Business plan for a USDA
A USDA business plan details your rural business concept, market research, money forecasts, management, and operations. It displays how your business matches USDA's rural growth aims like making jobs, bettering infrastructure, enhancing food safety, or pushing renewable power.
A USDA business plan is required for most USDA loan and grant programs, such as the Business and Industry (B&I) Loan Guarantee Program, the Intermediary Relending Program (IRP), or the Rural Microentrepreneur Assistance Program (RMAP). These programs provide loan guarantees, direct loans, or grants to rural companies that fulfill specific eligibility needs.
A USDA business plan can assist you:
- Elucidate your business vision and goals
- Pinpoint your target market and competitive edge
- Approximate your startup costs and revenue flows
- Devise your marketing and sales tactics
- Evaluate your financial needs and risks
- Convey your business value proposal to lenders and investors
- Track your progress and performance
If you are a small business, refer to our SBA 7(a) Business Plan and SBA 504 Business Plan for additional resources.
USDA Business Plan Template
A USDA business plan template is a tool helping rural business owners make a thorough and professional business plan for their USDA loan or grant request. Tools like USDA business plan template and USDA farm business plan worksheet can guide what information to include in each business plan section, as well as examples and tips on how to write a USDA business plan for farm loan effectively.
Some of the benefits of using a USDA business plan template are:
- Save time and effort by providing a clear and consistent format for the business plan.
- Help to avoid common mistakes and omissions that could jeopardize the approval of the loan or grant.
- Demonstrate the business owner’s commitment and preparedness to the USDA and other stakeholders.
- Increase the chances of securing funding and achieving success for the rural business.
A USDA business plan typically consists of the following sections:
Executive Summary
The executive summary section briefly overviews the business concept, goals, products/services, market opportunity, competitive edge, financial highlights, and USDA funding request. It covers:
- Business name, location, structure, ownership
- Purpose, vision, mission, values
- Product/service benefits and features
- Target customers and needs
- Competitors and competitive advantages
- Goals and metrics
- Startup costs, revenue, expenses
- Funding needs and uses
- Contributions to rural economy and USDA goals
The summary makes a compelling, concise case for the business and funding request. It highlights alignment with USDA rural development objectives in under two pages.
Business Description
The business description section provides background on the business history, structure, operations, and legal aspects, including:
- Start date and motivation
- Legal form and ownership
- Management roles and responsibilities
- Required licenses, permits, regulations
- Facilities, equipment, technology, inventory
- Industry size, outlook, growth, drivers, barriers, regulations
- Target market segments and niches
It provides pertinent details showing comprehension of the business setting, industry dynamics, and potential opportunities.
Market Analysis
The market analysis analyzes the target market, customer profile, behavior, and competitive landscape. It covers:
- Target customer demographics, geographics, psychographics, behaviors
- Market size and growth potential
- Market segmentation, needs, preferences, pain points
- Customer acquisition, retention, satisfaction tactics
- Pricing tactics and methods
- Promotion tactics and channels
- Distribution tactics and channels
- Customer service tactics and standards
- Competitor identification and analysis
- Competitive differentiation and unique selling points
The analysis shows a clear grasp of the target customers and market. It displays a viable, sustainable competitive edge and marketing/sales tactics.
Financial Plan
The financial plan section presents your business's financial projections, assumptions, and analysis. It includes:
- Income Statement - Projects revenue, COGS, OPEX, and profit margins for the next 3-5 years.
- Balance Sheet - Projects assets, liabilities, and equity for the next 3-5 years.
- Cash Flow Statement - Projects cash inflows and outflows for the next 3-5 years.
- Break-Even Analysis - Indicates the break-even point and how long it will take.
- Sensitivity Analysis - Shows how sensitive the business is to changes in key variables like sales volume, price, cost, and interest rate.
The financial plan indicates the amount of USDA funding requested and what it will be used for. It outlines the loan repayment schedule.
The projections demonstrate a realistic, feasible financial model to generate revenue, cover costs, loan repayment, and manage potential risks and uncertainties. The plan answers key financial questions and shows the business can repay the USDA loan. Refer to our loan officer business plan for more information.
Applying for a USDA Commercial Loan
A USDA commercial loan is a guarantee the USDA offers through its Business and Industry (B&I) Loan Guarantee Program. This program aims to improve rural areas' economic and environmental climate by supporting businesses that create or save jobs and provide essential services. A USDA commercial loan can be used for various purposes, such as:
- Business conversion, enlargement, repair, modernization, or development
- Purchase and development of land, buildings, or infrastructure
- Purchase and installation of machinery or equipment
- Working capital
- Debt refinancing
- Business acquisition
To apply for a USDA commercial loan, a rural business owner must find an eligible lender participating in the B&I Loan Guarantee Program. The lender will then submit an application package to the USDA on behalf of the borrower.
