USDA REAP Grants: Eligibility, Application Process, and Tips

The Rural Energy for America Program is one of the most underutilized federal grant programs in the country. REAP provides guaranteed loan financing and grant funding to rural small businesses and agricultural producers for renewable energy systems and energy efficiency improvements. The program has awarded billions of dollars since its creation, yet many eligible businesses have never heard of it.

If you operate a small business or farm in a rural area and you are considering solar panels, energy-efficient HVAC systems, biomass heating, small wind turbines, or even upgrading to more efficient manufacturing equipment, REAP may cover up to 25% of your project cost as an outright grant -- no repayment required. Combined with the loan guarantee option, REAP can cover up to 75% of total project costs.

This guide covers the full REAP application process, from eligibility verification through submission, including the scoring criteria that determine whether your project gets funded.

What REAP Funds

REAP supports two categories of projects:

Renewable Energy Systems (RES)

These are systems that generate energy from renewable sources. Eligible technologies include:

• Solar photovoltaic (the most commonly funded technology under REAP)
• Small wind (turbines rated at 100 kW or less, though larger systems can qualify)
• Biomass (wood pellet boilers, anaerobic digesters, biogas systems)
• Geothermal (direct-use and electric generation)
• Hydroelectric (small-scale, typically run-of-river)
• Hydrogen (derived from eligible renewable resources)
• Ocean energy (wave, tidal, and current systems, though these are rare in REAP applications)

Grant-only awards for renewable energy systems are capped at $500,000. The minimum grant request is $2,500. If you combine a grant with a REAP guaranteed loan, the total federal support can be significantly higher.

Energy Efficiency Improvements (EEI)

These are improvements to existing buildings or equipment that reduce energy consumption. Common examples include:

• High-efficiency HVAC systems
• Insulation upgrades
• Lighting retrofits (LED conversions)
• Variable frequency drives on motors
• Refrigeration system upgrades
• Efficient irrigation systems
• Grain dryers and crop drying equipment

Grant-only awards for energy efficiency improvements are capped at $250,000, with a minimum of $1,500. The project must achieve a measurable reduction in energy consumption, documented through an energy audit or assessment.

Eligibility: Who Can Apply

REAP eligibility comes down to two questions: who you are and where you are.

Eligible Applicants

Small businesses: You must meet the Small Business Administration's size standards for your industry. For most sectors, this means fewer than 500 employees, though the threshold varies. Check the SBA size standards table for your NAICS code. The business must be located in an eligible rural area.

Agricultural producers: You must derive at least 50% of your gross income from agricultural operations. The 50% threshold is based on the preceding year's tax return (or averaged over the past three years, at your option). Agricultural producers do not need to be located in a rural area -- this is one of the few exceptions in the program.

Eligible Areas

For small businesses, your operation must be located in a rural area as defined by USDA. Generally, this means a community with a population of 50,000 or less that is not within an urbanized area adjacent to a city of 200,000 or more. USDA provides an online eligibility tool at rd.usda.gov where you can enter your address and confirm rural status.

Important note: Many applicants assume they are not rural enough to qualify and never check. Suburban communities, small towns within commuting distance of cities, and unincorporated areas frequently qualify. Enter your address into the USDA tool before ruling yourself out.

Who Is Not Eligible

• Nonprofit organizations (REAP is for for-profit businesses and agricultural producers only)
• Businesses located in ineligible urban areas (unless they are agricultural producers)
• Passive investors who do not operate the business
• Projects on residential properties (unless the property is part of an agricultural operation)

How Much Funding Can You Get?

REAP offers both grants and guaranteed loans, and you can combine them.

Grant-Only

• Renewable Energy: Up to 25% of total eligible project costs, maximum $500,000
• Energy Efficiency: Up to 25% of total eligible project costs, maximum $250,000

Guaranteed Loan Only

• Up to 75% of total eligible project costs
• Maximum loan amount: $25 million
• Terms: Up to 30 years for real estate, 15 years for equipment, 7 years for working capital

Combined Grant and Loan

• Grant covers up to 25% and guaranteed loan covers up to 50%, for a total of 75% of project costs
• The applicant must provide at least 25% from their own funds or other non-federal sources

Practical Examples of Funded Projects

To illustrate what REAP funding looks like in practice:

A dairy farm in Wisconsin installed a 200 kW solar array for a total project cost of $380,000. REAP provided a $95,000 grant (25%), and the farm secured commercial financing for the remainder. The system offsets approximately 85% of the farm's electricity consumption.

