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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