Frequently Asked Questions

Question: Who can apply for an RUS electric loan or loan guarantee?

Answer: Any entity that provides electric service to rural consumers. It should be noted, however, that the project must be feasible both from and engineering and financial perspective.

Question: Does RUS finance start up costs?

Answer: No. RUS will only finance construction costs (bricks and mortar).

Question: Will RUS finance merchant plants?

Answer: No. RUS can only finance facilities that will serve rural consumers. Since the power generated from merchant plants is not specifically targeted to any specific group RUS cannot finance such a project.

Question: What type of loan programs does RUS have?

Answer: RUS has three loan programs (hardship rate, municipal rate, and Treasury rate) and a loan guarantee program.

Question: What are the differences between the loan programs?

Answer: The hardship rate loan program provides loans at 5 percent, the municipal rate loan programs provides funds at the municipal rate, which changes quarterly, and the Treasury rate program provides funds at the Treasury rate, which changes daily. Loan funds from these programs are restricted to providing funds for the construction and acquisition of distribution plant. The criteria for qualifying for the hardship rate program are set by Congress. See 7 CFR Part 1714 for details.

Answer: Does RUS provide 100 percent of the funding?

Answer: RUS will provide 100 percent financing for hardship rate and treasury rate loans. Municipal rate loans require the entity to obtain 10 to 30 percent of the financing from outside sources. See 7 CFR Part 1714 for details.

Question:: What is the loan guarantee program used for?

Answer: The loan guarantee program is primarily used to finance the construction and acquisition of generation and transmission projects. These funds can, however, also be used to finance the construction and acquisition of distribution facilities.

Question:: Who provides the funds under the loan guarantee program?

Answer: Most of the funds (over 99 percent) provided under the loan guarantee program and provided by the Federal Financing Bank (a Federal Agency). However, entities are free to obtain the loan guarantee funds from outside sources if they desire.

Question:: Are interest rates locked in at the time of the loan?

Answer: No. Interest rates under the hardship rate program are set at 5 percent. Interest rates under the municipal rate, municipal rate, and loan guarantee programs are established at the time of the advance. Therefore, you could have multiple interest rates under one loan. The interest rates under the municipal rate program change quarterly while the interest rates under the Treasury rate and loan guarantee programs change on a daily basis.

Question:: How do I find out about the current interest rates?

Answer: The current interest rates are posted on the RUS web site (www.usda.gov/electric/rates.htm). In addition, RUS borrowers are notified on a quarterly basis of changes to the municipal rate.

Question:: What type of security does RUS require for its loans and loan guarantee?

Answer: In most cases, Indian tribes, Public Utility Districts, and municipals are the exceptions, the current assets and all future assets of the entity are pledged as security for the debt. This pledge of assets is secured by a loan contract and mortgage. The standard loan contract and mortgage is outlined in 7 CFR Part 1718. Loans for Indian Tribes, Public Utility Districts, and municipals are generally secured by a lien on the entity's revenue.

Question:: As part of its standards setting function RUS maintains a standard list of materials. How do I get my electric product listed on the standard list of materials?

Answer: General guidance is provided on the Technical Standards Committee page of our web site (www.usda.gov/rus/electric/tsca.htm). Specific questions concerning the acceptance process may be directed to the Chair of the Technical Standards Committee "A" at hbowles@rus.usda.gov.

Question:: I have an electric utility that is interested in purchasing my product but they tell me that I must be on the RUS list of materials. How long does it take to get my product on the list of materials?

Answer: The time varies but in most cases where we have all of the necessary information, including test reports, drawings and certifications, processing should be completed within two to three months.

Content updated November 07, 2002

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