The federal government issued bonds, at 6 percent interest, and agreed to pay the two railroads $16,000 for each mile of track laid on level ground, $32,000 for track laid in foothills, and $48,000 per mile for track laid in mountainous areas.

In the 19th century, particularly during the construction of the Transcontinental Railroad, U.S. railroad companies were primarily "paid" through a combination of federal land grants and government loans. Under the Pacific Railroad Acts of 1862 and 1864, the government granted companies like the Union Pacific and Central Pacific ownership of public land in a "checkerboard" pattern—specifically, 10 to 20 square miles of land for every mile of track completed. The companies could then sell this land to settlers, farmers, and speculators to raise capital. In addition to land, the government provided subsidies in the form of government bonds, which functioned as low-interest loans. These were paid out based on the difficulty of the terrain: $16,000 per mile for flat plains, $32,000 for foothills, and $48,000 for mountainous regions. While the land grants were essentially gifts to encourage western expansion, the bond loans were intended to be repaid with interest, a process that was largely completed by the early 20th century.