Grant & Loan Programs

9006 Frequently Asked Questions

Contents

Section 9006 Background

Eligibility Questions

Application-Specific Questions

Section 9006 Background

What is Section 9006?

Section 9006 is the Renewable Energy Systems and Energy Efficiency Improvements Program, created as part of the Energy Title in the 2002 Farm Bill. It provides grants and loan guarantees to farmers, ranchers and rural small businesses. (In the next Farm Bill it is renamed the "Rural Energy for America Program" or REAP).

How Much Funding is Available?

In 2008, Congress appropriated $36 million for the program. The USDA seeks to allocate $15.9 million in grants and $205 million in loan guarantees. Any funds not awarded for loan guarantees will be available to fulfill additional grant funding.

What is a Guaranteed Loan?

A guaranteed loan protects your lender against a portion of the value of a loan in the event of a default.  In essence, USDA Rural Development is guaranteeing repayment of your loan.

What is a Grant-Guaranteed Loan Combination?

A grant-guaranteed loan combination is an application in which the project is seeking both a grant and a loan guarantee.  The amounts of each request can be different.  The loan guarantee still needs to be submitted by your lender.  However, USDA will evaluate the two applications together.

Why is a Fee Charged for a Guaranteed Loan?

The guaranteed loan origination and annual fees are paid by the borrower to USDA to offset the upfront and ongoing costs of monitoring compliance with the terms of the guarantee.

What Are the Minimum/Maximum Grant Amounts?

For energy efficiency projects, the minimum grant amount is $1,500 and the maximum grant amount is $250,000.

For renewable energy systems, the minimum grant amount is $2,500 and the maximum grant amount is $500,000. No person or entity can receive more than $750,000 from multiple projects. Grants from this program cannot exceed 25% of the total project cost. The remaining 75% must come from non-federal sources including loans, investors, your own assets or any available state or local grants.

What Are the Minimum/Maximum Guaranteed Loan Amounts?

The minimum guaranteed loan is $5,000 and the maximum is $10 million. The guaranteed loan can cover up to 50% of eligible project costs and up to 85% of the loan amount for loans under $600,000, declining to 70% for loans of $5-10 million.

Who Do I Contact with Additional Questions?

For a listing of state USDA Rural Development contacts, click here. They can assist you with program details and the application process.

How Can I Stay Informed on the Status of the Program?

To join our e-mail list-serve on Section 9006 and related agricultural energy issues, click here. We will not share your e-mail address with other organizations.

Eligibility Questions

Who Is Eligible for Funding?

The program is open to farms, ranches, livestock operations, rural small businesses and rural electric cooperatives. To be eligible, you must be actively involved in the business and the proposed project. You must also show a "demonstrated financial need" for grant funding. Farmers must derive the majority of their income from farming.

What Is a Rural Small Business?

The definition of "small business" is based on the Small Business Administration's criteria based on the type of business. To determine if your business qualifies, see this USDA link to check a check size qualifications by  business category.
"Rural" means a community of fewer than 50,000 people not located within a larger metropolitan area. To determine whether a potential project is in a rural area, use the rural area determination map.

What Types of Projects are Eligible?

Energy Efficiency: Any projects that save energy (electricity, propane or natural gas, or diesel fuel) are eligible. Examples include dairy pumps and cooling systems, weatherization of poultry houses, efficient lighting and ventilation, irrigation equipment, industrial motors and supermarket refrigeration systems. Projects that save fuel used in mobile sources (tractors, trucks) are not eligible.
Renewable Energy: Renewable energy systems can include small and large wind turbines, active or passive solar energy systems, geothermal heating and cooling, anaerobic digesters using food or livestock waste, systems using biomass fuels, or facilities producing ethanol or biodiesel.

What Types of Projects are Not Eligible?

For energy efficiency projects, grants cannot be used for a new facility unless that facility is replacing an existing facility. The grant can only be used for identifiable energy efficiency improvements such as lighting, heating, refrigeration, motorized equipment or insulation. Grants can not support agricultural equipment or other vehicles. For renewable energy systems, only proven, commercially available and pre-commercial technology is eligible. Grants cannot fund research and development activities.

Is There a Preference for Certain Technology Types?

USDA has developed a “technology-neutral” statistical method for comparing projects across a broad range of technologies.  Because of this, projects which may have longer financial paybacks or produce less energy may still be awarded grants.

 

Application-Specific Questions

When are Applications Due?

In 2008, there are two deadlines for grant-only applications: April 15th and June 16th.  All applications must be received in USDA offices (not postmarked) by these dates. The application deadline for grant-loan guarantee combinations and for guaranteed loans is June 16th.

You are encouraged to submit applications early so that your state USDA official can identify any application gaps prior to the deadline.

Do In-Kind Contributions Count Towards My Matching Share?

In-kind contributions from third parties can count towards matching funds up to 10 percent of the project costs. In-kind contributions from yourself or your business cannot be counted.

What Type of Application is Required?

There are two types of applications: a simplified application for projects with a total value under $200,000 (grant request under $50,000) and a standard application for projects over this amount.  The simplified application requires less detailed financial and project information.  You can find more details on the specific application requirements by consulting our “Applications & Tools” page.

Can I Submit my Application Electronically?

Yes.  USDA encourages electronic application filing.  Go to www.grants.gov or use this link to access the Section 9006 electronic application directly.

What Personal Information Do I Need to Provide in My Application?

