Capital Funding

Capital grants are funds awarded for the acquisition, improvement, or construction of physical assets. It could be used to expand or renovate a building, purchase major equipment, or construct a new facility. When searching for funding for capital grants, 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.

Grants Available for Capital Funding

While many grant programs exist for which facilities are eligible, the majority of these grants do not allow for purchase of major equipment and even fewer are available for construction. Therefore, it is important when searching for grants to look for programs that specifically state they will fund capital projects. Some grant programs that will fund construction or equipment acquisition are:

• U.S. Department of Agriculture (USDA) Community Facilities Direct Loan and Grant Program
  The USDA Community Facilities Direct Loan and Grant 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.
  
  Eligible borrows include public bodies, community-based non-profit corporations, and federally recognized tribes.
• USDA Distance Learning and Telemedicine Grant Program
  This program helps rural communities use advanced telecommunications technology to connect to each other – and the world – overcoming the effects of remoteness and low population density.
  
  Eligible applicants include most entities that provide education or healthcare through telecommunications, including state and local organizations; federally recognized tribes; non-profit organizations; incorporated, for-profit businesses; and groups of eligible entities working together.

Who Finances Capital Projects?

It is often necessary to utilize loan funds for capital projects. Local banks can often loan funds for a portion of 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 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 what might typically be acquired.

Business and Cooperative Loans
Rural Development's Rural Business-Cooperative Service (RBCS) is an agency that supports rural economic development through a variety of programs and services. It focuses on boosting the viability of rural businesses, promoting cooperatives, and creating job opportunities. RBCS offers financial assistance, technical support, and resources to help rural businesses expand, become more competitive, and promote community development.

• Business Programs
• Cooperative Services
• Energy Programs

U.S. Department of Housing and Urban Development Office of Hospital Facilities Section 242 – Hospital Mortgage Insurance Program
The Office of Hospital Facilities manages the Section 242 program, which provides mortgage insurance for acute care hospital facilities ranging from large teaching institutions to small rural Critical Access Hospitals.

U.S. Small Business Administration Certified Development Company 504 Loan Program
The 504 Loan Program provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation. The maximum loan amount for a 504 loan is $5.5 million.

To be eligible for a 504 loan, your business must:

• Operate as a for-profit company in the U.S. or its possessions.
• Have a tangible net worth less than $20 million.
• Have an average net income of less than $6.5 million after federal income taxes for the two years preceding your application.

Essential Community Facility

Essential community facilities is a term used by USDA Community Facilities programs to describe the types of facilities it will fund. 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.

Essential community facilities include 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.

Community Development Financial Institution

Community Development Financial Institutions (CDFIs) are financial institutions that have community development as their primary mission and 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 U.S., such as affordable housing developers, small business owners, community groups, and other non-profits or social service providers.

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 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:

• Charles A. Frueauff Foundation
  This foundation awards grants in 35 states. They will consider applications from hospitals and healthcare agencies for equipment purchases.
• Gladys Brooks Foundation
  This foundations awards grants in 12 states. It supports institutions with the goal of establishing and supporting educational institutions, hospitals, and clinics, among others.
• Sunderland Foundation
  This foundation awards grants in four broadly defined funding areas: higher education; human services; arts and culture; and healthcare and hospitals.

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