RD Instruction 4279-B

Table of Contents

Page 1

(Revision 2)

**PART 4279 - GUARANTEED LOANMAKING**

**Subpart B - Business and Industry Loans**

**TABLE OF CONTENTS**

**[Sec]{.underline}. [Page]{.underline}**

**4279.101 Introduction. 1**

**(a) Content. 1**

**(b) Purpose. 1**

**(c) Documents. 1**

*(d) Early Agency review. 1*

**4279.102 Definitions. 2**

**4279.103 Exception Authority. 2**

**4279.104 Appeals. 2**

**4279.105 - 4279.106 \[Reserved\] 2**

**4279.107 Guarantee fees. 2**

**(a) Initial guarantee fee. 2**

**(b) Annual renewal fee. 3**

**4279.108 Eligible borrowers. 3**

**(a) Type of entity. 3**

**(b) Citizenship. 4**

**(c) Rural area. 4**

**(d) Loans to cooperative organizations. 4**

**(e) Other credit. 5**

**4279.109 - 4279.112 \[Reserved\] 5**

**4279.113 Eligible loan purposes. 5**

**4279.114 Ineligible purposes. 9**

**4279.115 Prohibition under Agency programs. 10A**

**4279.116 - 4279.118 \[Reserved\] 10A**

**4279.119 Loan guarantee limits. 10A**

**(a) Loan amount. 10A**

**(b) Percent of guarantee. 10B**

**4279.120 Fees and charges. 11**

**(a) Routine lender fees. 11**

**(b) Professional services. 11**

*(c) Fee review. 11*

(12-22-04) PN 381

RD Instruction 4279-B

Table of Contents

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(Revision 2)

**[Sec]{.underline}. [Page]{.underline}**

**4279.121 - 4279.124 \[Reserved\] 12**

**4279.125 Interest rates. 12**

**4279.126 Loan terms. 13**

**4279.127 - 4279.130 \[Reserved\] 13**

**4279.131 Credit quality. 13**

**(a) Cash flow. 13**

**(b) Collateral. 14**

**(c) Industry. 14**

**(d) Equity. 14**

**(e) Lien priorities. 15**

**(f) Management. 15**

**4279.132 - 4279.136 \[Reserved\] 15**

**4279.137 Financial statements. 15**

**4279.138 - 4279.142 \[Reserved\] 15**

**4279.143 Insurance. 16**

**(a) Hazard. 16**

**(b) Life. 16**

**(c) Worker compensation. 16**

**(d) Flood. 16**

**(e) Other. 16**

**4279.144 Appraisals. 17**

**4279.145 - 4279.148 \[Reserved\] 17**

**4279.149 Personal and corporate guarantees. 17**

**4279.150 Feasibility studies. 18**

**4279.151 - 4279.154 \[Reserved\] 18**

**4279.155 Loan priorities. 18**

**4279.156 Planning and performing development. 21**

**(a) Design policy. 21**

**(b) Project control. 21**

**(c) Equal opportunity. 21**

**(d) Americans with Disabilities Act (ADA). 21**

*(e) Agency role. 22*

**4279.157 - 4279.160 \[Reserved\] 22**

**4279.161 Filing preapplications and applications. 22**

**(a) Preapplications. 22**

**(b) Applications. 23**

**(c) Applications of \$600,000 and less. 26**

**4279.162 - 4279.163 \[Reserved\] 26**

RD Instruction 4279-B

Table of Contents

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(Revision 1)

