While working to bolster U.S. manufacturing and support American jobs and industries, implementing the Build America, Buy America (BABA) requirements for domestic sourcing also introduces new challenges: limited supply, longer lead times, (re)designing for compliant materials, and resulting cost increases. 

Significantly re-growing the U.S. manufacturing sector is a dauntingly huge goal. But one effective way to tackle a huge goal is to break it down into smaller, doable parts, implementing one strategically selected project at a time. 

Communities have an opportunity to play a key part in that big, national BABA goal, and also achieve their own economic development goals: Building local or regional manufacturing facilities that make a crucial part or component your community and its neighbors frequently need. 

What’s more, they can power these initiatives using Section 108 loan guarantee authority, a component of the Community Development Block Grant (CDBG) program – which can in turn stack or braid with other federal resources or priorities, including Opportunity Zones (OZs) and the New Markets Tax Credit (NMTC), to meet local economic and community development objectives.

Let’s take a closer look.

The challenge: BABA-compliant components

The BABA requirements, established under the Infrastructure Investment and Jobs Act, mandate that all iron, steel, manufactured products, and construction materials used in federally funded infrastructure projects be produced in the United States.

Notably, in the case of manufactured products, BABA requires that both (a) the product be manufactured in the United States and (b) “the cost of the components of the manufactured product that are mined, produced, or manufactured in the United States is greater than 55% of the total cost of all components of the manufactured product.”

Because many manufactured products used in infrastructure and housing construction contain parts from several countries, meeting the “greater than 55%” BABA requirement may mean swapping in an American-made component or part within a larger finished item, such as a pump, lift, or appliance. For example, an architecture and engineering firm might tell your public facilities department that if a specific part needed for assembling a typical water pump could be manufactured in the U.S., then the pump would be BABA-compliant, construction lead times would decrease, and project costs might come down. 

What if a few calls confirm that other nearby communities would also use these pumps? How can you make a component manufacturing factory a reality? 

Or if you are a Solar for All grantee facing a shortage of domestic BABA-compliant solar energy components, how can you increase their supply?

A solution: Section 108-funded targeted manufacturing

Section 108 of the Housing and Community Development Act of 1974, as amended, is a component of the CDBG program that gives local governments a useful tool to finance community and economic development projects. A CDBG grantee can use Section 108 to borrow up to five times its annual grant amount. (See the 2025 allocation spreadsheet to check whether your locality received funding, and how much.) 

Financing supported by loan guarantee proceeds can help fill gaps in conventional funding sources, giving communities access to low-cost, long-term financing for projects like manufacturing facilities that produce needed parts and products. 

In addition to the potential BABA-related benefits – supporting compliance, addressing supply chain bottlenecks, reducing project completion delays – potential benefits to this approach include:

• Local manufacturing can lead to more resilient and self-sufficient communities, less reliant on external suppliers.
• It can significantly boost the regional economy by creating high-quality, permanent jobs – principally for lower-income residents – ranging from skilled manufacturing positions to administrative and support roles.
• Moreover, the presence of a manufacturing facility can attract related businesses and industries, further stimulating economic growth and development in the region. This ripple effect can lead to a more vibrant and prosperous community.

Furthermore, Section 108 loan proceeds can be effectively combined with New Markets Tax Credits (NMTC) or used for projects in Opportunity Zones to amplify economic revitalization efforts.

• NMTCs provide tax incentives for investments in low-income communities, making them an attractive option for financing projects that align with BABA requirements. The NMTC Coalition webpage provides information about many manufacturing projects benefiting from NMTC resources.
• Similarly, Opportunity Zones offer tax benefits for investments in economically distressed areas, encouraging long-term investments that can spur economic growth.
• Also, annual CDBG funds may support projects with targeted job training or workforce development services. 

Section 108 loan guarantees in action

Examples of manufacturing projects approved for Section 108 loan guarantees – as posted on the HUD Exchange Section 108 pages – include:

• An Alabama city used a $2 million Section 108 loan guarantee to provide financing to a seafood company to consolidate its production facilities, remodel its 55,000-square-foot cold storage facility, develop a centralized distribution center, and add a new culinary training facility. The city planned this project to create at least 47 full-time equivalent (FTE) positions in a distressed area targeted for redevelopment.
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• A for-profit business specializing in energy storage and power delivery solutions was expanding its manufacturing operations in Arizona with the help of a $1.5 million Section 108 loan guarantee. The new $25.5 million manufacturing facility, located in a vacant 120,000-square-foot building, was planned to create 150 full-time jobs.
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• In a collaborative, multi-county building supply project, the Commonwealth of Pennsylvania, in conjunction with two counties, used Section 108 loan guarantees to support a lumber business. This project involved a $5 million loan from one county and additional funds from the state to refinance an existing term loan, ultimately creating or retaining 422 full-time equivalent jobs. Read more >

These projects demonstrate the potential of Section 108 financing to not only meet BABA requirements but also drive needed economic revitalization and job creation.

An integrated approach to BABA and revitalization

By leveraging Section 108 loan guarantees in conjunction with these compatible programs, communities can maximize financial resources, support local manufacturing, and achieve economic development goals. This integrated approach not only enhances compliance with BABA but also fosters sustainable economic revitalization and job creation in targeted areas.

Continue the conversation: If you have ideas or opportunities for this intersection of BABA, manufacturing, and Section 108 funding, or have seen it in action, please reach out.