A rural manufacturing company in Oregon upgraded its HVAC and compressed air systems for $160,000. The REAP grant covered $40,000 (25%) of the project cost. The energy audit documented a projected 32% reduction in annual energy costs.

A vineyard in Virginia installed a 50 kW rooftop solar system and upgraded its cold storage refrigeration. The combined project cost was $210,000, with REAP covering $52,500 as a grant.

Application Process: Step by Step

Step 1: Confirm Eligibility

Before investing time in an application, verify two things:

1. Your business location qualifies as rural (use the USDA eligibility tool at rd.usda.gov)
2. You or your business meets the applicant criteria (SBA size standards for small businesses, or 50% agricultural income for producers)

Contact your state USDA Rural Development office. They can confirm your eligibility and often provide guidance specific to your state's competitive landscape.

Step 2: Get an Energy Audit or Technical Report

For energy efficiency projects: You need an energy audit conducted by a qualified auditor. The audit must document your current energy consumption, identify the proposed improvement, and estimate the energy savings. USDA specifies requirements for the audit, including the auditor's qualifications (a certified energy auditor or licensed professional engineer).

For renewable energy projects: You need a technical report prepared by a qualified individual. The report must include the system design, energy production estimates, site assessment, and an analysis of the project's technical merit.

For projects under $80,000: A simplified energy assessment may be accepted instead of a full audit. This reduces the upfront cost, but the assessment must still document baseline energy use and projected savings.

The energy audit or technical report is not optional. It is a scored component of the application, and a poorly prepared technical document will drag your score down regardless of the project's merit.

Step 3: Choose Your Application Window

REAP operates on two application tracks:

Unrestricted (larger projects, $20,001 and above): Applications are accepted on a rolling basis, with quarterly competition dates. USDA announces specific deadlines each fiscal year, typically in the Federal Register. Competition dates usually fall in March, June, September, and the end of the fiscal year.

Small grants ($20,000 or less): These follow a separate, simplified application process with its own deadlines. The simplified application (Form RD 4280-3A) requires less documentation and is processed more quickly.

Check the current year's Federal Register notice for exact dates. Your state Rural Development office can also confirm the competition schedule.

Step 4: Prepare Your Application Package

A complete REAP application includes:

Application form: SF-424 (Application for Federal Assistance) and USDA Form RD 4280-3A or 3B, depending on project size.

Business information: Entity type, years in operation, number of employees, NAICS code, and documentation of small business status or agricultural producer status.

Project description: A clear narrative describing the proposed energy system or efficiency improvement, including the technology, the vendor, installation timeline, and how the project fits into your overall operations.

Energy audit or technical report: As described above, prepared by a qualified professional.

Financial information: Evidence of matching funds (the 75% you must provide from non-REAP sources), financial statements for the most recent three years, and a projection showing that the business can sustain operations during and after the project.

Vendor quotes or contracts: At least one detailed quote from an equipment vendor or installer. Multiple quotes strengthen the application.

Environmental compliance: A description of the project site and any potential environmental impacts. Most REAP projects receive a categorical exclusion from detailed NEPA review, but you must still provide the required environmental information.

Step 5: Submit Through Your State Office

Unlike many federal programs, REAP applications are not submitted through Grants.gov. They are submitted to your state USDA Rural Development office, which serves as the initial point of contact and conducts the eligibility review before forwarding competitive applications to the national office for scoring.

This state-level process is important. Building a relationship with your state Rural Development energy coordinator can give you valuable insight into what makes applications competitive in your state.

Scoring Criteria: How Your Application Is Evaluated

REAP applications are scored on a 100-point scale. Understanding the scoring criteria allows you to maximize your points.

Quantity of Energy Replaced, Saved, or Generated (up to 25 points)

For renewable energy projects, this measures the percentage of existing energy use that the new system will offset. A solar installation that covers 100% of your electricity gets more points than one covering 30%.

For energy efficiency projects, this measures the percentage reduction in energy consumption. A project that reduces energy use by 50% scores higher than one that saves 15%.

Environmental Benefits (up to 5 points)

Points are awarded for environmental benefits beyond energy savings, such as reducing greenhouse gas emissions, eliminating criteria air pollutants, or remediating environmental contamination.

Commercial Availability (up to 5 points)

Commercially established technologies (solar, standard HVAC upgrades) score higher than experimental or unproven systems. This criterion rewards projects that are likely to perform as predicted.

Technical Merit (up to 25 points)

This is based on the quality of your energy audit or technical report. A well-documented audit with credible savings estimates, equipment specifications, and a qualified auditor earns maximum points. A thin report with vague estimates will cost you here.

