USDA » Guaranteed Community Facility Loan Program
Lender Benefits
- May be used towards Community Reinvestment Act requirements
- Guarantee rate usually 80% of loan amount; 90% under special circumstances
- Lender may charge different rates on guaranteed and non-guaranteed portions of loan
- Lender’s risk of loss reduced by percent of loan guarantee
- Loan stimulates related banking services such as checking and savings accounts
- Guaranteed portion of loan secured by full faith and credit of U.S. Government
- Guaranteed loans may be sold on secondary market – lender retains interest rate margin for servicing; increases yield on loan amount retained
- Guaranteed portion of loan does not count against legal lending limits
- Provides portfolio protection from:
- Temporary financial problems such as natural disasters, adverse economic trends, reduced use of facilities, etc.
- Major reorganizations due to enlargements, bankruptcy, death of principals operating and managing facility, etc.
- Decline in collateral value due to adverse economic trends
- Accelerated depreciation and inherent risk associated with highly specialized facilities
- Excellent public relations in local communities bydemonstrating interest in funding projects
Customer Benefits
- Ability to obtain more timely financing, thereby reducing inflationary increases in construction costs
- Establishes loan history with commercial lender – not the Government
- Better terms offered by lender, especially when loan is sold on secondary market
- May combine guarantee funds with other Federal, State and local funds
Community Benefits
- Adequate local services attract residential and commercial development, increasing tax base
- Decreased insurance rates with better fire protection
- Improved quality of life
Loan Processing Assistance
- Lender uses their own documents to make and service loans
- Agencystaff available to assist lenders to prepare required documents for guaranteed loan processing
- Agencytechnical staff available to review construction plan and environmental impact statements for benefit of the Government
Typical Projects Financed
- Health Care Facilities – hospitals, clinics, nursing homes, etc.
- Public Safety – police & fire stations, jails, fire & rescue vehicles, communication centers, etc.
- Telecommunications – medical & educational telecommunications links
- Public Services – adult & child care centers, courthouses. airports, schools, fairgrounds, etc.
Eligibility
- Public entities
- Federally recognized Indian Tribes
- Nonprofit organizations
- Lender unwilling to make loan without obtaining loan guarantee
- Limited to unincorporated rural areas and incorporated towns of 20,000 or less
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