The ability of a healthcare facility to meet the needs of a rural patient population is directly related to the
efficiency, size, and quality of the facility and its equipment. According to the 2008 Rural Hospital and Renovation
Expansion Study, updated facilities and equipment impact the ability of a rural community to recruit and
retain health professionals, improve patient safety, expand services, and increase satisfaction rates.
Capital funding sources allow for investment in healthcare infrastructure, including the
construction, renovation, and expansion of rural healthcare
facilities. The purchase and installation of major equipment and technology are also considered to be capital
investments. Finding funding for capital projects is a major concern for many rural healthcare facilities.
Needs for healthcare capital are many in rural communities. As mentioned in Critical Access
Hospital Replacement Process: The Manual, many small rural hospitals were built in the Hill-Burton era
of the 1940s and 1950s. Faced with aging and inadequate infrastructure, hospital leaders must consider and
undertake major capital projects such as renovation or replacement of the facility. In addition to bricks and
mortar, capital projects may include patient redesign, which includes facility design elements and equipment
needed to manage patient flow, enhance infection control, and reduce patient stress. In recent years, another
pressing capital funding need has been the purchase and installation of electronic health
records and telehealth systems, which can add significant hardware, software,
implementation, and data compilation costs.
Successfully funding a capital project can require blending multiple sources and types of funding, including
public grants and low-interest loan programs, as well as private sources such as foundations, local donors, and
traditional lending sources. Blending funding sources can be especially effective for larger projects, such as
hospital building and major renovations.
While there is a lot of complexity and many steps to acquire capital for a facilities project, it is critically
important to start with an understanding of how the proposed project is connected to the changing healthcare
needs of the community and the industry trends of population health. In addition to this kind of strategic
planning, successful organizations plan up front regarding their debt capacity and operational needs. If needed,
a consultant or financial advisor early in the process can ensure that projects are feasible and
planning dollars are spent wisely.
This guide brings together resources for running successful capital campaigns and provides information on
current capital funding needs of rural hospitals, clinics, and other providers of healthcare services. This
guide also lists federal, state, foundation, and community development finance funders that are interested in
supporting capital projects.
What types of low-interest loan programs are available to rural healthcare facilities
for capital investment projects?
USDA Rural Development tends to be the most available capital resource for rural healthcare facilities. USDA
offers programs that provide low-interest loans and grants for capital funding. A brief description of those
programs is below. Contact your local USDA Rural
Development state office or a USDA guaranteed lender to discuss which loan product is the best fit for
the project. In many cases, the funding will include a combination of grant and loan products.
Business and Industry Guaranteed Loans can be used to purchase and
develop land or equipment, or for expansion or renovation costs. Proposed projects must improve employment
and economic conditions in rural communities.
to $50,000 through a Microloan Intermediary to cover working capital, supplies, equipment, furniture, and
fixtures. Businesses may also access free business counseling. (See the Local Assistance tool)
Business Development Centers offer individualized business counseling, training, and technical
assistance for small businesses in their regions. Use the tool on the program page to search for assistance by
What are the major federal grant programs that support capital projects for rural healthcare facilities?
When healthcare facilities undertake a capital project that will require significant fundraising, grant programs
can play an important part in achieving a monetary goal. While healthcare facilities are eligible for many
grant programs, the majority of grants available are for programmatic costs and do not allow for purchases of
major equipment, construction, renovation, or expansion. It is important to look for programs that specifically
state that they will fund capital projects.
Here is a list of federal agencies that fund capital projects for rural healthcare facilities. Please note that
the application cycles for these programs may or may not be open at this time.
Federal Agencies that Fund Capital Projects for Rural Healthcare Facilities
What is a loan guarantee and how can it help fund a capital project in a rural hospital or clinic?
A loan guarantee, or mortgage insurance, provides reassurance to a lending institution that if the borrower
defaults, a third party (usually a government agency) will agree to pay some or all of the debt owed.
Rural healthcare organizations are more prone to face financial hardships than their urban counterparts and are
therefore generally considered higher risks to lenders. Loan guarantees essentially boost the credit rating of a
healthcare facility borrower because they provide security to the lending institution. Many federal and state
agencies will provide loan guarantees, enabling healthcare organizations to have access to needed capital.
Federal programs that provide loan guarantees for rural healthcare facilities include:
In 2020, USDA launched the OneRD Guarantee Loan Initiative
which is designed to increase private investments that improve the economy and quality of life in rural
communities through several USDA guaranteed loan programs. Facilities looking for capital funding may seek
lenders that provide USDA guaranteed loans or request that local lenders consider participating in the program.
Lenders can consult the Lender Help Desk for
tools, forms, and USDA contact information.
What is an Essential Community Facility and how can it help rural
healthcare facilities access capital?
