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You may already know that USDA Rural Development provides financial assistance through both grants and loans; however, we are primarily a lender.
When I first started my position as the Wyoming State Director, I was disappointed to learn that more grant dollars were not available. However, since that time, I have developed a greater appreciation for how loans can be advantageous for rural families, businesses and communities, as well as for taxpayers.
USDA Rural Development has a very thorough underwriting process. This ensures the borrowers have the capacity to repay loans and that projects are modest in size, scope and design. Wyoming Rural Development has very low loan default rates in all of our programs. The focus on “modest” maximizes the efficient use of project dollars and directs spending to supporting true needs.
For businesses, RD does not make direct loans. Instead, we can issue 80% loan guarantees to commercial banks. Business borrowers must be located in communities of 50,000 or less (anywhere except Casper or Cheyenne) and must have adequate repayment ability, and adequate equity and collateral.
Larger community projects are often funded through a combination of grants and loans. This is particularly true for those that address human health and safety issues such as Rural Development’s Water and Environmental Programs. The proportion of grant versus loan funding is determined by what the community can afford. Economically-disadvantaged communities receive a higher proportion of grant dollars, while loan amounts may be set to be within the community's ability to pay. The combination of grants and loans allows communities to take on larger projects than otherwise would be possible without federal funding.
During the underwriting process, service charges (water, for example) are carefully compared to similar nearby communities to make certain Rural Development dollars are being used appropriately. Likewise, Rural Development also services its loans over the useful life through annual visits. Service visits make certain that loan facilities, equipment and infrastructure are being maintained.
The bottom line is that Rural Development wants to see worthwhile projects succeed. As for any type of financial assistance, a considerable amount of information has to be submitted for the application. However, there can be unexpected returns for applicants. The Rural Development application process provides access to experts in project development and financial planning. This enables the borrower to establish short-term and long-term strategies to address even the most daunting community challenges. The process is also free and Rural Development employees assisting with loan applications typically have an in-depth understanding of other funding sources at the local, state and federal level.
Please contact us if you know of a project that could take advantage of our programs. There may be a Rural Development program with grant dollars available, but do not overlook our loans which are a proven, cost-effective method for advancing rural prosperity.
Your State Director, Glenn Pauley
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