoma	665	130	5.12
California	658	133	4.95
Arizona	485	83	5.84
Missouri	481	269	1.79
Kentucky	470	74	6.35
Oregon	438	108	4.06

Each of these rankings has a specific structural explanation, and they're worth understanding because they tell you where the lending infrastructure for B&I actually lives.

North Carolina is at #1 because Live Oak Bank is at #1. Headquartered in Wilmington, Live Oak has been the largest USDA Rural Business-Cooperative Service guaranteed lender in the country for most of the past decade. The bank surpassed $1 billion in cumulative renewable-energy lending by September 2021 and operates specialized vertical teams in solar, bioenergy, healthcare practice acquisition, and self-storage. That single institution drives a large share of NC's volume. Layer on top the state's poultry-processing concentration — North Carolina ranks first nationally in poultry receipts at over $16 billion in farm cash receipts in 2022 — and you get the #1 state ranking by absolute dollars.

Louisiana at #2 is the program's most counterintuitive result. The state has fewer than 4.6 million residents and is dominated by a small number of metros that fall outside B&I eligibility. But the rural parishes along the Gulf Coast — Terrebonne, Lafourche, St. Mary, Iberia — host a dense network of oil and gas service companies, petrochemical processing plants, and seafood operations. CEES is one example. There are dozens more. Louisiana ranks third per capita ($236) behind only Alaska and Wyoming, and its average loan size of $7.59 million reflects the capital intensity of its dominant industries.

Texas at #3 is volume by geography. With 254 counties spread across vast rural acreage, Texas runs the spectrum from West Texas oil-field service borrowers to Hill Country hospitality projects to Panhandle agribusiness. The state's $8.64 million average loan size — the highest in the top 10 — reflects the capital intensity of its energy and manufacturing borrowers.

Missouri is the data point that should make any analyst stop. Missouri ranks #8 by total dollars but #1 by loan count — 269 loans averaging $1.79 million each. That's a community-bank-density signature. Missouri has a thicker network of state-chartered community banks per capita than most states, and First Bank of the Lake out of Osage Beach is one of the program's most active small-loan originators. The state's pattern foreshadows what the FY2026 sub-$5M policy change is likely to amplify nationally: more loans, smaller projects, broader geographic distribution.

The per-capita map flips everything. Alaska ($251), Wyoming ($239), and Louisiana ($236) lead per-capita rankingsbecause their rural populations are small and their industries are capital-intensive (1). The bottom of the per-capita table reads almost entirely Northeast: New Jersey at $2, Massachusetts at $3, Connecticut at $10, Maryland at $14. The unexpected name in that group is Indiana at $16 — a state with significant rural manufacturing presence but very limited B&I activity, suggesting the program has not yet penetrated the Midwest manufacturing belt the way it has the Gulf Coast and the Carolinas.

The risk picture: lower than you'd expect, with concentrated vintages

The B&I program paid approximately $501.6 million in cumulative loss claims between fiscal 2015 and fiscal 2024 (1). On a portfolio that obligated $13.4 billion in core B&I loans across the same window, that is a roughly 3.7% lifetime gross loss ratio — well below the comparable SBA 7(a) cumulative charge-off rate of approximately 7.5% (10).

The vintage distribution matters more than the headline. Summit's analysis attributes "the bulk of losses" to obligations originated pre-2012, in 2013, and in 2015 (1). Average annual losses from 2021 through 2024 ran "just under $30 million" against peak loss years of 2016 and 2018 that each exceeded $70 million. In other words, the program's loss tail is mostly behind it. Newer cohorts — the $1.8 billion to $1.9 billion annually obligated in 2021, 2022, 2023, and 2024 — are performing materially better than the pre-OneRD vintages.

The subsidy rate trajectory tells the same story from the other direction. The B&I subsidy rate, calculated annually by USDA and OMB based on projected long-term losses net of fee income, ran at 5.11 in 2015. By 2025 it had fallen to 0.20, the second-lowest in program history (1). That is a 96% reduction in modeled lifetime cost over a decade. It cost the federal government roughly 20 cents to support every $100 of B&I lending in 2025, against $5.11 in 2015.