**[Sec]{.underline}. [Page]{.underline}**

*4279.164 Preapplication processing. 26*

*(a) Nonrelocation. 26A*

*(b) Privacy. 26A*

*(c) Decision. 27*

*(d) Identification numbers. 27*

*(e) Rural Community Facilities Tracking System 28*

*(RCFTS).*

**4279.165 Evaluation of application. 28**

**(a) General review. 28**

**(b) Environmental requirements. 29**

*(c) State loan committee. 29*

*(d) Concurrence. 29*

*(e) National Office Loan Committees. 30*

**4279.166** **Timeframe for processing applications.** **30**

**4279.167 - 4279.172 \[Reserved\] 30**

**4279.173 Loan approval and obligating funds. 30**

**4279.174 Transfer of lenders. 31**

175. **Domestic lamb industry adjustment assistance program**

> **set aside. 31**

**4279.176 - 4279.179 \[Reserved\] 32**

**4279.180 Changes in borrower. 32**

**4279.181 Conditions precedent to issuance of\
Loan Note Guarantee. 32**

**4279.182 - 4279.185 \[Reserved\] 33**

**4279.186 Issuance of the guarantee. 34**

**4279.187 Refusal to execute Loan Note Guarantee. 35**

**4279.188 - 4279.199 \[Reserved\] 35**

**4279.200 OMB control number. 35**

*Appendix A - Guide for Completion of Feasibility Studies.*

*Appendix B - Guide for Sale/Structure of Guaranteed Loans.*

*Appendix C - Business and Industry Application Priority Points
Scoring.*

*Appendix D - Business and Industry Loan Processing Checklist.*

**oOo**

(12-22-04) PN 381

RD Instruction 4279-B

**PART 4279 - Guaranteed Loanmaking**

**Subpart B - Business and Industry Loans**

**§ 4279.101 [Introduction]{.underline}.**

**(a) [Content]{.underline}. This subpart contains loan processing
regulations for the Business and Industry (B&I) Guaranteed Loan Program.
It is supplemented by subpart A of this part, which contains general
guaranteed loan regulations, and subpart B of part 4287 of this chapter,
which contains loan servicing regulations.**

**(b) [Purpose]{.underline}. The purpose of the B&I Guaranteed Loan
Program is to improve, develop, or finance business, industry, and
employment and improve the economic and environmental climate in rural
communities. This purpose is achieved by bolstering the existing private
credit structure through the guarantee of quality loans which will
provide lasting community benefits. It is not intended that the
guarantee authority will be used for marginal or substandard loans or
for relief of lenders having such loans.**

**(c) [Documents]{.underline}. Copies of all forms, regulations, and
Instructions referenced in this subpart are available in any Agency
office.** *Whenever a form is designated in this subpart, that
designation includes predecessor and successor forms, if applicable, as
specified by the field or National Office.* *Any portion of this
Instruction appearing in italicized type is considered by the Agency to
be administrative procedure and has not been published as part of the
regulation in the Federal Register.*

*(d) [Early Agency review]{.underline}. All B&I inquiries,
preapplications, or applications should be reviewed by loan officers at
the first contact with the Agency to determine that the proposal fits
into the overall purpose of the program. The purpose of the early review
is to advise the lender as soon as possible when eligibility problems
are likely or when there are concerns about whether the project meets
the intent of the program. This early communication can prevent
unnecessary expense and frustration in the preparation of a full B&I
application. Credit quality and collateral should be scrutinized closely
early in the process. Loan officers should likewise initiate the
environmental review process early in the planning stage and should be
alert for projects which may have a significant impact on the
environment. As soon as an application is received, make a priority
ranking using the worksheet provided in appendix C of this subpart.
Document the action by filing the completed worksheet in the project
case file.*

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

DISTRIBUTION: WSAL Guaranteed Loanmaking

## 1

## (Revision 1)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

**§ 4279.102 [Definitions]{.underline}.**

**The definitions and abbreviations in § 4279.2 of subpart A of this
part are applicable to this subpart.**

**§ 4279.103 [Exception Authority]{.underline}.**

**Section 4279.15 of subpart A of this part applies to this subpart.**

**§ 4279.104 [Appeals]{.underline}.**

**Section 4279.16 of subpart A of this part applies to this subpart.**

**§§ 4279.105 - 4279.106 \[Reserved\]**

**§ 4279.107 [Guarantee fees]{.underline}. (Revised 10-03-05, SPECIAL
PN.)**

**For all new loans there are two types of non-refundable guarantee fees
to be paid by the lender. The fees may be passed on to the borrower. The
fees may be forwarded to the Agency through an electronic funds transfer
system or, at the Agency's discretion, by a check payable to USDA using
a USDA-approved form.**

> **(a) [Initial guarantee fee]{.underline}. The initial fee is paid at
> the time the Loan Note Guarantee is issued. The fee may be included as
> an eligible loan purpose in the guaranteed loan. The fee will be the
> rate (a specified percentage not to exceed 2 percent) multiplied by
> the principal loan amount, multiplied by the percent of guarantee.
> Subject to specified annual limits set by the Agency, the initial
> guarantee fee may be reduced to 1 percent if the borrower\'s business
> supports value-added agriculture and results in farmers benefiting
> financially, or**

**(1) is a high impact business development investment in accordance
with § 4279.155(b)(5), and**

**(2) is located in a rural community that:**

**(i) is experiencing long-term population decline and job
deterioration, or**

**(ii) has remained persistently poor over the last 60 years, or**

## 2

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RD Instruction 4279-B

§ 4279.107(a)(2) (Con.)

