Rural Development

Housing & Community Facilities Programs

USDA Rural Development

Community Facilities Guaranteed Loan Program

Lender Eligibility and Benefits

Eligibility

Eligible Lenders of Record include Federal or State chartered banks, thrifts, the Bank for Cooperatives, National Rural Utilities Cooperative Finance Corporation, Farm Credit System, insurance companies regulated by a State or National insurance regulatory agency, and State bond banks or State bond pools.  Eligible Lenders of Record must be subject to credit examination and supervision by an appropriate agency of the United States or a State that supervises and regulates credit institutions.  A Lender of Record must have the capacity and authority to adequately service loans through maturity for which a guarantee is requested.  Under some circumstances, non-traditional lenders may be deemed eligible to participate.  Please contact your USDA Rural Development Office on how to apply for Lender of Record eligibility determination.

 Benefits

Guaranteed Community Facility financings result in excellent public relations with the community.  As the lender is providing financing for community projects, there is a much higher probability for additional financing within the community from business development generated through the infrastructure enhancement and stability.

• Loans are guaranteed by the USDA against loss for up to 90 percent of the loss.

• Guaranteed Community Facilities loans are eligible to meet CRA (Community Reinvestment Act) requirements of Commercial Banks and Savings & Loan institutions.

• Reduction in capitalization requirements:  Once the guarantee is in place, the guaranteed portion carries a risk weighting of 20% (i.e. Assuming a capital target of 10%: $1,000,000 guaranteed portion X 20% risk weighting X 10% capital target = $20,000 capital allocation vs. $100,000 capital allocation without the guarantee).

• Loans may be sold on the secondary market through an assignment of guarantee, increasing the Lender of Record’s return on investment.  Secondary Market purchase of the guaranteed portion carries a risk weighting of 0%.  (i.e. Assuming a capital target of 10%: $1,000,000 X 0% risk weighting X 10% capital target = $0 capital allocation vs. $100,0000 capital allocation without the guarantee).

• Lenders of Record use their own forms, loan documents, and security instruments.

• There is no maximum loan limit; the amount is determined based upon project feasibility, repayment ability, and reasonable project cost; however, when demand is high, projects requiring less budget authority will take precedence over substantially larger requests.

• The only USDA fee is a one-time 1% guarantee fee assessed against the guaranteed portion, with no annual renewal fee. This fee is payable upon the release of the USDA loan note guarantee. (Face Amount X 90% Guaranteed X 1% Guarantee Fee).

• Rates and terms are flexible, and are negotiated between the Lender of Record and the borrower.  The Lender of Record may split the interest rates charging a higher rate for the non-guaranteed portion than for the guaranteed portion.

• Typically, loan approval occurs 30-60 days after the receipt of a completed application.

 Lender’s Handbook