The following information is Martin Group's interpretation of the RUS Rural Broadband Access Loan and Loan Guarantee Program. For definitive information about the program, please refer to The Notice of Funds Availability (NOFA) published in the Federal Register on January 20, 2003 and 7 CFR 1738 - Rural Broadband Access Loans and Loan Guarantees (
Click here for that document).
Questions & Answers about the RUS Broadband Loan Program
What is the RUS Broadband Loan Program?
The "Rural Broadband Access Loan and Loan Guarantee Program" is a program offered by the Rural Utilities Service (RUS) to encourage deployment of broadband telecommunications services to rural America. The primary goal is to ensure that rural consumers enjoy the same quality and range of telecommunications services that are available in urban communities.
Click here for more information.
When was this program started?
Two prior pilot broadband programs preceded this permanent program, and included grants as well as loans. This program was authorized in 2002 and was released to the public on January 30, 2003. This program does not include grants, but also has fewer restrictions and requirements as compared to the earlier programs.
What can the loan money be used for?
This program will provide loans for:
- the construction
- improvement, and
- acquisition of facilities and equipment to provide broadband services to eligible rural communities.
Is this program strictly for Telephone Companies?
NO! Almost anyone can participate, including cooperative, nonprofit, limited dividend or mutual associations, limited liability companies, Indian tribes and commercial organizations. State or local governments will be eligible for a broadband loan only if no one else has committed to offer broadband services to a particular rural community before May, 2003.
Who can NOT participate?
Individuals or partnerships of individuals are not eligible. Companies already serving more than 2% of the total number of telephone lines in the US are not eligible (RBOCs and large regional telephone companies).
How much money can a borrower obtain?
A total of $1.455 Billion has been made available for this program in 2003. The minimum loan amount is $100,000. One subpart of this program includes "direct 4%" loans, and are capped at $5,000,000. Other loans are limited by project feasibility and RUS approval.
What types of loans will be available?
This program will offer three types of loans:
- A direct cost-of-money loan, bearing interest at the cost of borrowing to the Department of the Treasury for obligations of comparable maturity;
- a direct 4 percent loan; and
- a private lender guaranteed loan.
The terms & conditions will vary from borrower to borrower depending on the specific situation. The length of the repayment period will be determined by the economic life of the equipment.
Does the borrower have to have "up front" money?
Yes, a borrower must have enough cash to finance the proposed operations for one year or 20% of the loan value, which ever is greater.
Can existing RUS Borrowers apply for a broadband loan?
Yes, but the broadband funds cannot be used to for the same purposes as existing RUS loan.
What can the funds be used for?
Funds can be used for the construction, improvement, and acquisition of facilities and equipment to provide broadband service. This includes
any technology having the capacity to transmit data to enable a subscriber to originate and receive high-quality voice, data, graphics, and video. Projects must offer
data transmission services, and may provide voice, graphics, and video.
Read this to mean: ADSL, VDSL, twisted pair copper, coaxial cable, fiber optic
(as distribution or as access - FTTx), ISP equipment, wireless systems, Ethernet
in the loop, EPON, APON (xPON), proprietary, non-proprietary - or just about
anything else that satisfies the objectives of the program. The RUS prefers
approved equipment.
Can the funds be used for anything else?
The RUS will allow loans to finance capital leases of equipment (not operating leases - terms defined according to GAAP). In special cases an acquisition may be financed with loan funds.
Is there anything that the funds may not be used for?
RUS loan funds may not be used to purchase CPE equipment, operations & maintenance vehicles, or to pay for any other operating expenses.
Do materials need to be approved by the RUS?
The RUS does state in 1738-2 (under Construction Procedures, 1. b.) that equipment and materials must be on the approved materials list, but numerous exceptions are also listed.
Can these funds be used to overbuild an existing system?
Yes, provided that the community to be served does not already have broadband services. If the incumbent telephone and cable TV companies are not offering broadband services and no one has made a prior commitment to construct a broadband system, these funds can be used to overbuild a community. Read the rules carefully on this subject!
Can new borrowers build competing systems in ILEC service areas?
Existing RUS borrowers have been given a two year window in which they can request that the RUS withhold funding from other borrowers
IF the existing borrower commits to the installation of broadband services. The program contains specific rules regarding this issue.
What does one need to do to receive a loan?
The procedure for obtaining a loan under the RUS Broadband program is detailed in RUS Bulletin 1738-1. The following 10 steps must be completed:
- Application for Broadband Loan or Loan Guarantee (RUS Form 532)
- Market Survey
- Business Plan
- Certified System Design
- Financial Forecast
- Environmental Report
- Certification on Availability of Broadband Service
- Evidence of Legal Notification
- Supplemental Information
- Compliance with other Federal Statutes and Regulations
Martin Group is experienced in all areas required for the preparation of a loan
application. With 35 years of experience preparing loan applications for the
RUS, Martin Group will help ensure your application is complete, accurate, and
compliant with the RUS requirements.
Once a loan is approved, what construction procedures does the RUS require?
Broadband loan borrowers are required to follow procedures laid out in RUS Bulletin 1738-2. These procedures are similar to other RUS loan programs; The RUS requires the use of contract forms 397, 515, 773 and other existing contracts, a distinction is made between Small-scale construction and Large-scale construction, a borrower may use in-house engineering if approved by the RUS but is otherwise required to contract with a licensed engineer, etc. The procedures are different than those imposed on a telephone company (7CFR1753), but are similarly complex. Careful study of 1738-2 is advised!
Martin Group is an independent engineering & consulting firm with years of experience
working with state-of-the-art technologies and RUS procedures. Call us to discuss how to turn your broadband network ideas into a successful business!
How can I find out more?
Contact Martin Group at 877-996-9646 or find out more about us at
www.martin-group.com.
Contact the RUS:
www.rus.usda.gov or
www.usda.gov/rus/telecom/broadband.htm.
Martin Group has 35 years of experience preparing feasibility studies, RUS loan applications, and designing & implementing telecommunications systems. Call us today at 877-996-9646.
