Loan funds may be used to pay for any of the following expenses:

To fund the construction, improvement, or acquisition of all facilities required to provide service at the broadband lending speed to rural areas, including facilities required for providing other services over the same facilities.

To fund the cost of leasing facilities required to provide service at the broadband lending speed if such lease qualifies as a capital lease under GAAP. Notwithstanding, loan funds can only be used to fund the cost of the capital lease for no more than the first three years of the loan amortization period. If an IRU qualifies as a capital lease, the entire cost of the lease will be amortized over the life of the lease and only the first three years of the amortized cost can be funded.

To fund an acquisition, provided that:

The acquisition is necessary for furnishing or improving service at the broadband lending speed;

The acquired service area, if any, meets the eligibility requirements set forth in § 1738.102;

The acquisition cost does not exceed 50 percent of the broadband loan amount; and

For the acquisition of another entity, the purchase provides the applicant with a controlling majority interest in the entity acquired.

To refinance an outstanding telecommunications loan made under the RE Act if refinancing the loan supports the construction, improvement, or acquisition of facilities and equipment for the provision of service at the broadband lending speed in rural areas provided that:

No more than 40 percent of the broadband loan amount is used to refinance the outstanding telecommunications loan;

The applicant is current with its payments on the telecommunication loan(s) to be refinanced; and

The amortization period for that portion of the broadband loan that will be needed for refinancing will not exceed the remaining amortization period for the telecommunications loan(s) to be refinanced. If multiple notes are being refinanced, an average remaining amortization period will be calculated based on the weighted dollar average of the notes being refinanced.

To fund pre-loan expenses in an amount not to exceed five percent of the broadband loan excluding amounts requested to refinance outstanding telecommunication loans. Pre-loan expenses may be reimbursed only if they are incurred prior to the date on which notification of a complete application is issued (see § 1738.205), they meet the requirements for reimbursement (found on the agency's Web site) and a loan contract is entered into with RUS.