Question of the ages, “What is love?” We know it when we feel it, but can we define it? Sorta like defining “Rural” in SBA lending. Anyhow, I think so.

I thought about that recently when I received two newsletters about the U.S. Census Bureau re-defining “Rural.” What they really did was redefine “Urban.” Update: The 2020 Census Urban Area Criteria have changed from the 2010 Census:

  • The minimum population to qualify as urban has increased from 2,500 to 5,000, with the added alternative of qualifying based on a 2,000 minimum housing unit threshold instead of population size (using an average 2.5 people/housing unit as a baseline).
  • Housing density is now used instead of population density.
  • The Bureau no longer distinguishes between different types of urban areas (no more “urban clusters” – all are urban areas)

According to the Bureau, using the new criteria, there will be about a 1 percentage point change – a slight decrease in the urban population and a slight increase in the rural population.

Finding Urban. The SOP provides links to two look up-tables of urban areas on page 535. Don’t bother. One link is broken and the other links to 2010 data. Hopefully, we’ll see updated information when the new SOP is issued. Meanwhile, many lenders have relied on the maps the USDA uses to determine eligibility for its rural lending programs. Nice maps. But they’re not referenced in the SOP.

The most current information comes from the Census Bureau’s List of Urban Areas, published in December 2022. If an area isn’t listed as urban well then, it’s rural. But there are some surprises. My hometown isn’t on.  But there is no doubt that it’s rural. Then, there’s a town of 8,109 people about 30 miles away classified as urban. True that it has a stop light and a McDonalds, both of which my hometown lacks. Also, I’m somewhat familiar with Savannah Missouri, population 5,253. Yep. It’s listed as urban, although it sure feels rural for both of the minutes it takes to drive through it.

Finding Rural. Better Luck in the SOP. Links here are broken or outdated, too. But rather than leave it to our good sense to define “rural” as we do “love,” the SOP defines “rural” as an area located in a county the U.S. Census Bureau has defined as at least 30% rural and refers readers to the Bureau’s Urban-Rural classification.

What’s it All About? As SBA lenders, we need to know rural from urban. What impact does the changed definition have for our loans? For one thing, a CDC can earn a servicing fee of 1.5% on 504 loans made to businesses in rural areas, as opposed to 0.625% elsewhere. For another, the requirement that a CDC manager be employed directly by the CDC can be waived if the CDC is in a rural area. And importantly, a project that aids rural development qualifies as meeting a public policy goal, so job creation isn’t required. Of course there is no accounting for the amount of publicity a CDC may earn by an article in the Rural Area Daily Bugle heralding the coming of more capital for Hometown Small Business Expansion.

You see? I know what love is AND I know what rural is!

Richard Jeffrey
Senior Associate, CDC/504 Program