**(iii) is experiencing trauma as a result of natural disaster, or**

**(iv) is experiencing fundamental structural changes in its economic
base.**

> *(3) Written requests for approval of a guaranteed loan with the
> reduced guarantee fee must be forwarded to the National Office, Attn:
> Director, Business Programs Processing Division, for review and
> consideration prior to obligation of the guaranteed loan. The
> Administrator will provide a written response to the State Director
> concerning the request confirming approval or disapproval of the
> request to approve the guaranteed loan with the reduced guarantee fee.
> After the guaranteed authority has been exhausted, the National Office
> will provide guidance to the State Directors.*
>
> **(b) [Annual renewal fee]{.underline}. The annual renewal fee is paid
> once a year and is required to maintain the enforceability of the
> guarantee as to the lender.**
>
> **(1) The rate of the annual renewal fee (a specified percentage) is
> established by Rural Development in an annual notice published in the
> Federal Register, multiplied by the outstanding principal loan balance
> as of December 31 of each year, multiplied by the percent of
> guarantee. The rate is the rate in effect at the time the loan is
> obligated, and will remain in effect for the life of the loan.**
>
> **(2) Annual renewal fees are due on January 31. Payments not received
> by April 1 are considered delinquent and, at the Agency's discretion,
> may result in cancellation of the guarantee to the lender. Holders'
> rights will continue in effect as specified in the Loan Note Guarantee
> and Assignment Guarantee Agreement. Any delinquent annual renewal fees
> will bear interest at the note rate and will be deducted from any loss
> payment due the lender. For loans where the Loan Note Guarantee is
> issued between October 1 and December 31, the first annual renewal fee
> payment will be due January 31 of the second year following the date
> the Loan Note Guarantee was issued.**

## 

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## (Revision 3)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

**§ 4279.108 [Eligible borrowers]{.underline}.**

**(a) [Type of entity]{.underline}. A borrower may be a cooperative
organization, corporation, partnership, or other legal entity organized
and operated on a profit or nonprofit basis; an Indian tribe on a
Federal or State reservation or other Federally recognized tribal group;
a public body; or an individual. A cooperative organization is a
cooperative or an entity, not chartered as a cooperative, that operates
as a cooperative in that it is owned and operated for the benefit of its
members, including the manner in which it distributes its dividends and
assets. A borrower must be engaged in or proposing to engage in a
business. Business may include manufacturing, wholesaling, retailing,
providing services, or other activities that will: (Revised 12-22-04, PN
381.)**

**(1) Provide employment;**

**(2) Improve the economic or environmental climate;**

**(3) Promote the conservation, development, and use of water for
aquaculture; or**

**(4) Reduce reliance on nonrenewable energy resources by encouraging
the development and construction of solar energy systems and other
renewable energy systems (including wind energy systems, geothermal
energy systems, and anaerobic digesters for the purpose of energy
generation). (Revised 12-22-04, PN 381.)**

**(b) [Citizenship]{.underline}. Individual borrowers must be citizens
of the United States (U.S.) or reside in the U.S. after being legally
admitted for permanent residence. Citizens and residents of the Republic
of Palau, the Federated States of Micronesia, and the Republic of the
Marshall Islands shall be considered U.S. citizens. Corporations or
other nonpublic body organization-type borrowers must be at least 51
percent owned by persons who are either citizens of the U.S. or reside
in the U.S. after being legally admitted for permanent residence.**

**(c) [Rural area]{.underline}. The business financed with a B&I
Guaranteed Loan must be located in a rural area, except for cooperative
organizations financed in accordance with paragraph (d)(3) of this
section. Loans to borrowers with facilities located in both rural and
non-rural areas will be limited to the amount necessary to finance the
facility located in the eligible rural area, except for cooperative
organizations financed in accordance with paragraph (d)(3) of this
section. Rural areas are any areas other than: (Revised 12-22-04, PN
381.)**

## 4

## (Revision 1)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.108 (Con.)

**(1) A city or town that has a population of greater than 50,000
inhabitants; and**

**(2) The urbanized area contiguous and adjacent to such a city or town,
as defined by the U.S. Bureau of the Census using the latest decennial
census of the United States.**

**(d) [Loans to cooperative organizations]{.underline}. (Added 12-22-04,
PN 381.)**

> **(1) B&I loans to eligible cooperative organizations may be made in
> principal amounts up to \$40 million if the project is located in a
> rural area, the cooperative facility being financed provides for the
> value-added processing of agricultural commodities, and the total
> amount of loans exceeding \$25 million does not exceed 10 percent of
> the funds available for the fiscal year.**
>
> **(2) Cooperative organizations that are headquartered in a non-rural
> area may be eligible for a B&I loan if the loan is used for a project
> or venture that is located in a rural area.**
>
> **(3) B&I loans to eligible cooperative organizations may also be made
> in non-rural areas provided:**

**(i) The primary purpose of the loan is for a facility to provide
value-added processing for agricultural producers that are located
within 80 miles of the facility;**

## 4A

## (Added 10-03-05, SPECIAL PN) 

RD Instruction 4279-B

§ 4279.108(d)(3) (Con.)