Financial Feasibility (up to 10 points)

USDA evaluates whether the project makes financial sense -- whether the energy savings or revenue will justify the investment. Simple payback period, return on investment, and the applicant's financial capacity are all considered.

Readiness (up to 10 points)

How ready is the project to proceed? Applications with signed vendor contracts, completed permits, and confirmed matching funds score higher than those still in the planning phase.

Small Business or Agricultural Producer Size (up to 10 points)

Smaller businesses and farms receive more points. If your business has fewer than 20 employees or your farm operation is relatively small, you have an advantage here.

Previous REAP Awards (up to 5 points)

First-time applicants receive more points than those who have received REAP funding before. If this is your first application, you have a built-in scoring advantage.

Administrator Points (up to 5 points)

USDA administrators can award discretionary points for projects in underserved areas, projects benefiting socially disadvantaged groups, or projects aligned with administration priorities.

State-Level Competition

One of the least understood aspects of REAP is that competition varies significantly by state. USDA allocates a portion of REAP funding to each state based on rural population and energy needs. Some states receive more applications than their allocation can fund, while others have funding that goes unused.

States with heavy agricultural activity (Iowa, Nebraska, Kansas, Minnesota) tend to be highly competitive. States with smaller agricultural sectors or lower awareness of the program may have less competition. Your state Rural Development office can give you a sense of the competitive landscape.

This state-level dynamic means that a project scoring 70 out of 100 might be funded in one state but not in another. If you are near the margin, the quality of your technical report and the completeness of your application become decisive.

Tips for a Competitive Application

Invest in a strong energy audit. This is the single most impactful thing you can do. A detailed, well-documented audit from a certified energy auditor can be worth up to 25 points in technical merit. Spending $2,000-$5,000 on a thorough audit is a high-return investment when $250,000 or $500,000 is on the line.

Maximize the percentage of energy replaced. If you are installing solar, size the system to offset as much of your energy consumption as possible. A system that offsets 75% of your electricity scores significantly higher than one that offsets 30%.

Have your matching funds committed. Projects that can demonstrate confirmed financing for the non-REAP share of the cost score higher on readiness. A letter of commitment from your bank or a signed loan agreement is stronger than a general statement that you intend to seek financing.

Apply for the right amount. REAP grants cover up to 25% of project costs. Requesting less than 25% does not make your application more competitive -- you are scored on the project, not on how much grant you are requesting. Request the full 25% if your project qualifies.

Get permits in order. Local building permits, utility interconnection agreements, and any required environmental clearances should be as far along as possible at the time of application. Readiness points reward preparation.

Work with your state office. USDA Rural Development energy coordinators review REAP applications before they are scored. They can identify deficiencies in your application and suggest improvements. Some state offices hold REAP workshops or webinars. Attend them.

Combining REAP with Other Incentives

REAP grants can often be stacked with other incentives, though there are rules about the total federal share.

Federal tax credits: The Investment Tax Credit (ITC) and Production Tax Credit (PTC) for renewable energy can be combined with REAP. However, the REAP grant amount reduces the tax credit basis. If your solar project costs $200,000 and REAP covers $50,000, your ITC is calculated on $150,000.

State incentives: Most state renewable energy incentives can be combined with REAP. State-level rebates, production incentives, and renewable energy certificates are generally compatible.

Other USDA programs: REAP can be combined with other USDA programs, but the total federal assistance cannot exceed the total project cost, and specific USDA stacking rules apply.

Utility rebates: Many utilities offer rebates for energy efficiency improvements and distributed generation. These can typically be combined with REAP without affecting your grant amount.

Common Mistakes to Avoid

Assuming you are not eligible. Many businesses in small towns and rural-adjacent communities qualify. Check the eligibility tool before ruling yourself out.

Submitting a weak energy audit. A one-page assessment from an unqualified provider will cost you up to 25 points. This is the most common reason competitive projects lose funding.

Missing the competition deadline. REAP applications received after the quarterly competition date roll into the next cycle, but funding allocations may be exhausted by then. Submit well before the deadline.

Neglecting the financial documentation. Your business must demonstrate financial viability. Three years of tax returns, a current balance sheet, and evidence of matching funds are not optional.

Not contacting the state office. Rural Development staff are generally helpful and willing to review draft applications. Use this resource.

Keep Reading

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• Grant Budget Justification Template
• How to Find Grants for Nonprofits
• Estimate your grant project costs with Granted AI

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