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 provide an essential
public service to the local community which meets all of the following criteria:
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
Must include significant community support
This source of capital can be useful to rural healthcare facilities because USDA considers Essential Community
Facilities to include medical clinics, hospitals, assisted living facilities, police stations, fire and rescue
stations, community centers, public buildings, transportation, schools, libraries, and childcare centers —
facilities that are essential to the quality of life in rural communities.
What is the Community Development Block Grant (CDBG) Program and how can it help rural facilities?
The Community Development Block Grant Program is administered by the U.S. Department of Housing and Urban
Development (HUD) and works to build strong and resilient communities through community and economic development
activities. All CDBG activities must meet at least one of the national objectives: to benefit low- and
moderate-income persons; aid in the prevention or elimination of slums and blight; or meet urgent community
CDBG funds have been used for the following types of projects, which could be beneficial for rural facilities
Economic development projects
Public and community facilities
Microenterprise (small business) technical and financial assistance
There are multiple CDBG funding programs that may be utilized for health and health-related capital projects in
State CDBG Program is a funding instrument
that allows states to make grants to smaller units of local government. It is sometimes referred to as the
Non-Entitlement CDBG Program for states and small cities. Local units of government across the country use
the funding for projects such as microenterprise loan funds, affordable housing, community facilities, and
sub-grants for community services. Contact information for each state that administers this program may be
found on the grantee
contact page of the HUD website.
Typically, local economic and/or community development departments are knowledgeable about CDBG
activities and funding, and they can field questions about available funding in your area. If you are
having trouble finding information about funding in non-entitlement areas of your state, contact the
appropriate field office listed on the HUD Community Planning and
Development contact page.
CDBG Colonias Set-Aside requires the
border states of Arizona, California, New Mexico and Texas to set-aside a percentage of their annual state
CDBG allocations to help provide colonias residents with potable water; adequate sewer systems; and safe,
healthy, affordable housing. For additional information, see the Information per State section of
the program page above.
Questions about projects in the U.S. Virgin
Islands are directed to the San Juan Field Office, and questions about projects in other insular areas
should be directed to the Honolulu Field Office. Contact information is listed on the HUD Community Planning and
Development contact page.
Section 108 Loan Guarantee
Program provides communities with a financing source for economic development, housing
rehabilitation, public facilities, and physical development projects, including improvements to increase
resilience against natural disasters.
Individual foundations have funding priorities which dictate the types of projects that they will consider. Most
foundations typically like to be the “last in”
on a capital project. That is, foundations will usually want all other funding secured, and then the foundation
in with the funds to complete the project.
Examples of private foundations that list capital projects for healthcare facilities as a focus area include:
Gladys Brooks Foundation – Awards grants in 17 states.
Capital funding is listed as one of the types of funding applicants may request.
Sunderland Foundation – Awards grants in 10 states. They
consider applications from healthcare agencies and hospitals for capital funding purposes.
Can for-profit healthcare facilities apply for grant funds, or are only nonprofit organizations eligible?
There are several low-interest loan programs available to for-profit entities but, with very few exceptions,
grant funds are only extended to nonprofit healthcare facilities, government entities, or tribal entities.
Funders view grants as an investment in social good. Giving grant money to for-profit businesses is unlikely
because that would be an investment in one particular individual or set of individuals who stand to monetarily
gain from the ultimate success of a venture.
In rare cases, funders may consider a for-profit applicant if it has a strong social mission and is seen as a
force for public good. It is important to read through all eligibility requirements prior to applying for
What other avenues of funding are available to finance capital projects for rural medical facilities?
When funding a capital project, it is best to gain local support before approaching federal agencies or national
foundations. National funders generally have more competitive processes with longer, more time-intensive
applications. Many funders also have a matching funds requirement, which can be met by initiating a local
Rural communities have a distinct interest in seeing healthcare facilities remain in their area because of the
community and economic benefits they bring. For information on demonstrating the economic impact healthcare
facilities have on their rural communities, see our Community Vitality and
Rural Healthcare guide.
Community fundraising campaigns can be an effective way of raising funds with the proper strategy and a
dedicated committee. Approaching organizations and individuals within the community can be helpful to achieving
a successful fundraising goal.
Local businesses and business organizations
Local locations of larger companies
Schools, school boards, and post-secondary institutions
Chambers of commerce
Economic development organizations
Local human resources groups
Nonprofit housing developers
Local banks or lending institutions
Elected officials and city staff
Local CDFIs and community loan funds
Fundraising letters to individuals and businesses, special events, and planned giving are several strategies to
achieving a fundraising goal. Local government agencies may also be able to award grants or loans, or assist in
implementing a dedicated tax levy.