**(ii) The applicant satisfactorily demonstrates that the primary
benefit of the loan will be to provide employment for rural residents;**

**(iii) The principal amount of the loan does not exceed \$25 million;
and**

**(iv) The total amount of loans guaranteed under this section does not
exceed 10 percent of the funds available for the fiscal year.**

**(4) An eligible cooperative organization may refinance an existing B&I
loan provided that the existing loan is current and performing, the
existing loan is not and has not been in payment default (more than 30
days late) or the collateral of which has not been converted, and there
is adequate security or full collateral for the new B&I loan.**

**(e) [Other Credit]{.underline}. All applications for assistance will
be accepted and processed without regard to the availability of credit
from any other source.** *Applicants are to be advised of other
potential sources of credit but are not encouraged or required to pursue
financing from any of these sources in lieu of assistance from the
Agency.* **(Renumbered\
12-22-04, PN 381.)**

**§§ 4279.109 - 4279.112 \[Reserved\]**

**§ 4279.113 [Eligible loan purposes]{.underline}.**

**Loan purposes must be consistent with the general purpose contained
in**

**§ 4279.101 of this subpart. They include but are not limited to the
following:**

**(a) Business and industrial acquisitions when the loan will keep the
business from closing, prevent the loss of employment opportunities, or
provide expanded job opportunities.**

**(b) Business conversion, enlargement, repair, modernization, or
development.**

**(c) Purchase and development of land, easements, rights-of-way,
buildings, or facilities.**

**(d) Purchase of equipment, leasehold improvements, machinery,
supplies, or inventory.**

## 5

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## (12-23-96) SPECIAL PN 

## RD Instruction 4279-B

§ 4279.113 (Con.)

**(e) Pollution control and abatement**.

**(f) Transportation services incidental to industrial development.**

**(g) Startup costs and working capital.**

**(h) Agricultural production, when not eligible for Farm Service Agency
(FSA) farmer program assistance and when it is part of an integrated
business also involved in the processing of agricultural products.**

**(1) Examples of potentially eligible production include but are not
limited to: an apple orchard in conjunction with a food processing
plant; poultry buildings linked to a meat processing operation; or sugar
beet production coupled with storage and processing. Any agricultural
production considered for B&I financing must be owned, operated, and
maintained by the business receiving the loan for which a guarantee is
provided. Independent agricultural production operations, even if not
eligible for FSA farmer programs assistance, are not eligible for the
B&I program.**

**(2) The agricultural-production portion of any loan will not exceed 50
percent of the total loan or \$1 million, whichever is less.**

**(i) Purchase of membership, stocks, bonds, or debentures necessary to
obtain a loan from Farm Credit System institutions and other lenders
provided that the purchase is required for all of their borrowers.
(Revised 12-22-04, PN 381.)**

**(j) Purchase of cooperative stock by individual farmers or ranchers in
a farmer or rancher cooperative established for the purpose of
processing an agricultural commodity. (Added 12-22-04, PN 381.)**

**(1) The cooperative may contract for services to process agricultural
commodities or otherwise process value-added agricultural products
during the 5-year period beginning on the operation startup date of the
cooperative in order to provide adequate time for the planning and
construction of the processing facility of the cooperative.**

**(2) Notwithstanding §§ 4279.131(d) and 4279.137, the individual farmer
or rancher may provide financial information in the manner that is
generally required by commercial agricultural lenders in order to obtain
a loan.**

6

(Revision 1)

RD Instruction 4279-B

§ 4279.113 (Con.)

**(k) Aquaculture, including conservation, development, and utilization
of water for aquaculture. (Renumbered 12-22-04, PN 381.)**

**(l) Commercial fishing. (Renumbered 12-22-04, PN 381.)**

**(m) Commercial nurseries engaged in the production of ornamental
plants and trees and other nursery products such as bulbs, flowers,
shrubbery, flower and vegetable seeds, sod, and the growing of plants
from seed to the transplant stage. (Renumbered 12-22-04, PN 381.)**

**(n) Forestry, which includes businesses primarily engaged in the
operation of timber tracts, tree farms, and forest nurseries and related
activities such as reforestation. (Renumbered 12-22-04, PN 381.)**

**(o) The growing of mushrooms or hydroponics. (Renumbered 12-22-04, PN
381.)**

**(p) Interest (including interest on interim financing) during the
period before the first principal payment becomes due or when the
facility becomes income producing, whichever is earlier. (Renumbered
12-22-04, PN 381.)**

