Rural Capital Funding
Finding funding for capital projects is a major concern for many rural healthcare facilities. Capital funding is defined as funding used to expand or renovate a building, purchase major equipment or construct a new facility for a rural health provider. 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.
Frequently Asked Questions
- Are grants available for capital funding?
- Where does money for capital funding come from?
- What is involved in the fund-seeking process?
- From where can my organization borrow money to finance a capital project?
- What is an Essential Community Facility?
- What else can my organization do if we can't get funding?
- What is a CDFI?
- What is a State Health Facility Finance Authority and how are they used in capital funding?
- What are some examples of private foundations that offer funds to support rural capital projects?
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 rural healthcare 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:
- USDA Community Facilities Grant Program
- Distance Learning and Telemedicine Grant and Loan Program
- Rural Health Outreach Program Grant (Note: Allows equipment related to programmatic requests only; does not fund construction)
- HUD State Community Development Block Grant (CDBG) Program
State level resources for capital funding are also available in some states. To learn if any grant or loan programs are available in your state, contact your State Office of Rural Health or Rural Health Association.
Where does money for capital funding come from?
Funding comes from a variety of resources, both private and public. Private funds come from charitable giving organizations, foundations, direct giving programs, community groups and voluntary agencies. Public funds come from the government such as federal, state, and local agencies.
What is involved in the fund-seeking process?
There are 5 main steps involved:
Step 1: Identify the Need - Create a Strategic Plan
- What is the funding need?
- How does my strategic plan address the need for assistance?
- Do I need to do a market study?
- Do I have a space plan?
- Do I need to do a feasibility study?
- Who can I approach for funding?
- How do I obtain information about potential funders?
- What are the goals and objectives of the program?
- How will the program be carried out?
- How will the program be budgeted?
- What type of proposal format should be used?
- Can the funder's application deadlines be met?
- Is the proposal being sent to the appropriate contact?
- Is the proposal filled out completely and correctly?
- Was the proposal accepted?
- If not, why?
- If not, should I submit a revised proposal?
From where can my organization borrow money to finance 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
- Business and Cooperative Programs
- Distance Learning and Telemedicine Grant and Loan Program (DLT)
- HUD 242 - FHA Hospital Mortgage Insurance Program
- SBA Certified Development Company (CDC)/504 Loan Program
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 child care centers - facilities that are essential to the quality of life in rural communities.
What else can my organization do if we can't get funding?
Local resources are a very important resource for financing capital projects. Community fund-raising campaigns can be a very effective way of raising funds with the proper strategy and a dedicated committee. Fundraising letters to individuals and businesses; special events; and planned giving are several strategies that can be employed. Another option may be to contact local government agencies to explore if grants or loans could be issued or a dedicated tax levy implemented.
Also keep in mind these tips from a grantwriting expert:
- For small projects, it may be best to seek funding from local sources rather than from large, national foundations.
- Local financial support must be in place prior to approaching a foundation.
- Even if a loan is part of the funding package, local philanthropy is increasingly a key component of the plan.
- Grants for large projects, if awarded, must be part of an overall capital campaign plan.
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.
To locate a community development lender in your area and for further information please see the following:
What is a State Health Facility Finance Authority and how are they used in capital funding?
State Health Facilities Finance Authorities issue tax-exempt bonds and pool loans as well as other programs, such as capital planning assistance. Those eligible are nonprofit hospitals. Having a solid financial status improves bond rating.
For further information, contact your state health facilities finance authorities program. The National Association of Health and Educational Facilities Finance Authorities (NAHEFFA) provides a state-by-state listing of such member authorities. The council focuses its efforts on issues which directly influence the availability of or access to tax-exempt financing for healthcare facilities.
What are some examples of private foundations that offer funds to support rural capital projects?
Private foundations receive income from an individual, family or group of individuals. Prominent private rural health foundations are:additional programs that support capital funding.