REAP Energy Program


USDA-guaranteed loan program offers attractive funding for rural energy projects

By Lillian Salerno

Lenders are encouraged to use USDA Rural Development’s Rural Energy for America Program (REAP) guaranteed loans when looking for the best energy financing alternatives for their clients. Secretary of Agriculture Tom Vilsack recently announced over $280 million would be available through REAP to lenders to assist rural small businesses and agricultural producers with the purchase of renewable energy systems, and to make energy efficiency improvements.

Purchase of wind turbines, solar photovoltaic and solar thermal, renewable biomass and other energy projects are eligible to receive REAP funding. Projects that improve energy efficiency are also eligible including lighting, heating, cooling, ventilation, automated controls and insulation upgrades, all of which reduce energy consumption. These types of projects strengthen a rural business’s economic stability and make them financially stronger and thus better long-term customers for rural lenders.

For a lender, the REAP program serves as a credit tool that is conducive to a variety of energy installation or upgrade scenarios while yielding desirable returns. Lender benefits include expanding loan portfolios, making loans above banks’ legal lending limits, providing longer loan terms and increasing loan revenues. REAP-guaranteed loans offer a means to help lenders meet Community Reinvestment Act criteria.

Moreover, the program’s funding level has been increased to over $200 million nationwide and is anticipated to remain at or above this level in future years. Applications for guaranteed loans are accepted all year.

Rural Energy for America Program Guaranteed Loans feature:

Loan size:

  • minimum loan amount—$5,000
  • maximum loan amount—$25 million
  • maximum of 75 percent of total project costs can be financed

Maximum guarantee:

  • 85 percent guarantee—loans of $600,000 or less
  • 80 percent guarantee—loans greater than $600,000 up to and including $5 million
  • 70 percent guarantee—loans greater than $5 million up to and including $10 million
  • 60 percent guarantee—loans greater than $10 million

Maximum loan terms:

  • real estate—30 years
  • machinery and equipment—15 years or useful life (whichever is less)
  • working capital—seven years

Interest rate:

  • negotiated by lender and borrower
  • fixed or variable rate

Secondary-market benefits:

  • 100 percent of guaranteed portion sellable on secondary market
  • 5 percent of total loan must be retained by lender

Other features:

  • guarantee fee of 1 percent can be financed into the loan
  • annual renewal fee currently set at 0.25 percent
  • lender is allowed to charge routine servicing fees to borrowers
  • loans to small businesses within populations up to 50,000

For more information, contact the USDA energy coordinator for your state. A listing of USDA energy coordinators can be found at

Lillian Salerno is the administrator of USDA’s Rural Business Cooperative Service.