USDA Community Facilities Loan Guarantees insure commercial loans made by independent lenders for essential community facilities in rural areas, with populations of up to 20,000. Eligible borrowers include public entities, such as municipalities, counties, districts, not-for-profit entities and tribal governments. Borrowers must have the ability to pledge security for loans. Under the program, the USDA guarantees up to 90% of the loan, with the commercial lender assuming the remaining 10% loss position. Funds may be used for construction and renovation of healthcare facilities, as well as non-healthcare related public safety and public services, including costs to acquire land, professional fees, furniture and equipment. Refinancing existing debt may be eligible for USDA guaranteed financing, provided it is a secondary part of the loan and existing creditors are unwilling to modify terms in order for the USDA loan to be feasible. Interest rates for the Guarantee Program are established by the commercial lender and approved by USDA. The Guaranteed Loans are usually variable and USDA customarily guarantees only the permanent loan. In most cases the borrower must secure independent construction financing. Should a fixed rate loan be desired, an interest rate cap must be purchased. The USDA Guarantee Program can be highly competitive among applicants due to limited annual state and national allocations.

With eligibility criteria similar to that of the Guarantee Program, USDA can also make direct loans under the Community Facilities Programs to applicants who are unable to obtain commercial credit. Interest rates for the Direct Loan Program are established by the USDA. The USDA Direct Loan Program offers attractive interest rates, but availability is limited by annual state and national funding allocations. Due to fierce competition, borrowers should anticipate a need to supplement USDA Direct Loans with either a USDA Guarantee Loan, or some other form of composite-funding.

InnoVative Capital's USDA Banking Capabilities

InnoVative Capital is actively involved in the USDA Community Facilities Program and considers it as a potential financing technique for certain clients. Unlike many lenders, InnoVative Capital may offer access to both construction and permanent funding, eliminating the often difficult task of securing additional interim financing, prior to the USDA guaranteed take-out.