What the Rural Economic Development Loan & Grant Program does

The Rural Economic Development Loan & Grant Program (REDLG) is run by the U.S. Department of Agriculture and provides money to rural communities for economic projects. The program works through local lenders and utility companies rather than sending money directly to individuals. Loans fund infrastructure, equipment, or facilities; grants fund planning, training, or feasibility studies. Both are meant to create jobs or strengthen existing businesses in places with fewer than 50,000 people.

The money goes to organizations — not households — so you would explore through a business, nonprofit, utility, or local government body. A rural electric cooperative, water district, or city economic development office would be the typical applicant. The program does not fund personal expenses, consumer purchases, or individual employment.

Key Takeaways

  • REDLG provides loans and grants through local lenders and utility companies to rural communities, not directly to individuals or households.
  • Loans typically range from $10,000 to $250,000 and must be used for economic development projects like equipment, facilities, or infrastructure that create jobs.
  • Grants are smaller and usually fund planning, training, or studies that lead to future economic projects.
  • Your organization must be located in a rural area (generally under 50,000 people) and work with an approved lender or utility partner to access funds.
  • The process process involves submitting a project plan, budget, and evidence that the project will benefit the local economy or create employment.

Loans versus grants under REDLG

REDLG offers two distinct funding types. Loans must be repaid with interest and typically range from $10,000 to $250,000, though the exact ceiling depends on the lender and project type. Loans fund tangible assets: equipment, buildings, infrastructure improvements, or working capital for a business expansion. The borrower (usually a business or cooperative) repays the loan over time, typically five to ten years.

Grants do not require repayment and are usually smaller — often $5,000 to $50,000, though amounts vary. Grants pay for planning, feasibility studies, training programs, or technical information that prepares a community for a larger economic project. A rural town might use a grant to study whether a food processing facility is viable before seeking a loan to build it.

The choice between a loan and a grant depends on what your project needs. If you are buying equipment or building a facility, you would pursue a loan. If you need to research whether a project makes sense or train workers for a new industry, a grant is the better fit.

Who can explore and where projects must be located

REDLG does not accept applications directly from individuals. Instead, your organization must be one of these types: a for-profit business, a nonprofit organization, a rural electric cooperative, a water or wastewater utility, a telecommunications company, or a local government body. The applicant organization must be located in a rural area, which the USDA generally defines as a place with a population under 50,000. Some counties are entirely rural; others have rural and urban zones, and only projects in the rural portion may have access to.

The project itself must also be in a rural location. A business in a city of 100,000 cannot use REDLG funds even if it serves rural customers. You can check whether your county or specific address qualifies by using the USDA's Rural Development may be able to access map on their website.

If your organization is in an may be able to access rural area, you do not explore to the USDA directly. Instead, you work with an approved intermediary lender — usually a bank, credit union, or nonprofit lender — or with a rural utility company that participates in the program. The intermediary handles the process, underwriting, and loan servicing.

What REDLG funds can and cannot pay for

REDLG loans and grants must support economic development — meaning they create jobs, retain existing jobs, or strengthen the local economy. Approved uses include: purchasing equipment or machinery, constructing or renovating buildings, improving roads or utilities needed for a business, buying land for a business site, and funding working capital for a new or expanding enterprise. Grants can also fund business planning, market research, workforce training, or technical studies.

REDLG does not fund: personal living expenses, consumer purchases, debt repayment from other sources, political activities, or projects that primarily benefit a single individual rather than the community. The program also does not fund businesses that would relocate jobs from one rural area to another — the intent is to create net new employment or preserve existing jobs.

Your project must show a clear connection to economic benefit. A manufacturing plant that will hire 15 workers qualifies. A personal vehicle purchase does not, even if the vehicle is used for business.

How to find an intermediary lender and start the process

Because REDLG works through intermediaries, your first step is locating an approved lender or utility in your area. The USDA Rural Development office maintains a list of certified intermediaries by state. You can contact your state's USDA Rural Development office directly — each state has one — or search their website for intermediaries near you. Many community banks, credit unions, and nonprofit lenders participate.

Once you identify a potential lender, contact them to discuss your project and ask whether they participate in REDLG. Not every lender offers the program, so you may need to call several. The lender will explain their specific requirements, timeline, and what documentation they need.

You will typically need to provide: a detailed business or project plan, a budget showing how funds will be used, financial statements or tax returns for your organization, evidence of the project's economic impact (such as job creation estimates), and proof that your location is in an may be able to access rural area. The lender will review these materials and decide whether to move forward with an process to the USDA.

Timeline and what happens after approval

The time from initial contact to funding varies widely depending on the lender and project complexity. straightforward projects with clear job creation may move faster; projects requiring environmental review or complex underwriting take longer. Most lenders estimate four to eight weeks from a complete process to a funding decision, though some take longer.

Once approved, the lender disburses funds according to a schedule tied to project milestones. If you are building a facility, funds might be released as construction progresses. If you are buying equipment, funds may be released once the equipment is delivered and installed. You do not receive all the money upfront.

For loans, you begin repayment according to the terms in your agreement — typically after a grace period of six months to a year. For grants, there is no repayment, but you may be required to report on the project's outcomes (jobs created, revenue generated) for a set period, usually three to five years.

Frequently Asked Questions

Can a sole proprietor or self-employed person use REDLG?

REDLG is designed for organizations, not individuals. A sole proprietor can explore if they operate as a registered business entity (such as an LLC or S-corporation) and the business is located in an may be able to access rural area. You would work with an intermediary lender who would evaluate your business plan and personal finances as part of the underwriting process.

What if my area is on the border between rural and urban?

The USDA uses specific population thresholds and census data to determine rural may be able to access. Some counties are split into rural and urban zones. Use the USDA Rural Development may be able to access map to check your exact address or county. If you are uncertain, contact your state USDA Rural Development office — they can confirm may be able to access in minutes.

Do I have to repay a grant?

No. Grants do not require repayment. However, you may need to document how you used the funds and report on outcomes (such as jobs created or training completed) for several years after receiving the grant. The lender or USDA will explain any reporting requirements when you receive the grant.

What interest rate will I pay on a loan?

Interest rates vary by lender and are not set by the USDA. The intermediary lender sets the rate based on their cost of funds, your creditworthiness, and market conditions. REDLG loans typically carry rates comparable to conventional small business loans, though rates differ between lenders. Ask each lender for their current rates before deciding.

Can I use REDLG funds to buy an existing business?

REDLG can fund the purchase of equipment or facilities, but the primary purpose must be economic development — creating or retaining jobs. Buying an existing business solely to own it does not may have access to. However, if you are buying a business and expanding it to hire additional workers, that expansion portion may be fundable. Discuss your specific situation with an intermediary lender.