Are you considering applying for State Revolving Fund (SRF) assistance? State SRF programs are often the most favorable option for financing small system projects, especially in the current funding landscape. Despite recent changes in overall federal operations and spending, SRF programs will continue to be funded to support critical water and wastewater infrastructure at the state level. With the January 2026 “minibus” federal appropriations package of $1.64 billion for Clean Water SRF and $1.13 billion for Drinking Water SRF, the previous fiscal year’s congressional allocation was nearly matched. As other funding sources are reduced or eliminated, and infrastructure costs are generally increasing, the SRF programs are an important resource for small systems which often have limited capacity – especially those serving disadvantaged communities.
The SRF programs generally offer more favorable loan terms than conventional financing, and there is potential for principal forgiveness in certain circumstances. And of course reducing costs overall is more responsible to ratepayers, minimizing the need for rate increases. SRF loans do take into account local factors such as median household income, existing debt of the applicant, and system conditions along with the more technical aspects of infrastructure engineering plans. But just like a personal loan, an assessment of the borrower’s ability to responsibly manage and pay back funds is critical. That’s true even for projects being considered for principal forgiveness.
The importance of good financial practices to support SRF applications – and funding requests in general – cannot be understated. Just like a personal loan, your system must demonstrate its ability to repay the loan or responsibly manage the funding if offered principal forgiveness. Here’s a brief summary of financial practices to get you started so you can demonstrate financial literacy to funders:
- Start with a financial audit.
- Review past and current revenues.
- Understand cash reserves.
- Consider a rate study.
- Create or update your asset inventory.
If all of this seems daunting and you aren’t sure how to get started, do not get discouraged! Tap into some of the many technical assistance options offered at no charge by TA providers like EFCN. Many small, aging systems are faced with similar challenges and there are likely no-cost or low-cost programs to meet your needs.
Now that you have a sense for best practices related to the financial preparations for your application, tune in to Part 2 for some additional details and next steps.