**(q) Feasibility studies. (Renumbered 12-22-04, PN 381.)**

**(r) To refinance outstanding debt when it is determined that the
project is viable and refinancing is necessary to improve cash flow and
create new or save existing jobs. Except as provided for in\
§ 4279.108(d)(4) of this subpart, existing lender debt may be included
provided that, at the time of application, the loan has been current for
at least the past 12 months (unless such status is achieved by the
lender forgiving the borrower\'s debt) and the lender is providing
better rates or terms. Subordinated owner debt is not eligible under
this paragraph.** **Unless the amount to be refinanced is owed directly
to the Federal government or is Federally guaranteed, the existing
lender debt refinancing must be a secondary part (less than 50 percent)
of the overall loan. (Revised 03-21-07, PN 407.)**

**(s) Takeout of interim financing. Guaranteeing a loan after project
completion to pay off a lender\'s interim loan will not be treated as
debt refinancing provided that the lender submits a complete
preapplication or application which proposes such interim financing
prior to completing the interim loan. A lender that is considering an
interim loan should be advised that the Agency assumes no responsibility
or obligation for interim loans advanced prior to the Conditional
Commitment being issued. (Renumbered 12-22-04, PN 381.)**

## 7

## (Revision 3)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.113 (Con.)

**(t) Fees and charges for professional services and routine lender
fees. (Renumbered 12-22-04, PN 381.)**

**(u) Agency guarantee fee. (Renumbered 12-22-04, PN 381.)**

**(v) Tourist and recreation facilities, including hotels, motels, and
bed and breakfast establishments, except as prohibited under ineligible
purposes. (Renumbered 12-22-04, PN 381.)**

*(1) Tourism and recreation projects can be a vital part of a rural
area\'s economic development strategy. On the other hand, they are
typically difficult credit decisions due to the risks involved. You may
want to obtain an independent feasibility study to make sure that
demand, utilization, and related cash flow issues are looked at
closely.*

*(2) Projects that are commonly not successful in the area normally
should not be financed. This does not mean that new ventures should not
be considered. It means, as a hypothetical example, that if 5 out of 10
ski areas without snowmaking capabilities in Vermont have failed, such a
recreational proposal probably carries excessive risk. Similar examples
might be hotels or motels in many rural areas, outdoor tennis or
swimming pools, or water slides in northern climates.*

*(3) Work closely with the lender, early in the process, on credit
quality. Many requests will meet the \"loan purpose\" eligibility test
but may not be credit worthy due to high risk.*

**(w) Educational or training facilities. (Renumbered 12-22-04, PN
381.)**

**(x) Community facility projects which are not listed as an ineligible
loan purpose such as convention centers. (Renumbered 12-22-04, PN
381.)**

**(y) Constructing or equipping facilities for lease to private
businesses engaged in commercial or industrial operations. (Renumbered
12-22-04, PN 381.)**

**(z) The financing of housing development sites provided that the
community demonstrates a need for additional housing to prevent a loss
of jobs in the area or to house families moving to the area as a result
of new employment opportunities. (Renumbered 12-22-04, PN 381.)**

8

(Revision 3)

RD Instruction 4279-B

§ 4279.113 (Con.)

**(aa) Community antenna television services or facilities. (Renumbered
12-22-04, PN 381.)**

**(bb) Provide loan guarantees to assist industries adjusting to
terminated Federal agricultural programs or increased foreign
competition. (Renumbered 12-22-04, PN 381.)**

**(cc) To finance energy projects. Commercially available energy
projects that produce biomass fuel or biogas as an output must have
completed two operating cycles at design performance levels submitted to
the Agency. Projects that produce steam or electricity as an output must
have met or exceeded acceptance test performance criteria submitted to
the Agency and be successfully interconnected with the purchaser of the
output. Performance or acceptance test requirements for all other energy
projects will be determined by the Agency on a case by case basis.
Financing for energy projects will only be allowed when the facility has
been constructed according to plans and specifications and is producing
at the quality and quantity projected in the application. (Added
07-26-06, PN 400.)**

**§ 4279.114 [Ineligible purposes]{.underline}.**

**(a) Distribution or payment to an individual owner, partner,**

**stockholder, or beneficiary of the borrower or a close relative of
such an individual when such individual will retain any portion of the
ownership of the borrower.**

**(b) Projects in excess of \$1 million that would likely result in the
transfer of jobs from one area to another and increase direct employment
by more than 50 employees.**

**(c) Projects in excess of \$1 million that would increase direct
employment by more than 50 employees, if the project would result in an
increase in the production of goods for which there is not sufficient
demand, or if the availability of services or facilities is insufficient
to meet the needs of the business.**

**(d) Charitable institutions, churches, or church-controlled or
fraternal organizations.**

**(e) Lending and investment institutions and insurance companies.**

**(f) Assistance to Government employees and military personnel who are
directors or officers or have a major ownership of 20 percent or more in
the business.**

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(Revision 2)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.114 (Con.)

