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COMMUNITY FACILITY DIRECT LOANS
RD INSTRUCTION 1942-A |
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The purpose of the Community Facility Direct Loan Program
is to provide financing to improve, or develop essential community facilities in rural areas (Fire and rescue are
covered in RD Instruction 1942-C). An essential community facility is a public improvement needed for beneficial
and orderly development of a rural community and is operated on a nonprofit basis. |
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Eligible Applicants |
- Public bodies such as a municipality, (cities, towns and villages, counties and special purpose districts
such as nursing home districts
- Not-for-Profit corporation
- Federally recognized Indian Tribe
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Population Limit |
Loans will not be made in a city or town with a population in excess of 20,000 population.
Priority will be to communities less than 5,000 population. |
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| Test for Credit |
Applicant must certify and USDA Rural Development must concur that it is unable to finance the proposed
project from their own resources or through commercial credit at reasonable rates and terms. |
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| Eligible Loan Purposes |
- Construct, enlarge, extend or otherwise improve essential community facilities including, but not limited to:
- Health services
- Community, social or cultural services
- Transportation facilities such as streets, roads and bridges
- Hydroelectric generating facilities and related connecting systems and appurtenances, when not eligible for RUS electric financing
- Supplemental and supporting structures for other rural electrification or telephone systems when not eligible for RUS electric financing
- Natural gas distribution system
- Industrial park sites (only land acquisition and site preparation)
- Otherwise improve includes, but is not limited to, the following:
- Purchase of major equipment which will provide an essential service to rural residents
- Purchase of existing facilities to improve or prevent a loss of service
- Funds may also be used to:
- Construct or relocate public buildings, roads, bridges, fences or utilities
- Relocate private buildings, roads, bridges, fences or utilities
- Pay for the following expenses:
- Reasonable fees and costs
- Interest
- Costs of acquiring interest in land and rights
- Purchasing or renting equipment
- Initial operating expenses
- Refinancing debts when all of the following exist:
- Debts being refinanced are secondary part of loan (less than 50%)
- Debts being refinanced were incurred for facility or service being currently financed
- Arrangements cannot be made with present creditors to extend or modify terms of the existing debts
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| Ineligible Loan Purposes |
- Facilities which are not modest in size, design and cost
- Loan finder's fees
- On-site utility systems or business and industrial buildings in connection with industrial parks
- Facilities to be used primarily for recreation purposes
- Community antenna television services or facilities
- Electric generation or transmission facilities or telephone systems except in limited circumstances
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| Loan Terms |
- Loan will not exceed the useful life of the facility
- Loan will not exceed 40 years for not-for-profit corporation
- Public body revenue bonds will not exceed 35 years
- Principal may be deferred the first two years
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| Interest Rates |
There are three interest rate levels: poverty, intermediate and market. The type of rate applicable to a
project is dependent on the median household income of the service area.
- The poverty rate is appropriate if the median household income of the service area is below the poverty* line or is below
80% of the state nonmetropolitan median household income ($31,234 and the loan is to upgrade existing facilities or construct new
facilities required to meet applicable health or sanitary standards
- The intermediate rate applies to loans that do not meet the requirements for the poverty line rate or for which the median
household income in the service area is below the poverty line or not more than 100% of the nonmetropolitan median household
income of the state ($39,043)
- The market rate applies to all loans that do not qualify for the poverty or intermediate rates. Currently, the poverty rate is 4.5%. The market rate is adjusted quarterly based on a bond buyer index. The intermediate
rate is midway between the poverty and market rates.
NOTE: For essential community facility loans, the current interest rate will be increased by two percent if the project being
financed will involve the use of, or construction on, prime or unique farmland.
*The poverty line amount is updated annually. As of April, 2010, the poverty line is $22,050. |
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| Security |
Loan will be secured by the best security position practicable to protect the interest
of the Government during the repayment of the loan. In Missouri, loans to public bodies are normally secured
by revenue bonds. Loans to nonprofit corporations are secured by a note and real estate deed of trust. Assignments are usually taken on accounts, contract rights, general intangibles, equipment and fixtures.
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| Feasibility Requirements |
- RD Instruction 1942-A [1942.17(h)] apply
- These instructions do allow some flexibility depending on the size and nature of the project
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Pre-Application/
Application |
- Standard Form 424-2, Pre-application
- State Intergovernmental Review
- Applicant’s certification on other credit
- Supporting documentation
- Current financial statements
- Audit Organizational documents (if non profit)
- Certificate of Incorporation
- Articles of Incorporation
- Bylaws
- Existing debt instruments
- Project write up and information on the applicant
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