Here are the key items for the B&I Complete Application Checklist:
- SAM registration and Unique Entity Identifier (UEI)
- Form RD 5001-1 “Application for Loan Guarantee”
- Written credit evaluation and Lender’s Credit Evaluation Checklist
- Environmental review information per §5001.207 and 7 CFR Part 1970:
Phase 1 assessments
Flood hazard forms
Other items required for review - Required financial statements:
Current and historical statements of borrowers and guarantors
Projected financial statements and assumptions
Pro forma balance sheet - Current credit reports
- Draft loan agreement (for requests $600k+)
- Loan classification and credit risk rating
- Real Estate Appraisals per §5001.203(c)
- Feasibility study if required by Agency (Refer to Appendix A to Subpart D of Part 5001)
- Business plan unless contained in feasibility study/credit evaluation
- Organizational documents and charts
- Form RD 5001-12 for loans >$1M increasing employment
- Form HUD-935.2A for 5+ residential units
- SEC Form 10-K, if applicable
- Certificate of need for healthcare facilities, if required
- Intergovernmental consultation comments per 2 CFR part 415
- Form RD 5001-2 or 5001-2a
The USDA reviews the application to ensure:
- Borrower is a U.S. citizen or legal resident
- Project is in a rural area with population under 50,000
- Project creates/saves jobs or provides essential services
- Borrower has sufficient equity, cash flow, and collateral
- Loan amount is within the limit (up to $25M, or $40M for some projects)
- Loan term is within the limit (up to 30 years real estate, 15 machinery/equipment, 7 working capital)
- Interest rate is negotiated and USDA-approved
- Guarantee fee is paid per USDA approval
If approved, USDA issues a conditional commitment specifying loan terms. The lender closes the loan, disburses funds, and receives a 90% loan guarantee from USDA.
How Do I Pay Back My USDA Loan?
The repayment of a USDA loan depends on the terms and conditions agreed upon by the borrower and the lender. The borrower is responsible for making regular monthly payments to the lender until the loan is fully paid off. The borrower can also choose to prepay the loan without penalty unless otherwise specified by the lender.
The borrower can use various methods to pay back their USDA loan, such as:
1. Online payment
You can make your mortgage payment online by logging in to your account and clicking “Make A Payment.” You must provide your bank routing number, bank account number, type of account (checking or savings), and payment amount. Payments made after 7:30 p.m. Central Time will be posted the following business day.
2. Payment by phone
You can pay by calling 1-800-414-1226 and selecting Option 1. You must enter your mortgage account number, social security number, bank account number, bank routing number, payment amount, and type of account (checking or savings) using a touch-tone phone.
3. Customer service assisted payment
You can make your payment with the assistance of a customer service representative by calling 1-800-414-1226 or 1-800-438-1832 (TDD/TTY Hearing Impaired Only) between the hours of 7 a.m. and 5 p.m. Central Time, Monday through Friday. You will need your mortgage account number, social security number, bank routing number, bank account number, type of account, and payment amount.
4. Checks or money orders
You can mail your payment to USDA/Rural Development, PO BOX 790170, St. Louis, MO 63179-0170. If your account is bankrupt, mail your payment to USDA/Rural Development, PO BOX 790190, St. Louis, MO 63179-0190. Please make sure to write your mortgage account number on your check.
5. Pre-authorized debit
You can schedule a date of the month on which your payment is automatically transferred from your checking or savings account to the USDA. You must sign Form RD 3550-28 (Authorization Agreement for Preauthorized Payments) and provide a voided check or deposit slip.
6. Western Union Quick Collect
You can make payment in cash at any Western Union location. You can call 1-800-325-6000 to find the Quick Collect office. You need to provide your name, address, phone number, mortgage account number, company name (USDA/RHS), code city (USDARURAL), and state (MO). This service has a fee, and Western Union only accepts cash.
7. MoneyGram
You can make payments in cash at any MoneyGram location. You can call 1-800-926-9400 to find the closest MoneyGram office. You need to provide your name, address, phone number, mortgage account number, receive code (16345), company name (USDA Rural Development), city (St Louis), and state (MO). There is a fee for this service.
OGSCapital Can Help You Write a Winning USDA Business Plan
Don’t hesitate to contact us today and get started on your USDA agriculture business plan. Schedule a free consultation with our SBA business plan consultant. Let us help you turn your rural business idea into a reality!
