USDA Rural Development's Rural Utilities Service program provides Guaranteed and Direct Loans and Grants for water, wastewater, and solid waste projects.

Rural communities and small incorporated towns/cities with populations of 10,000 or less based on the latest decennial Census of the United States are eligible to apply.

To qualify applicants must be unable to obtain the financing from other sources and/or their own resources at reasonable rates and terms.

Public bodies, nonprofit corporations, and federally-recognized Indian tribes can be eligible applicants.

Funds can be used for construction, land acquisition, legal fees, engineering fees, capitalized interest, equipment, initial operation and maintenance costs, project contingencies, and other cost that is determined by USDA Rural Development to be necessary for the completion of the project. Projects must be primarily for the benefit of rural users.

Rates are subject to change quarterly (January 1, April 1, July 1, and October 1). The market rate is based on the performance of the Bond Buyer Index. Rates are fixed and the maximum rate is established at the time the loan is approved. If rates drop by the time the loan is closed, the applicant will receive the lower rate.

Repayment Terms - Up to 40 years for direct loans, based on the applicant’s authority and the useful life expectancy of the system. Terms for guaranteed loans are negotiated between the applicant and the lender.

Security for Guaranteed and Direct Loans:

Public Bodies - Revenue Bonds, General Obligation Bonds, Special Assessment Bonds, Non-Profit Corporations - Promissory Notes, Real Estate Mortgages, Financing Statements, Security Agreements. Obligations that secure a guaranteed loan must be taxable.

Solid waste loans will be secured by a pledge of solid waste disposal revenue only when the revenue pledged includes that from solid waste plus revenue from other facilities of the applicant with tie-in enforcement rights, or by the taxing power of a participating local government.

Maximum Amounts - Direct loans may be obtained for 100 percent of eligible project costs subject to adequate security, ability to repay, applicant’s authority to borrow and availability of funds.

Guaranteed Loans - Same as for direct loans as determined by the private lender and approved by RUS. However, the Rural Development guarantee cannot exceed 90% of the loan, with the norm being 80%.

Grants - Grants are used to supplement direct loans for the purpose of reducing user charge for the facility to a reasonable level when compared to comparable systems and similar size communities with similar economic and income conditions. Maximum grant amount is 70%.

Grant funds cannot be used to pay project costs related to interest, refinancing, purchase of existing systems, and initial operation and maintenance.