Development Loan Program


Provides zero-interest loans and grants to Rural Utilities Service (RUS) financed telephone and electric utilities to promote rural economic development and job creation projects.

Reference: Section 313 of the RE Act 7 CFR 1703, Subpart B.

Applicant Eligibility

Zero-interest loans may be made, at the discretion of the Rural Business-Cooperative Service (RBS) Administrator, to any RUS borrower that is not delinquent on any Federal debt or in bankruptcy proceedings.

Loan Purposes

Eligible Purposes

To promote rural economic development and/or job creation projects including but not limited to:

  • Project feasibility studies
  • Start-up costs
  • Incubator projects
  • Other reasonable expenses
Ineligible Purposes

Any project in which any director, officer, manager, stockholder, or relative thereof, who has a significant ownership interest, or who would, in the judgment of the RBS Administrator, present a potential for or appearance of a conflict of interest.

  • Costs incurred prior to receipt of the completed application without prior written approval.
  • Projects located in areas covered by the Coastal Barrier Resources Act or projects which would adversely impact the environment.
  • For the purchase or lease of any real property, materials, equipment, or services from the borrower or significant stockholders, officers, managers, or close relatives thereof, without the RBS Administrator’s prior written approval.
  • To refinance any debt incurred prior to receipt of the completed application.
  • For any electric or telephone purpose.
  • For the borrower’s electric or telephone operation.
  • Any operations affiliated with the borrower without prior written approval.
  • To pay the salaries of any employee or owner of the borrower or its affiliates.
  • Community antenna television systems or facilities unless in conjunction with educational or medical entities and projects.

Maximum and Minimum Sizes

  • Maximum size of loan — 3% of projected total funds available under Section 313 of the Act, during that fiscal year, rounded to the nearest $10,000
  • Maximum loan size in Fiscal Year 2006 — $740,000
  • Minimum loan size — $10,000

Supplemental Funding Requirement

A project will not be selected unless supplemental funding is provided in an amount equaling at least 20% of the amount of the zero-interest loan funds provided by RBS. Supplemental funding may be provided by the project owner in the form of equity funds, private sources, State and local government source, other Federal Government sources, or the RUS borrower.

Terms and Policies

Terms of Zero-Interest Loan Repayment
  • The signed promissory note covering the repayment of the zero-interest loans between RBS and the RUS borrower establishing when repayments begin.
  • Repayment terms on a loan to the RUS borrower are based on the nature of the project. Ordinarily, the term, including any principal deferment period, will not exceed 10 years.
  • Repayment by the recipient must equal the terms to the RUS borrower, unless approved by the RBS Administrator.
  • Principal repayments may be deferred for a period of up to 2 years by RBS. Ordinarily, the deferment for an established business will be limited to 1 year.
  • Promote projects that will result in a sustainable increase in the productivity of economic resources in rural areas and thereby lead to a higher level of income for rural citizens.
  • RUS borrowers promote economic development in rural areas and job creation projects that are based on sound economic and financial analysis and take a long-term perspective.
  • Encourage economic development in rural areas and job creation projects without regard to service area.
  • To promote financially viable projects.
  • To encourage RUS borrowers to deposit funds in Cushion-of-Credit Accounts.

Application Process

Application Filing Procedures

Applications may be filed on any official workday at any Rural Development State Office. With the exception of applications to fund feasibility studies, a simultaneous filing must also be sent to the State single point of contact for State and local governments.

An “Application” must consist of:

  • Standard For 424: “Application for Federal Assistance”
  • Board Resolution (Refer to 7 CFR 1703.34 [2])
  • Miscellaneous Federal forms and certifications
Narrative discussion of the following:
  • “Selection Factors” as set forth in 1703.35
  • “Project Description” as set forth in 1703.36
  • Except for applications for feasibility studies, a discussion regarding the “environment impact of the proposed project”
Application Review

The following factors will be considered in the selection process:

  • Nature of the project
  • Job creation projections
  • Long-term improvements in economic development
  • Diversifying the rural economy or alleviating under-employment
  • Supplemental funds
  • Economic conditions and job creation
  • Unemployment rates
  • Per capita personal income
  • Change in population
  • Number of long-term jobs
  • Community-based economic development program
  • Plan for improving the marketable skills of people in rural areas
  • Location (rural)
  • Support for the program funds deposited in the cushion-of-credit account
  • Demonstration project
  • Probability of success
  • Special economic status

Other Considerations:

  • Environment requirements
  • Equal opportunity and nondiscrimination
  • Architectural Barriers Act of 1968
  • Flood hazard area precautions
  • Real property acquisition and relocation
  • Debarment and suspension
  • Drug-free workplace (grant only)
  • Restrictions on lobbying

Other Information

  • Sources of Funding — Funds for zero-interest loans are derived from annual appropriations from Congress
  • Available for Loans in Fiscal Year 2006 — Approximately $24,752,479
  • Program Administration — The program is administered at the state level by USDA-Rural Development State Offices