**(g) Racetracks for the conduct of races by professional drivers,
jockeys, etc., where individual prizes are awarded in the amount of
\$500 or more.**

**(h) Any business that derives more than 10 percent of annual gross
revenue from gambling activity.**

**(i) Any illegal business activity.**

**(j) Prostitution.**

**(k) Any line of credit.**

**(l) The guarantee of lease payments.**

**(m) The guarantee of loans made by other Federal agencies.**

**(n) Owner-occupied housing. Bed and breakfasts, storage facilities, et
al, are allowed when the [pro rata]{.underline} value of the owner's
living quarters is deleted.**

**(o) Projects that are eligible for the Rural Rental Housing and Rural
Cooperative Housing loans under sections 515, 521, and 538 of the
Housing Act of 1949, as amended.**

**(p) Loans made with the proceeds of any obligation the interest on
which is excludable from income under 26 U.S.C. § 103 or a successor
statute. Funds generated through the issuance of tax-exempt obligations
may neither be used to purchase the guaranteed portion of any Agency
guaranteed loan nor may an Agency guaranteed loan serve as collateral
for a tax-exempt issue. The Agency may guarantee a loan for a project
which involves tax-exempt financing only when the guaranteed loan funds
are used to finance a part of the project that is separate and distinct
from the part which is financed by the tax-exempt obligation, and the
guaranteed loan has at least a parity security position with the
tax-exempt obligation.**

**(q) The guarantee of loans where there may be, directly or indirectly,
a conflict of interest or an appearance of a conflict of interest
involving any action by the Agency.** *An example of a conflict of
interest would be where guaranteed funds are used to finance a Federal
office building where one of the tenants leasing the space is a USDA
agency or organization.*

**(r) Golf courses.**

## 10

## (Revision 2) 

## RD Instruction 4279-B

**§ 4279.115 [Prohibition under Agency programs]{.underline}.**

**No B&I loans guaranteed by the Agency will be conditioned on any
requirement that the recipients of such assistance accept or receive
electric service from any particular utility, supplier, or
cooperative.**

## **§§ 4279.116 - 4279.118 \[Reserved\]**

**§ 4279.119 [Loan guarantee limits]{.underline}.**

**(a) [Loan amount.]{.underline} The total amount of Agency loans to one
borrower, including: (1) the guaranteed and unguaranteed portions; (2)
the outstanding principal and interest balance of any existing Agency
guaranteed loans; and (3) new loan request, must not exceed \$10
million, except as outlined in paragraphs (a)(1) and (2) of this
section. (Revised 12-22-04, PN 381.)**

**(1) The Administrator may, at the Administrator's discretion, grant an
exception to the \$10 million limit for loans of \$25 million or less
under the following circumstances: (Revised 12-22-04, PN 381.)**

**(i) The project to be financed is a high-priority project. Priority
will be determined in accordance with the criteria contained in §
4279.155 of this subpart;**

**(ii) The lender must document to the satisfaction of the Agency that
the loan will not be made and the project will not be completed if the
guarantee is not approved;**

**(iii) The percentage of guarantee will not exceed 60 percent. No
exception to this requirement will be approved under subsection (b) of
this section for loans exceeding \$10 million; and**

**(iv) Any request for a guaranteed loan exceeding the \$10 million
limit must be submitted to the Agency in the form of a preapplication.
The preapplication must be submitted to the National Office for review
and concurrence before encouraging a full application.**

**(2) The Secretary, whose authority may not be redelegated, may approve
guaranteed loans in excess of \$25 million, at the Secretary's
discretion, for rural cooperative organizations that process value-added
agricultural commodities in accordance with § 4279.108(d)(1) of this
subpart.**

## 

## 10A

## (Revision 1)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.119 (Con.)

**(b) [Percent of guarantee]{.underline}. The percentage of guarantee,
up to the maximum allowed by this section, is a matter of negotiation
between the lender and the Agency. The maximum percentage of guarantee
is 80 percent for loans of \$5 million or less, 70 percent for loans
between \$5 and \$10 million, and 60 percent for loans exceeding \$10
million. Notwithstanding the preceding, the Administrator may, at the
Administrator\'s discretion, grant an exception allowing guarantees of
up to 90 percent on loans of \$10 million or less under the following
circumstances:**

**(1) The project to be financed is a high-priority project. Priority
will be determined in accordance with the criteria contained in §
4279.155 of this subpart;**

10B

(Revision 1)

RD Instruction 4279-B

§ 4279.119(b)

**(2) The lender must document to the satisfaction of the Agency that
the loan will not be made and the project will not be completed if the
higher guarantee percentage is not approved; and**

