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Capital Funding

Capital funding is defined as funding used to expand or renovate a building, purchase major equipment or construct a new facility. In searching for funding for capital projects, it is very important that facilities consider and use a variety of potential sources, including public grants and loan programs, as well as private sources such as foundations and donations from local residents.

Are Grants Available for Capital Funding?

The first step that many communities research when undertaking a capital project is the availability of grant funds. Unfortunately, while many grant programs exist for which facilities are eligible, the majority of grants available are programmatic in nature and do not allow purchases of major equipment and even fewer are available for construction. Therefore, when searching for grants it is important to look for programs that specifically state that they will fund capital projects. Some grant programs that will fund construction or equipment are:

U.S. Department of Agriculture (USDA) Community Facilities Grant Program

What does this program do?
This program provides affordable funding to develop essential community facilities in rural areas. An essential community facility is defined as a facility that provides an essential service to the local community for the orderly development of the community in a primarily rural area, and does not include private, commercial or business undertakings.

Who may apply for this program?
Eligible borrowers include:

  • Public bodies
  • Community-based non-profit corporations
  • Federally recognized Tribes

What is an eligible area?
Rural areas including cities, villages, townships and towns including Federally Recognized Tribal Lands with no more than 20,000 residents according to the latest U.S. Census Data are eligible for this program.

How may funds be used?
Funds can be used to purchase, construct, and/or improve essential community facilities, purchase equipment and pay related project expenses.

What kinds of funding are available?

  • Low interest direct loans
  • Grants
  • A combination of the two above, as well as our loan guarantee program. These may be combined with commercial financing to finance one project if all eligibility and feasibility requirements are met.

What are the funding priorities?

  • Priority point system based on population, median household income
    • Small communities with a population of 5,500 or less
    • Low-income communities having a median household income below 80% of the state nonmetropolitan median household income.

USDA Distance Learning and Telemedicine Grant and Loan Program

What does this program do?
The Distance Learning and Telemedicine (DLT) program helps rural communities use the unique capabilities of telecommunications to connect to each other and to the world, overcoming the effects of remoteness and low population density. For example, this program can link teachers and medical service providers in one area to students and patients in another.

Who may apply?
Eligible applicants include most entities that provide education or healthcare through telecommunications, including:

  • Most State and local governmental entities
  • Federally recognized Tribes
  • Non-profits
  • For-profit businesses
  • Consortia of eligible entities

DLT 100% grant applications are accepted through a competitive process. The application window is announced annually (typically after the first of the year) through a Notice of Funds Availability or a Notice of Solicitation of Applications in the Federal Register. Applicants are required to provide a minimum 15 percent match. Awards can range from $50,000 to $500,000.

What is an eligible area?
Check with a General Field Representative to determine whether the proposed service area qualifies.

How may the funds be used?
Grant funds may be used for:

  • Acquisition of eligible capital assets, such as:
    • Audio, video and interactive video equipment
    • Terminal and data terminal equipment
    • Computer hardware, network components and software
    • Inside wiring and similar infrastructure that further DLT services
  • Acquisition of instructional programming that is a capital asset
  • Acquisition of technical assistance and instruction for using eligible equipment

What kinds of funding are available?
Grant-only funds, awarded through a nationally competitive process – 15% match required.

What are the grant terms?
A minimum 15% match is required for grant-only awards (cannot be from another federal source)

Who Finances a Capital Project?

It is often necessary to utilize loan funds for capital projects. Local banks can often loan funds for a portion of the project costs. However, it can sometimes be difficult to acquire a loan, especially at a reasonable interest rate, due to the risk associated with lending to struggling rural healthcare facilities. Several federal loan and loan guarantee programs exist that can be very helpful to facilities in securing loans, often with lower interest rates than might typically be acquired.

USDA Community Facilities Direct and Guaranteed Loan Program

What does this program do?
This program provides affordable funding to develop essential community facilities in rural areas. An essential community facility is defined as a facility that provides an essential service to the local community for the orderly development of the community in a primarily rural area, and does not include private, commercial or business undertakings.

Who may apply for this program?
Eligible borrowers include:

  • Public bodies
  • Community-based non-profit corporations
  • Federally recognized Tribes

What is an eligible area?
Rural areas including cities, villages, townships and towns including Federally Recognized Tribal Lands with no more than 20,000 residents according to the latest U.S. Census Data are eligible for this program.

How may funds be used?
Funds can be used to purchase, construct, and / or improve essential community facilities, purchase equipment and pay related project expenses.

Examples of essential community facilities include:

  • Healthcare facilities such as hospitals, medical clinics, dental clinics, nursing homes or assisted living facilities
  • Public facilities such as town halls, courthouses, airport hangars or street improvements
  • Community support services such as childcare centers, community centers, fairgrounds or transitional housing
  • Public safety services such as fire departments, police stations, prisons, police vehicles, fire trucks, public works vehicles or equipment
  • Educational services such as museums, libraries or private schools
  • Utility services such as telemedicine or distance learning equipment
  • Local food systems such as community gardens, food pantries, community kitchens, food banks, food hubs or greenhouses

For a complete list see Code of Federal Regulations 7 CFR, Part 1942.17(d) for loans; 7 CFR, Part 3570.62 for grants.