You will need to verify that you and/or your business are eligible for the grant program as specified in the final program rules.

What Project Information Do I Need to Provide?

The required project information varies by the type and size of the proposed project. All grant requests will require a technical report. The final rules explain these technical requirements for each category of renewable energy systems and energy efficiency improvements in considerable detail.

If you are applying for an energy efficiency grant, and your total project costs are over $50,000, you will need to have an energy audit performed by a qualified energy auditor.

If you are applying for a renewable energy system with project costs over $200,000, you will need to have a business feasibility study performed by an independent consultant. If you plan to sell power back to a utility, you will also need to provide an Interconnection Agreement and a Power Purchase Agreement.

What Financial Information Do I Need to Provide?

The type of financial information required will vary based on project size. For larger projects, you will need to provide personal/business financial information and projected financial performance results for your project or project budget just as you would for a bank loan.

You will also need to verify financial need. This can be accomplished by a letter from your banker stating that you do not have sufficient resources to finance this project on your own. You should also demonstrate that you have arranged for sufficient additional funding (personal assets, bank loans, outside investors) to complete your project. Projects that can demonstrate secure sources of financing will receive more points in their evaluations.

What Other Information Is Necessary?

You are required to complete several federal forms. Electronic copies are available on this website. Some of these forms may only require a signature while others will require detailed information.

Do I Have to Perform an Environmental Review?

Because the grants are funded with federal money, all projects are subject to environmental impact assessments. For energy efficiency and small renewable energy projects with no impact, you may simply have to sign a form attesting to this.

If you are planning to build a larger project, the environmental review requirements may be significant. Be sure to advise your state USDA office early of your intent and allow sufficient time for them to conduct this environmental assessment in the application process.

How Will USDA Evaluate My Proposal?

All projects must meet the minimum requirements specified in the rules, including financial need, farmer or rural small business eligibility, and overall application completeness in order to be considered for funding.
Projects will then be scored and ranked based on several criteria. These include:

    1. quantity of energy replaced, produced or saved,
    2. environmental benefits,
    3. commercial availability of equipment or systems,
    4. technical merit of project,
    5. project readiness,
    6. bonus points for being a small agricultural producer or very small business,
    7. use of the simplified application for small projects,
    8. receipt of previous Section 9006 awards and
    9. return on investment.

Note that the technical merit criteria are worth 35 points out of a total possible of 115. Applicants should be sure to include complete information on technical worksheets, adding extra sheets if necessary.

Applicants are encouraged to self-score when submitting their applications. However, USDA and the Department of Energy will be scoring the projects and will have final decisions regarding a project's scoring. You are strongly encouraged to use the scoresheet developed by the Iowa USDA Rural Development office posted on our website or available here.

What is the Likelihood of Winning an Award?

In recent years, the demand for grants has exceeded available funds.  Given USA preference, loan guarantees and grant-loan guarantee combinations have a higher likelihood of being funded, assuming that the project is otherwise financially and technically sound. (Note: USDA has modified the rules this year to remove the incentives for loan guarantees submitted only for purposes of winning grants. See the 2008 NOFA for details).

Who Am I Competing Against for the Grants?

You are competing against a national pool of applicants. USDA does not allocate a certain amount or percentage of funds by state.

Who Evaluates My Proposal?

Energy efficiency and renewable energy professionals at the US Department of Energy or US Environmental Protection Agency evaluate the technical merits of your proposal. USDA Rural Development personnel administering the program evaluate other criteria and make final grant determinations.

When Will I Know If I Received a Grant / Loan Guarantee?

Grant applications will be evaluated after their respective deadlines. For the first application cycle, awards should be announced by June 15th.  Projects not receiving awards in the first cycle will be re-evaluated in the second cycle. For the second application cycle, awards should be announced by mid-August.

Loan guarantee applications will be evaluated and decisions made on a rolling basis as received. Grant-loan guarantee combination applications will be evaluated and decisions made every two weeks up through the application deadline.

When Will I Receive the Funding?

For grants, USDA will send you a check after you fully utilize the funds from your matching share. In addition, USDA will withhold 10% of the grant amount until the project is completed and operational.
For loan guarantees, the guarantee will become effective when the loan is closed.

What if My Project is not Funded?

Due to limited funding and competitive evaluation criteria, not all projects will be funded.  However, grant requests submitted in the first application cycle will automatically be re-submitted for the second cycle if not initially funded.  In addition, if funds for loan guarantees are not fully utilized, remaining funds can be used to provide grants to additional projects.

Can I See the Score that USDA Gave My Project?

If you feel that your project was unfairly evaluated or want to know why your project was not awarded a grant or guaranteed loan, you have the right to appeal to your local USDA Rural Development office.

How Quickly Does my Project Need to be Completed?

The project should be completed within 24 months of approval of the grant or loan guarantee award. If you are unable to meet this timeline, you need to inform your state USDA official or the funds may be forfeited.

What Records Do I Need to Maintain?

You will need to record the funds spent on the project and document your energy savings or production. You must also allow USDA personnel access to your project over its lifetime.

Do I have to Pay Taxes if I Receive a Grant?

This question is best answered by your accountant.  Section 9006 grants, like other federal and state grants to private businesses, are considered taxable income in the year in which the funds are received.  However, if you are depreciating your investment and lower the depreciable basis by the amount of the grant, then the grant is not taxable.