Provides zero interest loans to RUS borrowers to promote rural economic development and job creation projects.
Reference: RD Instruction 4280-A

Zero interest loans may be made, at the discretion of the Administrator, to any RUS borrower that is not delinquent on any Federal debt or in bankruptcy proceeding.

To promote rural economic development and/or job creation projects, including, but not limited to:

• Project feasibility studies (in conjunction with zero-interest loans & grants.)
• Start-up costs
• Incubator projects
• Other reasonable expenses

• Any project in which any director, officer, manager or stockholder, or relative thereof, who has a significant ownership interest or which would, in the judgment of the Administrator, present a potential for, or appearance of, a conflict of interest.
• Costs incurred prior to receipt of the completed application, without prior written approval.
• Projects located in areas covered by the Coastal Barrier Resources Act or projects which would adversely impact the environmental.
• For the purchase or lease of any real property materials, equipment, or services from the borrower, or significant stockholders, officers, managers, or close relatives thereof without the Administrator’s prior written approval.
• To refinance any debt incurred prior to the receipt of the completed Application.
• For any electric or telephone purpose.
• For the borrower’s electric to telephone operation.
• Any operations affiliated with the borrower without prior written approval.
• To pay salaries or any employee or owner of the borrower or its affiliates.
• Community antenna television systems or facilities unless in conjunction with educational or medical entities and projects.

Maximum size of loans vary. Please contact the Area Office for current information.

Supplemental Funding Requirement

• A project will not be selected unless supplemental funding is provided in an amount equaling at least 20% of the amount of the zero-interest loan or grant funds provided by RBS.

Supplemental funding may be provided by the project owner in the form of equity funds, private sources, state and local government sources, other Federal Government sources, the borrower, etc.

Terms of zero-interest loan repayment

• The promissory note covering the repayment of the zero-interest loan is between RBS and the RUS borrower.
• Repayment terms on a loan to the borrower are based on the nature of the project.  Ordinarily, the term, including any principal deferment period, will not exceed 10 years.
• Repayment by the recipient must equal the terms to the RUS borrower, unless approved by the Administrator.
• Principal repayments may be deferred for a period up to 2 years by the Administrator. Ordinarily, the deferment for an established business will be limited to 1 year.

Policy

• Promote projects that will result in a sustainable increase in the productivity of economic resources in rural areas and thereby lead to a higher level of income for rural citizens.
• RUS borrowers promote economic development in rural areas and job creation projects that (1) are based on sound economic 
• and financial analysis and (2) take a long-term perspective.
• Encourage economic development in rural areas and job creation projects without regard to service area.
• To promote financial viable project.
• To encourage RUS borrowers to deposit funds in Cushion-of-Credit accounts.

Application Filing Period

Applications may be filed on any official workday during the first 14 days of every month.

With the exception of applications to fund feasibility studies, simultaneous filling must also be sent to the state single point of contact for state and local governments.

An "Application" must consist of:

• Standard Form 424, "Application for Federal Assistance.
• Board Resolution {RD Instruction 4280.39 (a) (2)}.
• Miscellaneous Federal Forms and Certifications.
• Narrative discussion of the following:

1. "Selection Factors" as set forth in 4280.42 (b)
2.  "Project Description" as set forth in 4280.39 (b) (1)
3.  Except for applications for feasibility studies, a discussion regarding the "Environmental Impact of the proposed project".

Application Review

• Completed applications are accepted by the 14th day of the month
• The following factors will be considered in the selection process:

1. Nature of the project
2. Job creation projections
3. Long-term improvements in economic development
4. Diversifying the rural economy or alleviating under-employment
5. Supplemental funds
6. Economic conditions and job creation
7. Unemployment rates
8. Per Capita personal income
9. Change in population
10. Number of long-term jobs
11. Community-based Economic Development Program
12. Plan for improving the marketable skills of people in rural areas
13. Location (rural)
14. Support for the program - funds deposited in the cushion-of-credit account
15. Demonstration Project
16. Probability of success
17. Special economic status

Other Considerations:

Environmental Requirements.
Equal opportunity and nondiscrimination
Architectural Barriers Act of 1968
Flood hazard area precautions
Real property acquisition & relocation
Debarment and Suspension
Drug-free workplace (grant only)
Restrictions on Lobbying

Sources of Funds:

Funds for zero interest loans are derived from annual appropriations from Congress.

The Application Process:

Application should be made at the Rural Development Area Office. The Area Office staff will be glad to discuss services available from the Rural Development and explain how to prepare a written application.  To find the Area Office serving your county, click here.