Community Facility Loan Eligibility
What kind of businesses qualify for loan guarantees?
– Community Based Non-Profit Businesses
– Federally Recognized Tribes
– Public Bodies
What is an eligible area?
– A city or town with a population of less than 50,000
Eligible uses include but are not limited to:
– Business expansion
– Purchase & development of land and/or buildings
– Purchase of equipment and machinery
– Supplies or Inventory.
– Reasonable Closing Costs and Interest Reserve
– Debt refinancing
Examples of essential community facilities include:
– Health care facilities
– Townhalls/Courthouses, Hangars, Street Improvements
– Public Medical & Denial Clinics & Nursing Homes
– Public Chile care centers, community centers fairgrounds
– Fire Departments and Police Departments and their Equipment
– Prisons and equipment
– Public Parks vehicles and equipment
– Museums, libraries, and schools
– Telemedicine services and distance learning equipment
– Community gardens, food pantries, community kitchens, food banks, food hubs, or greenhouses.
What are the loan terms?
– Up to 40 year terms
– 80% USDA Guaranty, set and updated annually in August/September.
Other Terms:
– Loans Must be fully amortized, no balloon payments
– Interest Only Payment up to 36 months permitted
– Interest Rate is negotiated with lender, subject to Agency approval
– Rates may be fixed or variable
– Variable Rates May not be adjusted more than Quarterly
What collateral is required?
– Collateral coverage is not required on the Community Facility Program however if a Guaranteed Loan is made some collateral should be expected to be pledged.
– Hazard insurance is required on collateral (equal to the loan amount or depreciated replacement value, whichever is greater).
– An Environmental review in accordance with RD 1970 will be required on all projects.
– This could include an Intergovernmental Review, Phase II or Environmental Assessment depending on the qualities of the project.
What are the applicable fees?
– Guarantee Fee: 1.5% of the Guaranteed amount
– Annual Renewal Fee: Currently 50bp; can be paid by borrower or lender and due 1/31 based on the guaranteed balance as of 12/31 each year.
– Closing Costs: Loan Origination; Title Insurance; Appraisal; Environmental; Attorney Fees; and Other Closing Items.
What are the underwriting requirements?
– Financial Feasibility Study: Required on all new projects or expansions. Must be from an independent third party.
– Project must have verifiable community support
– Operations must have reasonable/realistic repayment ability
– Applicants must have legal authority to borrow money, obtain security, repay loans, construct, operate, and maintain the proposed facilities
– Borrower: 3 years of Balance Sheet and Income Statements as well as Interim Financials current to 90 days, including Debt Schedule.