MRWA Finance Authority Interim Loan Financing Program
How Much Will It Cost to Complete Your Next RD
More Than Your Available Capital.
Minnesota Rural Water Finance Authority Interim
Public Projects Construction Finance Program
Can Help You Bridge the Gap
Applicaition | Loan Process
| Borrower Letter |
Frequently Asked Questions
The Minnesota Rural Water Finance Authority (MRWFA) was created in
December of 1999 by the Minnesota Rural Water Association (MRWA). The
purpose of the authority is to assist communities in obtaining
competitive interim financing for construction projects.
In an effort to assist borrowers
across the State of Minnesota with the overwhelming burden of
financing capital construction projects, the MRWFA in conjunction with
Morgan Keegan have created an interim construction
to provide funding for communities which have received a permanent
loan commitment from the United States Department of Agriculture, Rural
Development (RD). The program is structured to provide a mechanism for
obtaining competitive fixed rate loans for construction projects at a
very low cost of borrowing.
The program is designed as a
tax-exempt pooled financing and will have a loan term within the
program sufficient to complete each project . The MRWFA will be the
program administrator. Information regarding the program can be
obtained through the MRWFA.
The stated or nominal loan rate is
fixed at the market level. Loan funds are disbursed on an invoice
requisition basis. The effective rate of borrowing is based on the
nominal loan rate less an interest earnings credit on undisbursed
construction proceeds. The effective rate of funds is estimated at
approximately 2% - 3.5% depending on the actual timing of
The final loan rate will be based on
the residual earnings of the program. Depending on the success of the
program, the potential for a final rebate does exist but is not
guaranteed. Should excess funds exist after the closing of the
program, a final rebate will be made to program participants. Any
potential rebate will lower the effective cost of funds to the
Pre Application Phase:
Obtain Commitment from RD for permanent bond financing.
application from MRWFA, complete and return with RD Letter of
Loan Approval Phase:
will approve loans contingent upon execution of final loan agreement.
Loan Agreement Phase:
Complete and return loan agreement (your bond counsel will assist).
Request funds from Trustee Bank.
Loan Payoff Phase:
project is complete, payoff will be made to MRWFA by the borrower with
RD Bond funds.
Initial Rate of Borrowing: "set at
Estimated Rate of Borrowing After
Investment Earnings Credit and Final Rebate: 1.00% - 3.00%
Loans will be approved on a case-by-case basis and will
depend upon available funds.
interest is capitalized per RD budget.
Your loan is
repaid when your project is complete and final closing for the long
term financing from RD is approved by RD.
I would like to take
this opportunity to introduce you to the Minnesota Rural Water Finance
Authority (MRWFA). The Minnesota Rural Water Finance Authority was
formed to assist communities in obtaining competitive interim
financing for construction projects. The program is designed to
provide funding for communities that have received a permanent loan
commitment from the United States Department of Agriculture, Rural
Development (RD). We hope you will consider the Minnesota Rural Water
Finance Authority for your interim borrowing needs.
The following points
describe the financing steps.
borrower obtains Letter of Conditions.
completes application and returns it with the RD Letter of
Conditions to the Minnesota Rural Water Finance Authority (the
approves application within one week. Final approval is
contingent upon execution of loan agreement. The Advance
Agreement, which will be prepared by Bond Counsel, consists of
- Advance Agreement
Resolution Approving Advance Agreement
- Application for
- Opinion of Counsel
- Request for
- Opinion of Board Counsel
- Revenue Bond
- RD Commitment Letter
Pre-closing with local Bond Counsel (generally, most of the
loan documents are finalized at pre-closing). The completed
loan package is mailed to the MRWFA for final approval and
then forwarded to the Trustee Bank. Construction disbursements
may commence once the Trustee receives a complete set of
funds via fax from Trustee Bank. RD, Engineer, and Borrower
sign off on request. No invoices are required. Interest on the
entire loan is capitalized at the loan rate and is held in
escrow. All other funds are used for construction purposes.
The borrower receives an interest earnings credit on
construction proceeds until funds are actually disbursed.
completion, payoff is made to the Trustee Bank with RD bond
funds. Morgan Keegan coordinates loan payoff with RD, the
MRWFA and Borrower. The payoff equals construction draws plus
capitalized interest less interest earnings credit. A final
rebate is made when the pool Notes are paid off.
||Once the Note
issue has matured and program expenses paid, remaining funds
will be disbursed on a pro-rated basis to program
To start this
process, just fill out the enclosed application form and return to the
Minnesota Rural Water Association. We will then take care of
contacting your Bond Counsel and getting the next step started. If we
can answer any questions, please contact us at 800-367-6792.
Ruth Hubbard - Minnesota Rural Water
Frequently Asked Questions
Is there an application form to be
completed and a waiting period for approval and funding of the loan?
