Overview
USDA provides loans and grants and loan guarantees to develop essential community facilities in rural areas and towns of up to 20,000 in population. Loans and guarantees are available to public entities such as municipalities, counties, districts, not-for-profit entities and tribal governments. Borrowers must have the ability to pledge security for loans. Applicants must have the legal authority to borrow and repay loans, to pledge security for loans, and to construct, operate, and maintain the facilities. They must also be financially sound and able to organize and manage the facility effectively.

Funds may be used for construction and renovation of healthcare facilities, as well as non-healthcare related public safety and public services, including costs to acquire land, professional fees, furniture and equipment. Refinancing existing debt may be eligible for USDA-guaranteed financing, provided it is a secondary part of the loan and existing creditors are unwilling to modify terms in order for the USDA loan to be feasible.

USDA Community Facilities Direct Loans
Available for applicants who are unable to obtain commercial loans elsewhere. Repayment terms may not exceed the applicant’s authority, the useful life of the facility or a maximum of 40 years for applicants who are unable to obtain commercial loans. The USDA Direct Loan Program offers attractive interest rates, but availability is limited by annual state and national funding allocations. Due to fierce competition, borrowers should anticipate a need to supplement USDA Direct Loans with either a USDA Guarantee Loan, or some other form of composite-funding. USDA Direct Loans are set at the then-prevailing USDA fixed rate based upon three levels of interest rates (poverty, intermediate and market).

USDA Community Facilities Guarantees
Loan guarantees are made and serviced by lenders such as banks, savings and loans, mortgage companies which are part of bank holding companies, banks of the Farm Credit System, or insurance companies regulated by the National Association of Insurance Commissioners. Under the program, the USDA guarantees up to 90% of the loan, with the commercial lender assuming the remaining 10% loss position. Community Programs may guarantee up to 90% of any loss of interest or principal on the loan. Interest rates for the Guarantee Program are established by the commercial lender and approved by USDA. The USDA Guarantee Program can be highly competitive among applicants due to limited annual state and national allocations.

Security Requirements
Repayment of the loan must be based on bond or notes pledging taxes, assessments, revenues, fees, or other sources of money sufficient for operation and maintenance, reserves, and debt retirement. Bonds or notes pledging taxes, assessments, or revenues will be accepted as security if they meet statutory requirements. Where State laws permit, a mortgage may be taken on real and personal property. Tax-exempt notes or bonds may be issued to secure direct loans, but cannot be used for guaranteed loans. Feasibility studies are normally required when loans are for start-up facilities or existing facilities when the project will significantly change the borrower’s financial operations. The feasibility study should be prepared by an independent consultant with recognized expertise in the type of facility being financed.

Application Processing
InnoVative Capital works with eligible applications to develop and submit Pre-Applications and Application to USDA Rural Development field offices and manage the USDA underwriting process in conjunction with local and regional USDA offices and personnel, as well as USDA headquarters, relating to the financial feasibility, financing methodology, scope of the project, environmental review, and legal issues.

Advantages of USDA Loans and InnoVative Capital
InnoVative Capital works to make the Federal Government work for its clients. Our results have proven this, as InnoVative Capital’s clients have financed new hospitals and senior care facilities with USDA and FHA loans and guarantees. In certain instance, commercially financed projects received government composite-funding for infrastructure needs in the form of economic development grants and municipal allocations, for road construction, water, sewer and power lines, as well as offsite enhancements.