What kinds of funding are available?

  • Low interest direct loans
  • Grants
  • A combination of the two above, as well as our loan guarantee program. These may be combined with commercial financing to finance one project if all eligibility and feasibility requirements are met.

What are the funding priorities?

  • Priority point system based on population, median household income
    • Small communities with a population of 5,500 or less
    • Low-income communities having a median household income below 80% of the state nonmetropolitan median household income.

Business and Cooperative Programs

USDA's Rural Business-Cooperative Service offers programs to support business development and job training opportunities for rural residents.

Our programs help provide the capital, technical support, educational opportunities and entrepreneurial skills that can help rural residents start and grow businesses or access jobs in agricultural markets and in the bio-based economy. USDA and our public and private partners are connecting rural residents to the global economy by:

  1. Supporting business growth and development;
  2. Facilitating sustainable renewable energy development;
  3. Developing regional food systems;
  4. Generating and retaining jobs through recreation and natural resource restoration, conservation, and management;
  5. Increasing access to broadband;

These investments support the nation's long-term prosperity by ensuring that rural communities are self-sustaining, repopulating and thriving economically.

Business Programs
Through its Business Programs, Rural Development helps provide much-needed capital in rural areas, often in partnership with private-sector lenders and community-based organizations. The capital may be in the form of loan guarantees, direct loans or grants to individuals, rural businesses, cooperatives, farmers and ranchers, public bodies, non-profit corporations, Native American Tribes and private companies. The funding is intended to help improve the quality of life in rural communities by enhancing economic opportunities.

Cooperative Programs
USDA's Cooperative Programs promote the understanding and use of the cooperative form of business. Cooperatives market and distribute agricultural products and supplies and provide other services such as electricity, telecommunications, credit and financial services, housing, food, hardware and building supplies.

USDA Rural Development helps rural residents form new cooperatives and improve the operations of existing ones through education, research, technical assistance, publications and funding. We collect financial and other data from farmer, rancher and fishery cooperatives every year. This data is published in several reports, including a listing of almost 1,500 marketing, supply, service, fishery and bargaining cooperatives.

Community Development Programs
USDA's Community Development Programs include programs, technical assistance and initiatives that help communities and regions to realize their strategic, long-term economic development goals.

HUD 242 - Federal Housing Administration (FHA) Hospital Mortgage Insurance Program

The Office of Hospital Facilities (OHF) administers FHA's Section 242 Mortgage Insurance for Hospitals program within the Office of Healthcare Programs. Section 242 of the National Housing Act provides mortgage insurance for acute care hospital facilities ranging from large teaching institutions to small rural critical access hospitals. OHF is headed by the Director of the Office of Hospital Facilities and is comprised of two divisions which support underwriting and asset management of FHA-insured hospital loans. OHF staff members are primarily located at HUD Headquarters and New York City, with out-stationed staff in Ft. Worth, Jacksonville, Milwaukee, and St. Louis.

SBA Certified Development Company (CDC)/504 Loan Program

The CDC/504 Loan Program provides financing for major fixed assets such as equipment or real estate.

Bond issues are another option. Many states have agencies that act as the vehicle for providing financial assistance to public and non-profit healthcare providers through loans funded by the issuance of tax-exempt bonds. The diversity of the nature of facilities funded by state-based programs is dependent on the mission of the agency.

What is an Essential Community Facility?

Essential Community Facilities is a term used by USDA Community Facilities programs to describe the types of facilities it will fund. Essential Community Facilities must meet all of the following criteria:

  • Provide an essential public service to the local community - the service;
    • Should be a service that is typically provided by a local unit of government;
    • Be needed for the orderly development of the rural community and considered a public improvement;
    • Does not include private, commercial or business undertakings; and
    • Must include significant community support.

Essential Community facilities are medical clinics, hospitals, assisted living facilities, police stations, fire and rescue stations, community centers, public buildings, transportation, schools, libraries, and childcare centers - facilities that are essential to the quality of life in rural communities.

What is a CDFI?

Community Development Financial Institutions or CDFIs are financial institutions that have community development as their primary mission and that develop a range of strategies to address that mission. CDFIs provide comprehensive credit, investment, banking and development services. Some are chartered banks, others are credit unions, and many operate as self-regulating, non-profit institutions that gather private capital from a range of investors for community development or lending. CDFIs make loans and investments and provide basic services to people and institutions that, for various reasons, are unable to get these services from conventional financial institutions.

CDFIs serve economically disadvantaged people and communities throughout the United States, such as affordable housing developers, small business owners, community groups, and other non-profits or social service providers. CDFI is the administrator of New Markets Tax Credits program. In 1994 the Community Development Banking and Financial Institutions Act created a source of federal funding to fund community development financial institutions.

The CDFI Fund maintains a list of currently certified CDFIs. This list is organized by location and includes contact information.

Private Foundations

Private foundations receive income from an individual, family, or a group of individuals who have specified what types of projects they are interested in funding. Examples of private foundations that list capital projects for healthcare facilities as a focus area include:

There are many other private foundations that operate within a one- or two-state region. To view other possible capital funding sources, access RHIhub's funding section for a list of additional programs.