USDA Community Facilities Feasibility Study and Financial Feasibility Report

Every USDA Community Facilities loan needs a financial feasibility report. Which tier applies depends on whether the facility already exists, how the loan is secured, how much is borrowed and what the borrower's audited history shows. For most new facilities and revenue-dependent projects the report must carry a CPA examination opinion under AICPA attestation standards, and a guaranteed loan greater than $1,000,000 to a new entity or a new activity also requires an independent consultant's feasibility study. MMCG prepares the independent study, the market analysis and the forecast model, and coordinates with the client's independent CPA firm wherever an examination opinion is required.

The lender must submit a financial feasibility report prepared by a qualified firm or individual acceptable to the Agency. A financial feasibility analysis, which the lender itself may prepare, is permitted only where one of three conditions holds: the guaranteed loan is $25 million or less to an existing community facility, the loan is secured by a general obligation bond or other tax-supported income sufficient for life-of-loan debt service, or the borrower's audited financial statements for the last three years show the ability to pay all existing and new debt service. Every other guaranteed loan requires a financial feasibility study with an examination opinion prepared under the attestation standards of the American Institute of Certified Public Accountants by a preparer carrying professional liability insurance. For guaranteed loans greater than $1,000,000 to a new entity or an entity conducting a new activity, a feasibility study by an independent qualified consultant is required, with scope set by the Agency; at $1,000,000 or less the Agency may require one. Projections must account for any interest rate adjustment the note allows, must rest on mandatory hookup ordinances or enforceable user agreements for utility projects, must assess the viability of any business that is the facility's primary user, and for assisted living, skilled nursing and similar residential facilities may not assume more than 90 percent occupancy.

For direct loans, 1942.17(h) requires every applicant to provide a financial feasibility report prepared by a qualified firm or individual. Where the project will significantly affect the applicant's financial operations and depends on facility revenue to repay the loan, the report is prepared by a firm or individual with no direct interest in the management or construction of the facility. Rural Development's 2018 guidance recognizes three levels of report: a financial feasibility analysis, a financial feasibility study with a CPA review report, and a financial feasibility study with a CPA examination opinion. Loans under $500,000 typically need only the analysis. The tier for larger loans turns on the security offered and on whether the applicant has existed for at least five years and has been financially successful for the five years before applying, meaning positive net income before interest, depreciation and amortization and a debt service coverage ratio of at least 1.1. Applicants that fail that test go to the National Office for concurrence. USDA advises applicants to allow 6 to 12 weeks for a qualified independent third party to complete the report and asks for it in draft before the final.

Direct loans keep the $500,000 analysis threshold and the five-year test and add a middle CPA review tier. The guaranteed rule is binary: an analysis or an examination opinion. Direct applicants deal with Rural Development as the lender and must certify that credit is not available elsewhere. Guaranteed applicants work through a private lender that files the report with its application. Direct loans are limited to communities of 20,000 or fewer; guaranteed loans use the 50,000 rural area definition, with a funding reservation for communities of 20,000 or fewer.

Three questions decide the tier. Is the facility existing or new? Is the loan secured by a general obligation bond or a tax pledge? Does the borrower have three audited years showing debt service coverage? An established hospital expanding with a guaranteed loan under $25 million usually needs only the analysis. A start-up organization with no audited history and no tax pledge needs a CPA examination opinion at any loan size, and above $1,000,000 it also needs the independent consultant's study. Rural Development's own examples follow the same logic: a $200,000 medical equipment loan, a $900,000 assisted living renovation and a $3,500,000 publicly backed emergency services building each needed only an analysis, while a $2,800,000 start-up museum, an $8,000,000 community theater and a $17,000,000 Critical Access Hospital relocation each needed a full report.

Only a CPA can issue the examination opinion or the review report, and the processing office verifies that the CPA holds professional liability insurance. The independent feasibility study, the market analysis and the forecast model are prepared by an independent qualified consultant. Rural Development asks the processing office to verify the consultant's expertise through a declaration of any prior relationship with the applicant, a written qualification statement and active professional liability insurance. MMCG Invest is not a CPA firm. We prepare the independent feasibility study, the market study and the forecast model that the CPA examines, and we coordinate the engagement with the client's independent CPA so that the examined forecast and the study rest on one set of assumptions.

Eligible borrowers are public bodies, community-based nonprofits with significant ties to the local rural community, and federally recognized tribes. An essential community facility is a public improvement, operated on a nonprofit basis, needed for the orderly development of a rural community and open to the public. Eligible categories under 5001.103 include health care, including hospitals and licensed assisted living, fire, rescue and public safety, community, public, social, educational and cultural facilities, childcare, transportation, utilities not eligible for the Rural Utilities Service, telecommunications end-user equipment for public safety, medical and educational use, water infrastructure, renewable energy for an essential facility, and community parks and activity centers. Space leased to ineligible users must stay below 25 percent of floor area and must enhance the primary purpose. Ineligible projects include commercial enterprises, though private operators running education, childcare, geriatric care or health care on a not-for-profit basis qualify, principal places of worship, golf courses, racetracks, speculative real estate, owner-occupied housing, projects completed before application and related-party structures built to circumvent the rules. A borrower deriving more than 15 percent of gross revenue from gambling is ineligible. Health care projects financed with a direct loan need a state agency statement that the facility is not inconsistent with the State Medical Facilities Plan, which the study documents where the state operates certificate of need review.