There is a simple
two-page application that requests simple information of names and
addresses for your political subdivision, the project engineer, the
Rural Development (RD) district loan officer, bond counsel, and your
bank where the loan funds are to be wired. The application also asks
for a short description of the project, the amount of the loan and an
estimated start and completion date for the project construction. To
the application you will attach the Letter of Conditions received from
RD. This completes the application for mailing to the Minnesota Rural
Water Finance Authority (MRWFA). It will be approved upon receipt by
MRWFA and a letter of loan approval generally mailed within 3 days of
receipt of the completed application.
Is there a
standard loan agreement for the Program?
There is a
standard loan document called the Advance Agreement. This document,
with all attached exhibits for completion of the loan, will be sent
electronically or by mail to the bond counsel named on your
application. Your attorney for your specific loan will revise it. When
completed with all signatures you can forward the document to MRWFA or
the Program Attorney for review and submission to the Programís
there a maturity date on the borrowing?
There is a
maturity date on the Advance Agreement that is 45 days before the
maturity date of the Programís Notes to fund each annual pool. If your
project is not complete by the stated maturity, your loan will be
rolled over into the next yearís pool for continued funding. The
program will advise you of the need to rollover your loan and contact
your bond counsel to arrange for a new signed Advance Agreement.
additional fees to apply or receive a loan through the Program?
There are no additional fees. The
stated interest rate on the loan is the only cost charged by the
Program. Each borrower is responsible for paying the fees charged by
their own bond counsel to complete the loan. If your loan is rolled
over to a subsequent yearís pool, any legal fees for completing new
documents will be paid by the Program.
Where does the money come from for
Minnesota Rural Water Finance Authority, a political subdivision in
Minnesota formed in 2000, borrows the money for the pool by the sale
of their tax-exempt Public Project Construction Notes. Each series of
Notes matures in 12 months. The Authority issues a new series of Notes
whenever needed to keep the pool continuously funded at the levels
required to make all the existing loans, the applications approved for
funding, and the new loans likely to be approved over the next 12
the interest rate on the loan determined?
Agreement has a stated interest rate, which is the Program cost of
money. This rate of interest is charged on each dollar drawn by a
borrower to pay a project bill. Interest is charged only for those
dollars drawn from the Trustee Bank. The remaining dollars for an
individual borrowerís loan remain invested at the investment rate of
the Program. The rate of investment is higher than the interest rate
charged. All investment earnings accrue to the benefit of the borrower
and go to reduce the amount of interest due and owing when the interim
Advance Agreement is repaid at the completion of the project. In
addition, each borrower from the Program receives a rebate of interest
paid on a completed project from pool investment earnings at regular
intervals. The rebate is paid upon the maturity of each series of
MRWFA Public Projects Construction Notes to the borrowers from that
series of Notes during the previous 18 months.
investment earnings or the rebate returned to RD?
No, the interest
earnings and rebate are considered part of the overall funding for the
project. Project funds can be used for eligible construction costs,
administration, engineering, legal and interest on the first RD
payment. The rebate, when received, can be used to pay project costs
including the interest on your first RD payment. The rebate is money
to the borrower. When the rebate is used to repay RD it means that
other dollars that would otherwise go to debt repayment are available
for other needs of the project and the borrowing political
we contact to answer questions about the Program?
Ruth Hubbard at the
Minnesota Rural Water Association, 800-367-6792 for applications and
general questions on the Program. When your application is approved
and loan documents submitted you will be advised on how to contact the
Programís Trustee Bank. If you want someone to attend a meeting of
your governing board to describe the Program and answer questions,
please contact Ruth Hubbard.
Additionally, we will prepare loan and repayment scenarios for your
project for the draw of funds and repayment for any length of time. If
your project is going to take 2 months or 30 months, we can prepare
debt/draw schedules to answer your questions.
How do we draw
funds to pay a project bill?
The form and
procedure to draw funds are in the exhibits attached to the Advance
Agreement. The completed form is easy to complete and fax to the
Trustee Bank. The Trustee Bank reviews the form and generally wires
the funds to your designated bank account within 2-4 business days.
there a loan limit for the MRWFA Program?
The only limit is
the amount of loan dollars approved by Rural Development in its Letter
of Conditions. A borrower can borrow up to that amount in one loan or
in a series of loans. If there are multiple Letters of Conditions for
a borrower the total of all can be borrowed in one Advance Agreement
or in more than one. This is generally the case if RD, with subsequent
Letters of Conditions, approves a project in phases over time. The
Program can be flexible to meet the needs of the way the project is
How is the loan
to the MRWFA Program Repaid?
When your project
is certified by RD and they are ready to close your long-term loan
with them, you contact the Program. We will verify the amount of the
repayment to the Trustee Bank and coordinate with you, your bond
counsel and RD for the repayment of the MRWFA Program loan with the
proceeds of your long-term RD loan.
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