What does default risk look like by industry? USDA does not publish B&I loss claims broken out by NAICS sector at any level of granularity. The closest publicly available proxy is the SBA 7(a) charge-off data compiled by SBALenders.com from SBA's own loan-level records. Across 1995-2024, SBA 7(a) lifetime charge-off rates by industry look like this (10):

NAICS	Industry	Charge-off Rate
721110	Hotels and Motels	1.8%
722511	Full-Service Restaurants	5.9%
722211	Limited-Service Restaurants	6.6%
447110	Gas Stations w/ C-Store	3.5%
445110	Supermarkets	6.3%
811192	Car Washes	3.2%

This is only a directional benchmark. B&I loans average about 7.6 times the size of SBA 7(a) loans, are restricted to rural geographies, do not face a "credit elsewhere" test, and carry a uniform 80% guarantee where SBA's runs 75-85%. But the relative ordering — hotels lowest among hospitality, limited-service restaurants highest, manufacturing and healthcare meaningfully better than retail food — is a defensible starting point for any risk analysis on a B&I-eligible deal until USDA's Lender Lens dashboard publishes industry-level loss data directly.

What changes in FY2026

Two things shifted on October 1, 2025, and a third settled six weeks later when Congress finally passed an appropriations bill.

First, USDA published its FY2026 OneRD fee notice in March 2026 (4). For B&I loans of less than $5 million, the guarantee percentage rose from 80% to 90% and the initial guarantee fee dropped from 3% to 1%. The periodic retention fee fell from 0.55% to 0.50%. For lenders working sub-$5M deals — which is most community banks and most rural hospitality and manufacturing projects under $10 million in total project cost — the program just became materially more attractive. A 90% guarantee with a 1% upfront fee is closer to SBA 7(a) economics than B&I has ever been.

Second, the FY2026 Agriculture Appropriations Act was enacted on November 12, 2025 as Division B of P.L. 119-37 (6), ending a 43-day federal government shutdown. The bill provides approximately $1.8 billion in grants and loans for rural business and industry programs, against the FY2025 allotment of $3.5 billion. This is not a 50% cut to deal flow — the FY2025 figure was an inflated allotment that the program never actually obligated against, and historical core B&I obligations have averaged closer to $1.6-1.9 billion annually. The FY2026 number is consistent with the program's recent run-rate.

Third, USDA's Lender Lens dashboard launched on January 19, 2026 and now publishes total loan volume, average loan size, sector mix, geographic distribution, and delinquency rates with weekly refreshes (7). The data is downloadable to the loan level. For the first time in the program's history, anyone with a browser can see the B&I portfolio in close to real time. Whether that transparency changes lender behavior, borrower expectations, or congressional appetite for the program remains to be seen, but it materially reduces the information asymmetry that has characterized rural commercial lending for fifty years.

What this means if you're building rural

A few things follow directly from the data.

If your project is under $5 million, the math just got better. The 90% guarantee and 1% fee structure makes B&I competitive with SBA 7(a) for many small-business acquisitions, equipment purchases, and modest expansion projects. Community banks that have historically defaulted to SBA for sub-$5M deals should re-run the numbers. The B&I loan calculator lets you model the new fee economics directly.

If your project is $5 million to $25 million, you are in the program's sweet spot but you are also in the most competitive zone. Approval rates of 50-60% mean roughly half of submitted applications get rejected. The differentiating factors are sponsor experience, market analysis depth, debt service coverage at stress-tested assumptions, and a USDA-compliant feasibility study that anticipates and answers the questions a credit committee will actually ask. A "checkbox" feasibility study — generic market data, recycled financial templates, no scenario analysis — is a leading cause of B&I application denial. The Agency increasingly expects analytical rigor that mirrors what a private credit committee would demand on a non-guaranteed loan.

If your project is over $25 million, you are operating at the program's ceiling and you should be planning a stacked capital structure from the beginning. B&I caps out at $25 million per borrower. The Inn at Bellefield's $36 million debt stack — $25 million B&I plus $11 million C-PACE — is the pattern. So is REV Development's Holiday Inn Express in Silverthorne, Colorado at $20 million B&I plus $6.3 million C-PACE. Conventional construction debt, USDA Community Facilities, New Markets Tax Credits, and rural-eligible PACE programs all stack with B&I cleanly.

If you are in a rural state with limited B&I infrastructure — Indiana, Ohio, Pennsylvania, the Midwest manufacturing belt broadly — you have a structural advantage. The program is undersaturated in your geography. Lenders who specialize in B&I are concentrated in the Carolinas, Florida, and the Plains states. Borrowers in less-penetrated states often face less competition for capacity and faster review cycles, particularly if their state USDA RD office has scoring discretion under the priority points system. The first step in either case is verifying rural eligibility for the project address.