**(3) The State Director may grant an exception for loans of up to 90
percent on loans of \$2 million or less subject to the State Director's
delegated loan approval authority and meeting all of the conditions as
set forth in this section. In cases where the State Director does not
have the loan approval authority to approve a loan of \$2 million or
less or the proposed percentage, the case must be submitted to the
National Office for review.**

**(4) Each fiscal year, the Agency will establish a limit on the maximum
portion of guarantee authority available for that fiscal year that may
be used to guarantee loans with a guarantee percentage exceeding 80
percent. The limit will be announced by publishing a notice in the
Federal Register. Once the limit has been reached, the guarantee
percentage for all additional loans guaranteed during the remainder of
that fiscal year will not exceed 80 percent.**

*(5) Written requests for approval of a guaranteed loan with a guarantee
percentage above 80 percent must be forwarded to the National Office,
Attn: Director, Business Programs Processing Division, for review and
consideration prior to obligation of the guaranteed loan. The
Administrator will provide a written response to the State Director
concerning the request confirming approval or disapproval of the
request. After the guaranteed authority has been exhausted, the National
Office will provide guidance to the State Directors.*

**§ 4279.120 [Fees and charges]{.underline}.**

**(a) [Routine lender fees]{.underline}. The lender may establish
charges and fees for the loan provided they are similar to those
normally charged other applicants for the same type of loan in the
ordinary course of business.**

**(b) [Professional services]{.underline}. Professional services are
those rendered by entities generally licensed or certified by States or
accreditation associations, such as architects, engineers, packagers,
accountants, attorneys, or appraisers. The borrower may pay fees for
professional services needed for planning and developing a project
provided that the amounts are reasonable and customary in the area.
Professional fees may be included as an eligible use of loan proceeds.**

*(c) [Fee Review]{.underline}. You should review fees in the application
but rely on the opinion of the lender as to their reasonableness.*

## 11

## 

(12-23-96) SPECIAL PN

RD Instruction 4279-B

**§§ 4279.121 - 4279.124 \[Reserved\]**

**§ 4279.125 [Interest rates]{.underline}.**

**The interest rate for the guaranteed loan will be negotiated between
the lender and the applicant and may be either fixed or variable as long
as it is a legal rate. Interest rates will not be more than those rates
customarily charged borrowers in similar circumstances in the ordinary
course of business and are subject to Agency review and approval.
Lenders are encouraged to utilize the secondary market and pass
interest-rate savings on to the borrower.**

**(a) A variable interest rate agreed to by the lender and borrower must
be a rate that is tied to a base rate agreed to by the lender and the
Agency. The variable interest rate may be adjusted at different
intervals during the term of the loan, but the adjustments may not be
more often than quarterly and must be specified in the Loan Agreement.
The lender must incorporate, within the variable rate Promissory Note at
loan closing, the provision for adjustment of payment installments
coincident with an interest-rate adjustment. The lender will ensure that
the outstanding principal balance is properly amortized within the
prescribed loan maturity to eliminate the possibility of a balloon
payment at the end of the loan.**

**(b) Any change in the interest rate between the date of issuance of
the Conditional Commitment and before the issuance of the Loan Note
Guarantee must be approved in writing by the Agency approval official.
Approval of such a change will be shown as an amendment to the
Conditional Commitment.**

**(c) It is permissible to have one interest rate on the guaranteed
portion of the loan and another rate on the unguaranteed portion of the
loan provided that the rate on the guaranteed portion does not exceed
the rate on the unguaranteed portion.**

**(d) A combination of fixed and variable rates will be allowed.**

*(e) While the lender and applicant negotiate the interest rate on a B&I
loan, you have a responsibility as an Agency loan officer to make sure
that the rate is no more than that rate customarily charged borrowers
under similar circumstances when there is no guarantee. You should
encourage lenders, by counseling and the use of the priority ranking
system, to pass the savings of the secondary market on to the borrower.
Make sure that new lenders understand the requirements of this section
early in the loan process.*

## 12

##  

RD Instruction 4279-B

**§ 4279.126 [Loan terms]{.underline}.**

**(a) The maximum repayment for loans on real estate will not exceed 30
years; machinery and equipment repayment will not exceed the useful life
of the machinery and equipment purchased with loan funds or 15 years,
whichever is less; and working capital repayment will not exceed 7
years. The term for a loan that is being refinanced may be based on the
collateral the lender will take to secure the loan.** *See appendix B of
this subpart for structuring multiple note loans.*

**(b) The first installment of principal and interest will, if possible,
be scheduled for payment after the project is operational and has begun
to generate income. However, the first full installment must be due and
payable within 3 years from the date of the Promissory Note and be paid
at least annually thereafter. Interest-only payments will be paid at
least annually from the date of the note.** *Monthly payments will
normally be expected except for seasonal-type businesses.*

