Capital funding sources allow for investment in healthcare infrastructure, including the
construction, renovation, or expansion of rural healthcare
facilities. Capital investments can also be made through the purchase and installation of major
equipment and technology. Finding funding for capital projects is a major concern
for many rural healthcare facilities.
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. All of these factors play a role in the overall operational cost, making capital investments an important
part of financial viability.
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 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 and local donors.
Blending funding sources can be especially effective for larger projects, such as hospital building and major
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.
Frequently Asked Questions
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
|Administration for Children and
|Community Economic Development
||Nonprofit Community Development
Corporations with or without a 501(c)(3) status. (May require a change or addition to the company's
charter with regard to economic development)
In many cases, this funding is tied to the number of jobs created.
|Economic Development Assistance
||District organizations; Indian tribes;
states, cities, or subdivisions of states; institutions of higher education; nonprofit organizations
||Infrastructure, including water, wastewater,
telecommunications and roads projects which could strengthen healthcare facilities
|USDA Rural Development
|Community Facilities Direct and
Guaranteed Loans and Grant Program
||Public entities such as municipalities,
counties, and special-purpose districts, as well as nonprofit corporations and tribal governments in
rural areas with populations of up to 20,000
||Grant Maximum: Up to 75% of the project cost
Loan Maximum: Up to 100% of appraised value
|Construction, expansion, renovation, or equipment for
essential community facilities
|Economic Impact Initiative
||Public bodies, federally-recognized
tribes, and nonprofit organizations in eligible rural areas
||Up to 75% of eligible project costs. Grants
typically do not exceed $25,000.
||Development of essential community facilities in areas
of extreme unemployment and severe economic depression
|Rural Economic Development
Loan and Grant Program
||Local businesses, including healthcare
facilities, can apply through local utilities in towns with a population under 50,000
||Up to $300,000 for grants and $2,000,000 for
There are many other funders that support capital projects at the state or local level — see RHIhub's Funding and Opportunities by Topic:
Capital Funding. RHIhub also offers free customized funding searches — email firstname.lastname@example.org for assistance.
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.
Useful USDA publications for planning and financing capital projects:
There may be other types of low-interest loan repayments offered at your state or local level — see
Funding and Opportunities by Topic: Capital Funding. RHIhub also
offers free customized funding searches — email email@example.com
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.
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.
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
- Public services
- Housing rehabilitation
- Neighborhood revitalization
- 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.
The Indian Community Development Block Grant (ICDBG)
Program is a competitive HUD grant program for eligible tribes and Alaska Native Villages to improve
housing, community facilities, and infrastructure, as well as fund microenterprises and expand job
opportunities. Consult the ICDBG grant program
page for additional information, press releases, past funding announcements, and project activity
reports. Regional contact information may be found at the bottom of the HUD Office of Native American
Programs (ONAP) page.
The HUD Administered Non-Entitled
Counties in Hawaii Program allocates formula grants in Hawaii, Kauai, and Maui Counties based on
population, poverty, and housing overcrowding. Eligible activities and program beneficiaries are listed on
CDBG eligibility requirements page. Contact information and past program reports are available on
the HUD grantee page under Hawaii
County, Kauai County, and Maui County.
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.
CDBG Insular Areas Program provides
grants to American Samoa, Guam, Northern Mariana Islands, and the U.S. Virgin Islands to provide decent
housing, a suitable living environment, and expand economic opportunities for low- and moderate-income
persons. Eligible activities and program beneficiaries are listed on the CDBG
Insular Areas eligibility requirements page.
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.
Useful CDBG resources:
Which foundations support capital projects for rural healthcare facilities?
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 – This foundation awards grants in 17 states.
Capital funding is listed as one of the types of funding applicants may request.
Sunderland Foundation – This foundation awards grants in 10 states. They
consider applications from healthcare agencies and hospitals for capital funding purposes.
There are many other foundations that support capital projects at the state or local level — see RHIhub's
Funding and Opportunities by Topic: Capital Funding. RHIhub
also offers free customized funding searches — email firstname.lastname@example.org
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 RHIhub's Community Vitality and
Rural Healthcare guide.
Fact sheets, reports, and toolkits on federal financing resources and capital project planning and financing are
Capital Link's publications page.
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
- Major employers
- Schools, school boards, and post-secondary institutions
- Chambers of commerce
- Economic development organizations
- Local human resources groups
- 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 are some strategies for running a successful fundraising campaign for capital
According to the National Rural Health Resource Center's manual, Raising
Funds for Rural Health Care, it is important to:
Plan well by conducting a feasibility study, creating a budget, determining leadership for
the campaign, and engaging a consultant.
Gain local support by forming steering committees, executing a marketing strategy,
preparing a case statement, and soliciting donations from local donors.
Have a kick-off event in which you announce funding goals and advanced gifts, begin to
solicit larger funding sources, and talk about how the project will impact the community.
The USDA Community Facilities Infrastructure
Toolkit is another valuable resource that can be used to guide the capital fundraising process.
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,
There may be other types of funding offered at your state or local level — see RHIhub's Funding and Opportunities by Topic: Capital Funding. RHIhub
also offers free customized funding searches — email email@example.com
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.
The Community Development Financial Institutions Program is federal funding that
allows CDFIs to provide affordable financing and related services to low-income communities and populations
that lack access to affordable credit, capital, and financial services. The most recent list of CDFI funding
awardees is provided in the FY
2021 CDFI Program Award Book.
The Native American Community Development Financial Institution Assistance Program
(NACA) provides funding to build the community development capacity of Certified Native CDFIs,
Emerging Native CDFIs, and Sponsoring Entities, and to increase access to capital in Native Communities. The
most recent list of NACA funding awardees is provided in the FY
2021 NACA Program Award Book.
The Opportunity Finance Network (OFN) is a national membership network of
CDFIs that works to provide high-impact investments in distressed communities. OFN maintains a CDFI Locator tool that allows you to search for member CDFIs
with service areas that match your location. A full list of certified CDFIs may be accessed on the Treasury Department website.
For additional information, the Rural Monitor article CDFIs ‘Make Dreams Come True’ by
Creating Opportunity in Rural Spaces provides an in-depth look at CDFIs, philanthropy groups, and the
impact they are making in the rural health arena.
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
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.
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 its member authorities. In most cases, an organization will need to hire a municipal advisor
to work through a bond deal. For additional information, consult the Municipal
Securities Rulemaking Board.