What is a Community Development Financial Institution (CDFI) and how do they help rural healthcare
Community Development Financial Institutions, or CDFIs, are financial institutions that have community
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, nonprofit institutions that gather private capital from a range of
investors for community development or lending. CDFIs make loans and investments and provide basic financial and
development services to
people and institutions that, for various reasons, are unable to get these services from conventional financial
CDFIs get capital from many different places, such as private investors, public entities, and philanthropic
organizations. CDFIs serve economically disadvantaged people and communities throughout the United States, such
as affordable housing developers, small business owners, community groups, and other nonprofits or social
The U.S. Department of the Treasury CDFI Fund administers several
funding programs that may benefit rural healthcare facilities:
The New Markets Tax Credit Program (NMTC) provides options for the capital
rural healthcare organizations. The program provides tax incentives for investments for projects in
distressed rural or urban counties that will spur economic growth, including capital investments in
healthcare facilities. The program is open to CDFIs and organizations that are not CDFIs. Investors give to
Community Development Entities which then offer low-interest
financing to businesses and nonprofit organizations. New Markets Tax Credit deals are complex; facilities
will want to work with an experienced consultant.
The Capital Magnet Fund (CMF) provides grants to finance affordable housing and
community revitalization efforts that benefit low-income people and communities. Community facilities that
have been funded under the program include health clinics, senior housing, wellness centers, and oral health
facilities. The program is open to CDFIs and organizations that are not CDFIs.
Examples of CDFIs that have invested in rural healthcare facilities include:
Community Health Center Capital Fund – Supports rural
community health centers across the U.S. with operating and capital projects through direct lending and New
Market Tax Credits. Capital Fund provides the New Markets Tax Credit
Preparation Program, which is no-cost initial eligibility determination and other technical
assistance for health centers that are considering New Markets Tax Credit financing.
Fahe – Works with leadership, housing, education, health, and economic
development in an effort to eliminate poverty in Appalachia.
Hope Enterprise Corporation –
strengthen communities in the Delta and other economically distressed parts of Alabama, Arkansas, Louisiana,
Mississippi and Tennessee.
Primary Care Development Corporation – Provides loans and
assistance for healthcare providers across the U.S. to update and expand operations in order to better serve
Rural Community Assistance Corporation (RCAC) – Helps rural
in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah,
Washington, and Wyoming improve community infrastructure.
Rural LISC – Works to equip rural areas with capital,
and technical assistance to preserve and strengthen rural life across the United States.
Search for commissions, authorities, and/or planning agencies in your state/service region. Ask
about grant opportunities, revolving loan funds, training, networking opportunities, and ideas for
potential funders. (Use Google to search for the key words “regional commission,”
“development authority,” “metropolitan planning commission,” and your
Contact county and municipal community development and economic development agencies.
Local/state level nonprofit resource centers – Search for association members of the National Council of Nonprofits. They typically
offer in-person and virtual training opportunities and other resources on multiple topics relevant
to nonprofit organization operations and fundraising. They may be able to point you in the direction
of other funding and networking resources.
Businesses and corporate giving programs
Look at business directories for chambers of commerce in your retail catchment area. Search
for national companies with a local presence, then look for corporate giving programs.
Corporations headquartered in the state – Ask about giving and community
Look for community foundations
that serve your area. Discuss the project and ask about grant funds and ideas for potential funders.
What is a capital stack, and how do you build one?
A capital stack is essentially the financial structure of a project – the building blocks that work together to
fund a capital project. As shown in the image below, a capital stack may be made up of grants, government
funding, conventional loans, subordinated loans, and different types of equity.
Rural facilities and health and human services providers may lack the capacity to build complex capital stacks.
National intermediary CDFIs are in a good position to provide assistance in this area, as shown in the image
Intermediary CDFIs that may be able to provide assistance with building a capital stack include:
Are there funding programs that specifically support electronic health record
implementation or telehealth projects in rural healthcare facilities?
In addition to the grant programs listed above, there are a number of funding programs that offer grants
specifically for electronic health records, health information technology, and telehealth projects,
Healthcare Connect Fund – Universal Services Administrative Company (USAC)
program which provides funding to healthcare providers for telecommunications and internet access services,
as well as network equipment at a discounted rate.
Community Connect Broadband Grant Program – USDA Rural Utilities Service
program that funds broadband deployment into rural communities where it is not yet economically viable for
private sector providers to deliver service.
Small Hospital Improvement Grant Program (SHIP) – Federal Office of Rural
Policy (FORHP) program which provides grants to State Offices of Rural Health on behalf of small rural
hospitals in each state. Among other things, these funds may be used to purchase health information
technology (HIT) equipment. For program information and application, contact your State Office of Rural Health.
What are State Health Facilities Finance Authorities, and how can they help with capital funding?
Many states have State Health Facilities Finance Authorities, which issue tax-exempt bonds and pool loans as
well as other programs, such as capital planning assistance. Organizations with strong historical performance
and/or with general obligation tax support can access “non-rated” bond financing.