If you are advising any of the above, your job for the next 24 months is to track three things: the actual FY2025 obligation close-out when USDA publishes it through Lender Lens, FY2026 application throughput data when (and if) OCC or USDA refreshes the approval rate series, and the on-the-ground response to the sub-$5M 90% guarantee change. Those three data points will tell you whether the program is consolidating into a high-volume small-business credit-enhancement tool, holding its current larger-project orientation, or splitting cleanly into two operating modes.

The B&I program is not the largest federal credit program. It is not the most visible. It is, however, the most analytically interesting one in rural commercial finance in 2026, and the structural shifts of the past 18 months have created the most consequential opportunity set rural sponsors have seen since OneRD launched in 2021.

For sponsors evaluating whether their project qualifies, the B&I eligibility checklist walks through the borrower types, eligible uses, and population thresholds in detail. For lenders evaluating whether to expand B&I capacity, the data in this article should help frame the case to a credit committee.

MMCG Invest, LLC delivers third-party feasibility studies and market studies for SBA 7(a), SBA 504, USDA B&I, USDA REAP, USDA Community Facilities, and conventional financing on every asset class covered in this report. Engagements begin at a $4,900 minimum. The firm's lead reviewer holds a J.D. and is a Practicing Affiliate of the Appraisal Institute. For credit officers and sponsors evaluating an automated special-purpose asset under current SBA capital-stack pricing, request a scoping call before the LOI, not after.

EReach out to discuss how our methodology supports your lending decision.

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

Contact: michal@mmcginvest.com

Phone: (628) 225-1125

Disclaimer: This report is provided for informational purposes only and does not constitute investment advice. Data presented herein is derived from proprietary MMCG databases and third-party sources believed to be reliable; however, MMCG Invest makes no representation as to the accuracy or completeness of such information. Figures from third-party industry databases have been independently verified and, where appropriate, adjusted to reflect MMCG's proprietary analytical methodology. Past performance is not indicative of future results.

Sources

(1) Summit, LLC. "USDA B&I Guaranteed Loan Program: Economic Assessment 2025." Prepared for the National Rural Lenders Association. September 2025. Submitted as exhibit to House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development testimony, September 18, 2025. https://agriculture.house.gov/uploadedfiles/testimony_brand_9.18.2025.pdf

(2) Brand, Bette. Testimony before the House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development. September 18, 2025. https://agriculture.house.gov/uploadedfiles/testimony_brand_9.18.2025.pdf

(3) Office of the Comptroller of the Currency. "USDA Rural Development Business and Industry Guaranteed Loan Program." Community Developments Insights. June 2025. Table 3. https://www.occ.gov/publications-and-resources/publications/community-affairs/community-developments-insights/pub-insights-june-2025.pdf

(4) 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 Fed. Reg. 11272. March 9, 2026. https://www.federalregister.gov/documents/2026/03/09/2026-04581/

(5) Federal Register. "Business and Industry (B&I) Priority Scoring Notice for Fiscal Year 2024." 88 Fed. Reg. 85339. December 7, 2023. https://www.federalregister.gov/documents/2023/12/07/2023-26802/

(6) Congressional Research Service. "Agriculture and Related Agencies: FY2026 Appropriations." CRS Report R48564. February 2026. https://www.congress.gov/crs-product/R48564. Public Law 119-37, Division B, enacted November 12, 2025.

(7) U.S. Department of Agriculture. "USDA Launches Lender Lens Dashboard to Promote Data Transparency." January 19, 2026. https://www.usda.gov/about-usda/news/press-releases/2026/01/19/. Dashboard at https://www.rd.usda.gov/rural-data-gateway/onerd-loan-portfolio.

(8) USDA Rural Development. "USDA Invests Nearly $15.5 Million to Help Westby Cooperative Creamery Expand." December 2, 2025.

(9) The Herald (mchnews.com). "USDA Rural Development invests $16.4 million to expand Solar Glass production in Ohio." Late December 2025.

(10) King, Darren. "Understanding SBA Loan Failures: Industry Trends and Insights." SBALenders.com. March 10, 2025. https://www.sbalenders.com/state-of-sba-7a-loans-rising-defaults-and-growing-concerns/