What does this program do?

This program provides loan guarantees to eligible private lenders to help build essential community facilities in rural areas.

An essential community facility is defined as a facility that provides an essential service to the local community for the orderly development of the community in a primarily rural area, and does not include private, commercial or business undertakings.

Who may apply for this program?

Private lenders may apply for a loan guarantee on loans made to an eligible borrower that is unable to obtain the needed commercial credit on reasonable terms without the guarantee.

Eligible borrowers:

• Public bodies
• Community-based non-profit corporations
• Federally-recognized Tribes

Rural areas include any area other than a city or town with a population of greater than 50,000 inhabitants and any urbanized area contiguous and adjacent to that city or town based on the latest U.S. Census Data. 

Check an eligible rural area.

How may funds be used?

Each year the Agency will reserve funds for projects located in rural areas with a population of not more than 20,000 inhabitants based on the following reservation of funds schedule:

(1)   100% of the first $200,000,000 made available
(2)   50% of the next $200,000,000 made available
(3)   25% of all amounts exceeding $400,000,000 made available

Funds can be used to purchase, construct, and / or improve essential community facilities, purchase equipment and pay related project expenses.

Examples of essential community facilities include:

• Health care facilities such as hospitals, medical clinics, dental clinics, nursing homes or assisted living facilities
• Public facilities such as town halls, courthouses, airport hangers or street improvements
• Community support services such as child care centers, community centers, fairgrounds or transitional housing
• Public safety services such as fire departments, police stations, prisons, police vehicles, fire trucks, public works vehicles or equipment
• Educational services such as museums, libraries or private schools
• Utility services such as  telemedicine or distance learning equipment
• Local food systems such as community gardens, food pantries, community kitchens, food banks, food hubs or greenhouses

For a complete list see Code of Federal Regulations 7 CFR 3575.24.

What are the terms of a loan guarantee?

• Maximum guarantee = 90% of the eligible loan
• One-time guarantee fee = 1.5% of principal loan amount times the % of guarantee
• Annual renewal fee = .5% of outstanding principal as of December 31st times % of guarantee.
• Repayment term: useful life of the facility, state statute or 40 years, whichever is less and is negotiated between the lender/borrower, subject to USDA approval
• Interest rates: fixed or variable as negotiated between the lender/borrower, subject to USDA approval
• Loan note guarantee issued upon project completion/when conditions are met
• Combination of guaranteed loans, direct loans, grants and commercial financing may be used to finance one project if all eligibility and feasibility requirements are met
• Balloon payments and renewable notes are prohibited

Are there additional requirements?

• Applicants must have legal authority to borrow money, obtain security, repay loans, construct, operate, and maintain the proposed facilities
• Applicants must be unable to finance the project from their own resources and/or through commercial credit at reasonable rates and terms
• Tax exempt financing is not eligible for this program
• Lender responsible for determining credit quality and economic feasibility of proposed loan; adequacy of equity, cash flow, security, history and management capabilities
• Facilities must serve rural area where they are /will be located
• Project must demonstrate substantial community support
• Environmental review must be completed/acceptable

How do we get started?

• Borrowers: Contact INSIGNIA to learn more about USDA Loan Guarantee Programs
• Applications for this program are accepted year round
• Program resources are available online (includes forms needed, guidance, certifications)

Who can answer questions?
Contact INSIGNIA Financial Services

What governs this program?

Code of Federal Regulation, 3575 Subpart A.

If you need assistance, please fill in this form and a representative will be in touch with you. Your information is held in strict confidence.