How to Apply for the Cup Loan Program in 5 Easy Steps

The cup loan program, offered by the USDA, provides affordable financing to develop essential community facilities in rural areas. With low interest rates and flexible repayment terms it has become an attractive option for many public organizations looking to fund construction renovation or equipment purchases.

If you represent an eligible public entity like a town public school, public healthcare facility or non-profit organization, you may qualify for up to $10 million in cup loan financing. The application process is straightforward and can be completed online in just a few steps.

In this comprehensive guide, we’ll walk through the cup loan eligibility criteria, application requirements, and step-by-step process to submit your application and get approved for cup loan financing.

Cup Loan Program Overview

The Community Facilities Direct Loan Program, also known as the cup loan program, is administered by the USDA Rural Development. It offers affordable financing to develop essential community facilities in rural towns and communities with populations under 20,000.

Eligible applicants include:

• Towns and local governments
• Public schools
• Public healthcare facilities like hospitals, clinics, assisted living facilities
• Public safety services like fire, rescue and public safety
• Community support services like childcare centers, community centers, fairgrounds
• Local agricultural producers
• Non-profit organizations
• Tribal governments

The cup loan can be used to:

• Construct, enlarge or improve essential community facilities
• Purchase equipment and furnishings
• Pay related project expenses like professional fees, technical assistance
• Refinance debts under certain conditions

The maximum repayment period is 40 years, and fixed interest rates are set monthly based on current market yields.

Compared to market-rate loans, the cup loan offers more favorable rates and terms tailored specifically to benefit rural community public facilities.

Cup Loan Eligibility Criteria

To qualify for cup loan financing, applicants must meet the following eligibility criteria:

• The project must serve a rural area with a community population under 20,000.
• The applicant must be unable to finance the project from their own resources or through commercial credit at reasonable rates and terms.
• The applicant must have legal authority to construct, operate and maintain the proposed facility.
• The applicant must be financially sound and able to repay the cup loan.
• The project must demonstrate substantial community support.

Facilities like hospitals, assisted care facilities and nursing homes may be located in rural or urban areas. Childcare and community centers may be located in rural areas or towns with populations up to 50,000.

Cup Loan Application Requirements

To apply for a cup loan, the applicant must submit the following:

• Application for Federal Assistance (SF-424): This is the standard form required for federal financial assistance requests.

• Narrative Proposal: This proposal should provide details on the need for the project, estimated costs, community support, project location, existing facilities, implementation timeline, and other relevant information.

• Preliminary Architectural/Engineering Report: For construction projects, this report addresses project design, cost estimates, site analysis, environmental impacts, regulatory requirements and alternatives considered.

• Credit Report: This provides an analysis of the applicant’s financial position and capacity to repay the loan.

• Financial Statements: Audited financial statements for the past 3 years are required. For new entities, provide projected cash flows and financial statements.

• Authorizing Resolution: This resolution authorizes submission of the loan application and designates a representative.

• Interim Financing Plan: This outlines plans for financing the project until cup loan funds become available.

• Service Agreements: If the facility will be leased, shared use agreements must be provided.

• Environmental Information: Details must be provided on any environmental or historic preservation impacts.

Meeting all cup loan eligibility criteria and providing the required application items will help streamline the review and approval process.

How to Apply for a Cup Loan in 5 Steps

Follow these steps to submit your cup loan application:

Step 1: Determine if your project qualifies

Carefully review the cup loan eligibility criteria to confirm your organization and project meet the requirements. If needed, contact your state USDA Rural Development office to verify.

Step 2: Compile required application items

Gather all the required application components outlined above. Engage architects, engineers, accountants and legal counsel as needed.

Step 3: Complete application forms

Fill out the SF-424 form with details on your organization, project summary and funding request amount. Draft the project narrative proposal.

Step 4: Submit cup loan application

Applications can be submitted electronically via email or mail. Include all required items and documentation. Submit to your state USDA Rural Development office.

Step 5: Respond to information requests

The USDA may request clarification or additional information during review. Be prepared to respond promptly to keep the application moving forward.

It’s a good idea to start the application process 6-12 months before funding is needed. This provides time for thorough application preparation, review and approval.

What Happens After You Apply?

Here’s a quick rundown of what happens after you submit the cup loan application:

• Application Review: The USDA will review for completeness, eligibility and financial feasibility.

• Environmental Review: Federally-funded projects require an environmental assessment.

• Loan Approval: If approved, the USDA provides a Letter of Conditions outlining the terms.

• Loan Closing: Final documents are executed, and the loan is closed to access funds.

• Funding: Loan funds are disbursed as project expenses are incurred.

• Construction: With cup loan financing secured, construction or renovations can begin!

• Repayment: Loan repayment begins once the project is completed over the defined term.

With personalized guidance from USDA representatives, the cup loan process aims to be as streamlined and efficient as possible.

Cup Loan Program Benefits

The cup loan program provides rural communities with an affordable, viable financing option for essential public facilities. Key benefits include:

• Low fixed interest rates – Below market rate financing reduces interest costs.

• Flexible terms – Repayment up to 40 years matches the asset life.

• Cost savings – Lower costs compared to alternatives.

• Personalized service – Local USDA office provides guidance.

• Simple application – Online process and eligibility for smaller projects.

• Community support – Funds only projects with demonstrated need.

The cup loan presents an appealing opportunity for rural towns, schools, hospitals and non-profits to secure the funding required to serve their communities for years to come.

Is the Cup Loan Program a Good Fit For You?

If you answered yes to the following questions, the cup loan program may be a great fit:

• Is your organization an eligible public entity based in a rural area?

• Does your community have a population under 20,000?

• Does your project develop an essential public facility for the community?

• Is the project cost reasonable and within the cup loan maximum?

• Is your organization unable to secure reasonable rate/term financing elsewhere?

By understanding the eligibility criteria, application process, costs and benefits, you can determine if cup loan financing aligns with your public project needs.

Ready to Apply for a Cup Loan?

Now that you know the steps to apply for a cup loan, you can move forward with confidence. Remember, the key steps include:

• Confirm your eligibility
• Prepare all required application items
• Complete and submit application forms
• Respond promptly to information requests
• Maintain communication throughout review

The streamlined application process and personalized assistance from USDA representatives will help guide your project to approval.

With cup loan financing, you can upgrade, expand or construct that critical public facility that will benefit your rural community for decades to come. If you have any other questions, don’t hesitate to reach out to your local USDA Rural Development office for assistance getting started.