Facilitating Success
USDA Community Facility Program
As a USDA financial advisor, InnoVative Capital assesses client eligibility, identifies funding sources to address shortfalls, and creates a cost-minimizing framework.
We support our clients through all phases of the USDA loan process:1
Eligibility Phase
- Project Team Solicitation & Selection
- Project Management Support (through all phases)
- Eligibility Package Submission
- USDA Concept Meetings
Pre-Application Phase
- Project Scope & Sources Refinement
- State Historic Preservation and Environmental Reviews
- Pre-Application Submission
- USDA Public Hearing
Application Phase
- Feasibility and Appraisal Report Assistance
- Application Submission
- USDA Underwriting Meetings
- Construction Lender Solicitation and Selection Process
- Construction Loan Negotiations and Closing
Construction & Close-out Phase
- Construction Draw Servicing
- USDA Permanent Loan Closing and Construction Loan Refinancing
- * Sample Direct Loan Process
** For Guaranteed Loans: InnoVative Capital leads guaranteed lender solicitation and negotiation process ↩︎
DIRECT LOANS
Eligible Borrowers: Public bodies, community-based non-profit corporations, and federally recognized tribes in rural areas (populations of 20,000 or fewer) deemed essential community facilities by USDA. These borrowers must provide essential services such as healthcare, public safety, education, and utilities.
Use of Funds: To purchase, construct, and/or improve essential community facilities, purchase equipment, debt refunding, and pay related project expenses.
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DIRECT | Terms & Conditions
For USDA Direct Loans the applicant is the borrower.
- Repayment terms, lesser of, a) facility useful life, b) state statute, c) the applicant’s borrowing authority, or d) 40 years.
- No pre-payment penalties.
- No USDA servicing fees.
- Can leverage up to 100% Loan-to-Value.
- Fixed long-term loan rates, which are set (and reset quarterly) by USDA Rural Development.
- Rates are “soft” locked at the time of the issuance of the USDA loan commitment, based on the then prevailing, USDA Direct Loan rate. “Hard” lock occurs during USDA loan take-out, post construction.
- Funding subject to annual federal budget allocations.
- Interim construction loan is required, and primarily funded through a commercial bank loan or short-term construction note. In limited circumstances borrowers may access interim construction through USDA.
- Repayment terms, lesser of, a) facility useful life, b) state statute, c) the applicant’s borrowing authority, or d) 40 years.
GUARANTEED LOANS
Applicant Lenders: Commercial lenders, including chartered banks, farm credit banks, banks for cooperatives, savings and loan associations, mortgage companies (part of a bank-holding company), the National Rural Utilities Cooperative Finance Corporation, credit unions, and state bond banks/pools.
Eligible borrowers: Public bodies, indigenous tribes on federal and state reservations, federally recognized tribes, and non-profit organizations in rural areas with no more than 50,000 residents (per the latest U.S. Census).
Use of Funds: To purchase, construct, improve, or refinance essential community facilities, including healthcare, public safety, education, utilities, and community support services.
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Guaranteed Loan | Terms & Conditions
For USDA Guaranteed Loans, the commercial lender sets their terms and conditions for the borrower. InnoVative Capital assists clients in the solicitation and negotiation process with the lender.
- Lender (applicant) with USDA’s concurrence will establish borrower loan term. Term may not exceed 40 years.
- No pre-payment penalties.
- USDA Guaranteed loans receive an 80% guarantee.
- Interest rates are negotiated between the lender (applicant) and the borrower and may take the form of either fixed or variable rates.
- Funding subject to annual federal budget allocations.
- Independent construction loans are universally mandated for Project financing.
- Construction loans may be financed by commercial bank loans, bank placed tax-exempt bonds and publicly sold tax-exempt and taxable bonds.
- Lender (applicant) with USDA’s concurrence will establish borrower loan term. Term may not exceed 40 years.
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Guaranteed Loan | Fees
As the applicant is the commercial lender, there are additional associated fees that are levied on the borrower.
- Initial Guarantee Fee: 1.25% of guaranteed amount.
- Guarantee Retention Fee: 0.5% of outstanding principal paid annually.
- Fee for Issuance of Loan Note Guarantee Prior to Construction: 0.5%.
- The borrower should expect additional customary loan origination fees from the lender (applicant).
Let’s Discuss Your Project and Funding Needs
We can help from start to finish or advise on any phase of your project. Get started today.
TEL: 610-543-2490 x104