The study documents the need for the facility and the community support behind it, the existing and competing facilities within the 35-mile radius USDA reviewers use, and the proposed facility tied to the Preliminary Architectural Feasibility Report and its cost estimate. The financial section presents five years of historical and five years of forecast financial statements, debt service through the full loan term, the reserve build-up to one average annual installment, the 90 percent occupancy cap for residential care, payer mix and reimbursement assumptions, sensitivity analysis on the revenue drivers that matter, and the management and governance capacity of the applicant. USDA reviewers expect operators with experience developing and managing facilities of like kind and scope, and they look for a local contribution for start-up facilities. The study states each assumption so that the CPA can examine the forecast and the processing office can trace every figure.

The method is set out in full in MMCG's feasibility study methodology.

The Community Facilities program invested $5.7 billion in hospitals between 2000 and 2020, about a quarter of all CF investment. Rural hospital finance remains strained: industry analysis published in February 2026 classifies 417 rural hospitals as vulnerable to closure and finds 41 percent operating at a loss, with outpatient services generating most revenue at the typical Critical Access Hospital. MMCG hospital studies therefore test payer mix and cost-based reimbursement, outpatient volume as the primary revenue line, service-area outmigration and travel time to competing facilities, operating margin and debt service coverage against the 1.1 floor, reserve adequacy, and the Rural Emergency Hospital alternative where volume is thin. Critical Access Hospital relocations must preserve the necessary provider designation, which requires continuity of service area, services and staff documented with CMS.

Clinic studies document provider recruitment and retention, visit volume by payer, the Federally Qualified Health Center or Rural Health Clinic reimbursement model where it applies, and the referral relationships that sustain volume.

Senior housing projections are capped at 90 percent occupancy. The study documents licensure, the private-pay share in the service area, Medicaid waiver reimbursement where it applies, the competing supply within the review radius and the operator's experience. Independent living units qualify only on a campus that also provides assisted living or long-term care. Our USDA assisted living feasibility study page covers the Community Facilities and B&I routes in detail.

Nonprofit and public childcare routes to Community Facilities. The study documents licensed capacity in the service area, enrollment demand by age group, subsidy and tuition revenue, staffing ratios and the sponsoring organization's capacity.

Charter and private school studies document enrollment demand and per-pupil funding. Fire, rescue and public safety studies document the tax or assessment pledge and the call volume the facility serves. Cultural and community facility studies, which Rural Development treats as revenue-dependent start-ups, carry the full report with examination opinion and a market study of attendance and earned revenue.

Nonprofit and public ownership routes to Community Facilities, direct where the community is 20,000 or fewer and credit is not available elsewhere, guaranteed where a private lender finances the project in a community of 50,000 or fewer. Private for-profit operators route to B&I, where assisted living qualifies when constant medical care is available on site; see our USDA B&I feasibility study page. A Community Facilities project adding a renewable energy system needs a technical report under 5001.307, covered on our USDA REAP feasibility study page. The hub page on USDA feasibility studies compares all three programs.

CF direct loans carry a fixed rate set at approval, with no prepayment penalty, in three tiers tied to the service area's median household income: a poverty rate capped at 5 percent, an intermediate rate capped at 7 percent, and a market rate tied to the Bond Buyer index, published quarterly by USDA. The term may not exceed the facility's useful life, state statute or 40 years. Grants can cover up to 75 percent of project cost in communities of 5,000 or fewer whose median household income falls below 60 percent of the state nonmetropolitan median, stepping down to 55, 35 and 15 percent as community size and income rise. For fiscal year 2026 the CF guarantee is 80 percent with a 1.25 percent initial fee and a 0.5 percent annual retention fee, and the maximum guaranteed loan is $100 million. These terms remain operative until USDA publishes the fiscal year 2027 notice. Terms as of October 1, 2026.

MMCG delivers the independent feasibility study in 9 to 16 business days from engagement. Where the project also requires a CPA examination opinion, the CPA's examination follows the study, and USDA advises applicants to allow 6 to 12 weeks for the complete third-party report cycle. MMCG Community Facilities studies typically range from $8,000 to $16,000 on a fixed fee, with payment terms of 50 percent at engagement and 50 percent on delivery. The CPA's fee is separate. Every study carries a written acceptance guarantee: revisions required by the lender or by Rural Development are made at no additional cost.

Michal Mohelsky, J.D. | Principal | MMCG Invest, LLC Contact: michal@mmcginvest.com Phone: (628) 225-1110

Engagements are led by Michal Mohelsky, J.D., Practicing Affiliate of the Appraisal Institute. Feasibility studies are prepared under USPAP discipline, aligned with SBA SOP 50 10 8.1 for 7(a) and 504 loans and with 7 CFR Part 5001, Appendix A to Subpart D, for USDA Business and Industry, REAP and Community Facilities financing. Engagements start at $4,900 with fixed-fee scoping. Standard delivery is 9 to 16 business days, with rush turnaround available from 5 days. A senior analyst responds to proposal requests within 12 business hours from the firm's San Francisco office at 27 Maiden Lane, Suite 625.