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Frequently asked questions about REAP
Who can answer questions?
Contact your Minnesota Rural Development Energy Coordinator:
Brad Finstad, State Director
375 Jackson Street
St. Paul, MN 55101-1853
Voice: (651) 602-7800
Fax: (855) 744-0402
You can also visit https://www.rd.usda.gov/mn for more information.
Applications for grants of $20,000 or less and loan/grant of $20,000 or less combo applications due by March 31, 2022.
Applications for unrestricted grants or loan/unrestricted grant combo applications due by March 31, 2022.
Guaranteed loans are accepted on a continuous application cycle.
Fiscal year 2022 funding amounts:
Rural Energy for America Program (REAP) fiscal year 2022 funding amounts will be published with the enactment of the full-year appropriations act.
What does this program do?
The program provides guaranteed loan financing and grant funding to agricultural producers and rural small businesses for renewable energy systems or to make energy efficiency improvements. Agricultural producers may also apply for new energy efficient equipment and new system loans for agricultural production and processing.
Who may apply for this program?
Agricultural producers with at least 50 percent of their gross income coming from agricultural operations.
Small businesses in eligible rural areas.
NOTE: Agricultural producers and small businesses must have NO outstanding delinquent federal taxes, debt, judgment or debarment.
Who may qualify for loan guarantees?
Rural small businesses.
What are the borrowing restrictions for loan guarantees?
Individual borrowers must be citizens of the United States or reside in the U.S. after being legally admitted for permanent residence.
Private-entity borrowers must demonstrate that loan funds will remain in the U.S.
What is an eligible area?
Businesses must be in located in rural areas with populations of 50,000 residents or less.
Check eligible business addresses.
Agricultural producers may be in rural or non-rural areas.
How may the funds be used?
Funds may be used for renewable energy systems, such as:
Biomass (for example: biodiesel and ethanol, anaerobic digesters, and solid fuels).
Geothermal for electric generation or direct use.
Hydropower below 30 megawatts.
Small and large wind generation.
Small and large solar generation.
Funds may also be used for the purchase, installation and construction of energy efficiency improvements, such as:
High efficiency heating, ventilation and air conditioning systems (HVAC).
Cooling or refrigeration units.
Doors and windows.
Electric, solar or gravity pumps for sprinkler pivots.
Switching from a diesel to electric irrigation motor.
Replacement of energy-inefficient equipment.
Agricultural producers may also use guaranteed loan funds to install energy efficient equipment and systems for agricultural production or processing.
What funding is available?
Loan guarantees on loans up to 75 percent of total eligible project costs.
Grants for up to 25 percent of total eligible project costs.
Combined grant and loan guarantee funding up to 75% of total eligible project costs.
What is the maximum amount of a loan guarantee?
The loan guarantee percentage is published annually in a Federal Register notice. REAP loans approved in Fiscal Year 2021 will receive an 80 percent guarantee.
What are the loan guarantee terms?
The lender, with Agency concurrence, will establish and justify the guaranteed loan term based on the use of guaranteed loan funds, the useful economic life of the assets being financed and those used as collateral, and the borrower’s repayment ability. The loan term will not exceed 40 years.
What are the interest rates for the loan guarantee?
Interest rates are negotiated between the lender and borrower.
Rates may be fixed or variable.
Variable interest rates may not be adjusted more often than quarterly.
What are the applicable fees for the loan guarantee?
There is an initial guarantee fee, currently 1 percent of the guaranteed amount.
There is a guarantee retention fee, currently 0.25 percent of the outstanding principal balance, paid annually.
Reasonable and customary fees for loan origination are negotiated between the borrower and lender.
What are the underwriting requirements for the loan guarantee?
The lender will conduct a credit evaluation using credit documentation procedures and underwriting processes that are consistent with generally accepted prudent lending practices and also consistent with the lender’s own policies, procedures and lending practices.
The lender’s evaluation must address any financial or other credit weaknesses of the borrower and project and discuss risk mitigation requirements.
The lender must analyze all credit factors to determine that the credit factors and guaranteed loan terms and conditions ensure guaranteed loan repayment.
Credit factors to be analyzed include but are not limited to character, capacity, capital, collateral, and conditions.
What are the grant terms?
Renewable energy system grants:
Energy efficiency grants:
Are there additional requirements?
Applicants must provide at least 75 percent of the project cost if applying for a grant only.
Applicants must provide at least 25 percent of the project cost if applying for loan.
All projects must have technical merit and utilize commercially available technology.
Energy efficiency projects require an energy audit or assessment.
How do we get started?
Applications for this program are accepted year-round at your local office.
What law governs this program?
Grants – Code of Federal Regulation, 7 CFR 4280, Subpart B.
Guaranteed Loans – Code of Federal Regulation, 7 CFR 5001.
This program is authorized by Title IX of the Agricultural Improvement Act of 2018, (2018 Farm Bill).
Why does USDA Rural Development do this?
This program helps increase American energy independence by increasing the private sector supply of renewable energy and decreasing the demand for energy through energy efficiency improvements. Over time, these investments can also help lower the cost of energy for small businesses and agricultural producers.
NOTE: Because citations and other information may be subject to change, please always consult the program regulations listed in the section above titled “What law governs this program?” You may also contact your local office for assistance