Community

Facility 

Direct Loans

and 

Grants

Community

Facility

Direct Loans

and 

Grants
USDA Rural Development makes loans and

grants to develop essential rural community

facilities in areas of up to 20,000 in population.

Direct loans may be made to applicants unable

to obtain commercial credit. Priority is given to

applicants in rural communities with populations of 5,000 or less. Applicants with low

median household incomes receive a higher

percentage of the grants.

Types of Projects Financed

 Health Care — such as hospitals, clinics, nursing

homes, ambulatory care centers, etc.

 Public Safety — such as police and fire stations, jails,

fire and rescue vehicles, and communication centers.

 Public Services — such as adult and child care centers,

courthouses, airports, schools, fairgrounds, etc.

Eligible Entities

 Public entities — municipalities, counties, other public

subdivisions, and special-purpose districts.

 Federally recognized Indian tribes.

 Nonprofit organizations.

Who May Apply?

Loans and grants are available to public entities, such as

municipalities, counties, and special-purpose districts, as

well as to nonprofit corporations and tribal governments.

Applicants must:

 Be unable to obtain funds from commercial sources at

reasonable rates and terms;

 Have the legal authority to own, construct, operate, and

maintain the proposed facility;

 Provide for facilities needed for orderly community

development, consistent with the State strategic plan.
For grant funding, the facility must serve areas where the

median household income of the population is either

below the poverty line or below 90 percent of the State

non-metropolitan median household income (whichever is

higher).

In addition, applicants must have the legal authority

necessary for construction, operation, and maintenance of

the proposed facility and also be unable to obtain needed

funds from commercial sources at reasonable rates and

terms.

What Are the Terms?

The maximum term for all loans is 40 years. However, the

repayment period is limited to the useful life of the

facility or any statutory limitation on the applicant’s

borrowing ability.

What Is the Interest Rate?

Interest rates for direct loans are based on current market

yields for municipal obligations. Direct loans may qualify

for a lower interest rate depending upon the median

household income of the residents of the community to

be served.

What Security Is Required?

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.

How are Grants Prioritized?

Grants are authorized on a graduated scale. Priority is

given to applicants located in less populated rural

communities with low median household incomes.
How May Funds Be Used?

Grant funds may be used to assist in the development of

essential community facilities. A grant may be used in

combination with other financial assistance, such as a

direct or guaranteed loan, applicant contribution, or loans

and grants from other sources.

What Is the Maximum Grant?

Grant assistance may be available for up to 75 percent of

project costs.

Limitations on Grant Funds

Grant funds cannot be used to:

1. Pay any annual recurring costs, including purchases or

rentals that are generally considered to be operating

and maintenance expenses;

2. Construct or repair electric generating plants; 

3. Refinance existing indebtedness or pay interest;

4. Pay costs to construct facilities to be used for

commercial rental where the applicant has no control

over tenants and services offered;

5. Construct facilities primarily for the purpose of housing

State, Federal, or quasi-Federal agencies;

6. Finance recreational facilities or community antenna

television services or facilities.
The U.S. Department of Agriculture (USDA) prohibits discrimination in

all its programs and activities on the basis of race, color, national origin,

gender, religion, age, disability, political beliefs, sexual orientation, and

marital or family status. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for

communication of program information (braille, large print, audiotape,

etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice

and TDD).

To file a complaint of discrimination, write USDA, Director, Office of

Civil Rights, Room 326-W, Whitten Building, 14th and Independence

Avenue, SW, Washington, D.C. 20250-9410 or call (202) 720-5964

(voice or TDD). USDA is an equal opportunity provider and employer.

PA-1747

Revised August 2004

For additional information 

contact your local USDA Rural

Development office

–or–

USDA Rural Development

Community Programs Division

1400 Independence Ave. SW

Washington, D.C. 20250

TEL (202) 720-1490

FAX (202) 690-0471

Web Site

http://www.rurdev.usda.gov