Similar to the USDA Business and Industry loan guarantee program, the Community Facility ("CF") loan guarantee program is designed as a cooperative effort between the federal government and private banks to make loans into rural communities for essential community facilities. The USDA defines a rural setting for a CF loan guarantee as a community with a population of 20,000 or less. In the CF guaranteed loan program, the USDA guarantees losses from the default of the borrower up to 90%.

The CF loan guarantee program provides longer repayment terms—up to 40 years—for the development, construction, enlargement, improvement and operation of essential community facilities for public use in rural areas. Direct and guaranteed loans are available to public entities such as municipalities, counties, special-purpose districts, Indian tribes and nonprofit corporations

Proceeds from CF loans may be used to construct, enlarge or improve community facilities, including health care, public safety and public services, community buildings, child care centers, courthouses, public maintenance buildings, libraries, schools, industrial parks, roads, bridges, airports, fairgrounds, utilities and other improvements. It can also be used to acquire interest in land, leases and right of ways necessary to develop the facilities. In addition, loan funds may also be used for the operation of these facilities. Funds may also be used for multi-service centers and to pay necessary costs connected with these facilities.

The project must be based on taxes, assessments, revenues, fees or other satisfactory sources of money sufficient for operation, maintenance and reserve, as well as retire the debt. The project also must be consistent with available comprehensive and other development plans for the community, and comply with federal, state and local laws.

Some examples of qualifying projects are:

• The renovation of an existing agriculture fairground facility was funded in Minnesota for showing livestock and grain, training in new farming and homemaking techniques.
• The construction of a conference/training center with lodging facilities was funded in West Virginia with a direct loan of $2.5 million.
• A new agriculture fairground (40,000 square feet) was funded for $500,000 in Covington County, Alabama.
• The purchase of agriculture land for a research center was funded in Cottle County, Texas, for $30,780.
• A sprinkler system was funded in Jefferson County, Oregon, with a loan of $120,000.
• Assisted living centers in areas not currently served.
• Broadband and wireless communications for emergency medical, fire, police and homeland security.
• Multi community natural gas distribution system.
• The purchase of a community hospital in Mississippi was funded through a $24 million guaranteed loan.

Community Qualifications. To be an eligible loan or grant purpose under the Community Facilities Program, an essential community facility should meet all of the following criteria:

• Be a function customarily provided by a local unit of government.
• Be a public improvement needed for the orderly development of a rural community.
• Cannot include private affairs or commercial or business undertakings (except for a limited authority for industrial parks).
• Be the area of jurisdiction or operation for the public bodies eligible to receive assistance or a similar local rural service area of a nonprofit corporation owning and operating an essential community facility.
• A community may be a small city or town, county, or possibly multi-county body, depending on the type of essential community facility.