How to Use a USDA Community Facilities Loan

Rural communitybuildings provide essential services residents often can’t find elsewhere, from medical care to transitional housing. The USDA Community Facilities LoanProgram provides funds to build, improve, and buy supplies for these facilities.

Are you considering a USDA Community Facilities Loan for your rural project? Learn how the program works, which entities are eligible to apply, and how you may be able to use loan funds to help your community.

Understanding USDA Community Facilities Loan Program Requirements

To secure funding from the USDA Community Facilities Loan Program, you need to meet strict eligibility requirements. Learn which projects qualify, who can apply, and which areas are eligible for financing.

How Can You Use USDA Community Facilities Loan Funds?

To qualify for direct funding or grants, you must plan to use your loan for purchasing, building, or improving community facilities, purchasing necessary equipment, or paying other eligible project expenses. You can also use a guaranteed loan to refinance the debt of a community facility.

What Projects Are Eligible for the USDA Community Facilities Loan?

The USDA Community Facilities Loan Program provides funds for community facilities in rural areas. These facilities must provide an essential service that fosters community development, which can include:

Healthcare facilities, which can include hospitals, medical and dental clinics, assisted living facilities, and nursing homes
Child care centers
Community centers
Transitional housing centers
Fire departments
Police stations and prisons
Museums
Libraries
Private schools
Utility service centers
Local food providers
Transportation facilities
Water infrastructure facilities
Community parks

New construction, renovation, and improvement projects for these community facilities are eligible for funding. You can also use funds to buy equipment such as police vehicles, fire trucks, public works vehicles, telemedicine equipment, and other supplies.

Who Can Apply for a USDA Community Facilities Loan?

Loan funds are intended for public undertakings, not private or commercial projects. As a result, eligible borrowers include:

Public bodies
Community-based nonprofit corporations
Federally-recognized Tribes

Which Areas Are Eligible for Funding?

Borrowers can only use project funds in rural areas, which include cities, towns, and other communities with fewer than 50,000 residents for guaranteed loans and fewer than 20,000 residents for direct loans and grants.

The USDA gives priority to direct loans and grants for proposed service areas with up to 5,500 residents and low-income areas. Portions of guaranteed funding are also allocated for communities of less than 20,000 to help ensure eligible projects receive funding.

Not sure if you’re eligible for a Community FacilitiesLoan? You may be able to seek other USDA funding for rural projects.

Learn About Our USDA Loan Options

What are the Different Types of USDA Community Facilities Loans?

You can secure USDA funding for your project in several different ways:

Direct Loans

These loans are given directly by the USDA to eligible borrowers, with a fixed interest rate determined by your community’s status and population. The maximum loan term is 40 years but may be shorter depending on the useful life of your facility and other factors. There are no penalties for paying off your loan early.

Grants

Eligible borrowers can receive a grant for up to 75 percent of their proposed project’s cost if they meet certain criteria. Small communities with a low median household income are eligible for the highest proportion of grant funds. Larger communities or areas with a higher median household income may qualify for a lower proportion of grant funds, ranging from 15 to 55 percent. Borrowers applying for direct loans and grants must also meet additional requirements, including:

The legal ability to borrow and repay money and construct, manage, and maintain the funded facilities
The inability to personally finance the project or qualify for a reasonable commercial loan
Meeting the criteria for an eligible community facility in a rural area
Completing an acceptable environmental review

Guaranteed Loans

If borrowers are ineligible for a direct loan or grant or can’t finance their full project using other loan options, they may be eligible for guaranteed funding. These loans are supplied by third-party lenders, such as banks, credit unions, and mortgage companies, and the USDA guarantees a portion of the financing.

Government-guaranteed loans generally offer more favorable and flexible terms than commercial loans. A combination of guaranteed and direct loans may offer lower interest rates than municipal bonds.

How to Apply for a USDA Community Facilities Loan

If you meet the eligibility requirements for a USDA Community Facilities Loan, you can apply for direct loans and grant funding through your local Rural Development office anytime throughout the year.

Third-party lenders can also provide additional guidance and help you determine the best source of financing for your project, which may include a combination of direct funding and guaranteed loans. Lenders can also handle the application process on your behalf and ensure you have everything you need to improve your chances of approval.

Ready to Apply? Madison One CUSO Can Help

Whether you know your project is eligible for funding or you’ve exhausted other funding options and need guidance, Madison One CUSO can help. Our team can serve borrowers in nearly any industry across the country and help determine the best funding sources for your project. We’re highly experienced in serving medical and assisted living facilities, many of which are eligible for USDA Community Facilities Loan funding.

Unlike other lenders, we focus on government-guaranteed loans, and our team has the extensive knowledge and experience needed to navigate the loan process quickly and efficiently. We can secure up to $100 million in funding for eligible borrowers and structure your loans in the way that best meets your organization’s needs.

Schedule a consultation with our team today to learn if you’re eligible for USDA Community Facilities Loan funding and begin discussing your options for direct or guaranteed loans.