Texas businesses seeking government-backed lending face a choice between SBA and USDA loan programs. Both provide loan guarantees that reduce lender risk and improve terms for borrowers, but they serve different populations, have different eligibility requirements, and offer different products.
SBA Loan Programs
- 7(a) Loans: Up to $5 million for general business purposes — working capital, equipment, real estate, and acquisition. Available to businesses anywhere in the United States.
- 504 Loans: Fixed-rate financing for real estate and heavy equipment, typically up to $5 million. Requires 10% down payment.
- Microloans: Up to $50,000 through nonprofit intermediary lenders
- CAPLines: Revolving lines of credit for seasonal and cyclical needs
USDA Loan Programs
- Business & Industry (B&I) Loan Guarantees: Up to $25 million for rural businesses. Guarantees range from 60% to 80% depending on loan size.
- REAP Loan Guarantees: For renewable energy and energy efficiency projects in rural areas
- Intermediary Relending Program: Low-interest loans through intermediary lenders for businesses that cannot access conventional financing
- Rural Microentrepreneur Assistance: Microloans up to $50,000 for rural microenterprises with 10 or fewer employees
Key Differences
- Location requirement: SBA loans are available anywhere. USDA programs require the business to be in a USDA-eligible rural area (generally outside metro cores with population over 50,000).
- Loan size: USDA B&I loans go up to $25 million — much larger than most SBA products. For large rural business expansions, USDA may be the better fit.
- Guarantee percentage: SBA 7(a) guarantees up to 85% on smaller loans. USDA B&I guarantees up to 80% on smaller loans and 60% on larger ones.
- Industry focus: SBA serves all industries. USDA programs have a bias toward agricultural, food processing, and rural economic development.
- Grant component: USDA offers REAP grants (up to 40% of project cost) that can be combined with REAP loan guarantees. SBA does not offer direct grants through its lending programs.
When to Choose SBA
- Your business is in an urban or suburban area
- You need a loan under $5 million
- You want the widest lender network
- You need a revolving line of credit
- You want the 504 fixed-rate real estate product
When to Choose USDA
- Your business is in a USDA-eligible rural area
- You need a loan larger than $5 million
- You are making energy efficiency or renewable energy investments (REAP)
- You are in agricultural processing or food manufacturing
- You want to combine a grant with a loan guarantee (REAP)
Can You Use Both?
Yes. Rural Texas businesses may qualify for both SBA and USDA programs. A business could use an SBA 7(a) loan for working capital while using a USDA REAP grant for energy improvements. The programs are not mutually exclusive.
Bottom Line
SBA loans are the default government-backed lending option for most Texas businesses. USDA loans serve rural businesses with larger loan capacity and specific agricultural and energy programs. If your business is in a rural area, evaluate both.
Our screening report identifies which SBA, USDA, and other lending programs may apply to your Texas business. Start your free screening →