“I understand that building a prosperous rural America begins with healthy people,” Sonny Perdue, secretary of the U.S. Department of Agriculture, said regarding its $1-billion investment to improve health care facilities in rural communities via direct loans and grants.
In fiscal year 2017, the USDA Rural Development invested $1 billion in health care facilities in rural areas. It is in line with RD’s goal to provide affordable and safe housing, combined with essential facilities for community support.
USDA RD supports the building and repair of libraries, hospitals, and necessary community structures through Community Facilities Direct Loans and Grants.
Community Facilities Direct Loans and Grants 101
These Community Facilities Direct Loans and Grants are available to public bodies, non-profit organizations that are community-based, and tribes that are federally recognized.
To qualify, these entities must possess legal authority to borrow money and repay it and unable to finance the project out of their own funding or through commercial funding at reasonable terms.
Eligible borrowers can access funding for essential community facilities through direct loans at low interest rates, grants, or both. This public funding may be combined with loans from commercial private lenders if program conditions are met.
Funding under the program is based on priority, namely the population of the community (size = 5,500 or less), and median household income (low income = below 80% of the state’s rural counties median income).
Where do the funds go?
Qualified applicants can seek funding to develop facilities that will serve their rural communities, providing substantial support and development.
1. Health care – hospitals, medical and dental clinics, nursing homes, assisted living facilities.
Examples of projects funded in FY 2017: a $40-million loan for a 123-unit assisted-living facility in Quakertown, PA; a $2.8-million loan for a 14,000-square-foot clinic for Iola, Kansas; and a $6.7-million loan for an integrated care center in Cañon City, CO.
2. Public facilities – town halls, airport hangars, street improvements, courthouses
3. Community support – community centers, fairgrounds, child care centers, transitional housing units
4. Public safety – police stations, prisons, fire departments, purchase of public works equipment or vehicles
5. Education – libraries, private schools, museums
6. Utility – distance learning equipment, telemedicine
7. Local food systems – community kitchens, community gardens, food pantries, food banks, greenhouses
How direct loans and grants work?
For Community Facilities Direct Loans, they come with fixed interest rates determined by Rural Development. These loans are given at the lower market rate.
As of the current quarter (1st quarter of the fiscal year 2018 from October 1 to December 31, 2017), current rates are 4.50% (poverty), 4.00% (intermediate), and 3.50% (market).
The repayment term of the direct loans depends on the useful life of the facility, state statutes, the applicant’s authority, or 40 years at most.
These loans have no prepayment penalties are allowed.
As to grants, they can be between 15% and 55% depending on the location of the project: the rural community’s population size and median household income.