**(c) Only loans which require a periodic payment schedule which will
retire the debt over the term of the loan without a balloon payment will
be guaranteed.**

**(d) A loan\'s maturity will take into consideration the use of
proceeds, the useful life of assets being financed, and the borrower\'s
ability to repay the loan. The lender may apply the maximum guidelines
specified above only when the loan cannot be repaid over a shorter
term.**

**(e) All loans guaranteed through the B&I program must be sound, with
reasonably assured repayment.**

**§§ 4279.127 - 4279.130 \[Reserved\]**

**§ 4279.131 [Credit quality]{.underline}.**

**The lender is primarily responsible for determining credit quality and
must address all of the elements of credit quality in a written credit
analysis including adequacy of equity, cash flow, collateral, history,
management, and the current status of the industry for which credit is
to be extended.** *In reviewing the lender's analysis and related
materials, pay particular attention to working capital since it is
usually critical to project success.*

**(a) [Cash flow]{.underline}. All efforts will be made to structure or
restructure debt so that the business has adequate debt coverage and the
ability to accommodate expansion.** *The ability to repay a loan from
the cash flow*

## 13

## (Revision 1)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.131(a) (Con.)

*of the business is the most important consideration in the loanmaking
process. You should not approve loan guarantee requests that do not show
repayment ability. Historical operation reports are the best basis to
evaluate cash flow. Review interim operating statements carefully, for
they are just that, interim statements. Use a realistic projection of
future earnings. Test such a projection against industry averages and
historical operations to assess reasonableness and explain any
significant variations.*

**(b) [Collateral]{.underline}.**

**(1) Collateral must have documented value sufficient to protect the
interest of the lender and the Agency and, except as set forth in
paragraph (b)(2) of this section, the discounted collateral value will
normally be at least equal to the loan amount. Lenders will discount
collateral consistent with sound loan-to-value policy.**

**(2) Some businesses are predominantly cash-flow oriented, and where
cash flow and profitability are strong, loan-to-value coverage may be
discounted accordingly. A loan primarily based on cash flow must be
supported by a successful and documented financial history.**

*(3) Do not reject B&I applications automatically when weak collateral
is the only unfavorable factor. Other factors, such as a strong
indication of repayment ability and managerial ability, can offset this
deficiency.*

*(4) Make sure that all worthwhile collateral is pledged to the project,
but do not require assets with little or no collateral support to be
pledged mainly for cosmetic reasons.*

**(c) [Industry]{.underline}. Current status of the industry will be
considered and businesses in areas of decline will be required to
provide strong business plans which outline how they differ from the
current trends. The regulatory environment surrounding the particular
business or industry will be considered.**

**(d) [Equity]{.underline}.**

## **(1) A minimum of 10 percent tangible balance sheet equity will be required for existing businesses at loan closing. A minimum of 20 percent tangible balance sheet equity will be required for new businesses at loan closing. For energy projects, the minimum tangible balance sheet equity requirement range will be between 25 percent and 40 percent. Criteria for considering the minimum equity required for an individual application will be based on: existing businesses with successful financial and management history**

## 

## 14

## (Revision 1) 

RD Instruction 4279-B

§ 4279.131(d)(1) (Con.)

**vs. start-up businesses; personal/corporate guarantees offered;
contractual relationships with suppliers and buyers; credit rating; and
strength of the business plan/feasibility study.** **Where the
application is a request to refinance outstanding Federal direct or
guaranteed loans, without any new financing, the equity requirement may
be determined using adjusted tangible net worth. An application that
combines a refinancing guarantee request with a new loan guarantee
request is subject to the standard, unadjusted, equity requirement
except as provided in paragraphs (d)(1)(i) or (d)(1)(ii) of this
section. Increases or decreases in the equity requirements may be
imposed or granted as follows: (Revised 07-26-06, PN 400.)**

**(i) A reduction in the equity requirement for existing businesses may
be permitted by the Administrator. In order for a reduction to be
considered, the borrower must furnish the following:**

**(A) Collateralized personal and corporate guarantees, including any
parent, subsidiary, or affiliated company, when feasible and legally
permissible (in accordance with § 4279.149 of this subpart), and**

**(B) Pro forma and historical financial statements that indicate the
business to be financed meets or exceeds the median quartile (as
identified in Risk Management Association\'s Annual Statement Studies or
similar publication) for the current ratio, quick ratio, debt-to-worth
ratio, debt coverage ratio, and working capital.**

**(ii) The approval official may require more than the minimum equity
requirements provided in this paragraph if the official makes a written
determination that special circumstances necessitate this course of
action.**

**(2) The equity requirement must be met in the form of either cash or
tangible earning assets contributed to the business and reflected on the
balance sheet.** *For sole proprietorships, financial statements should
be prepared using only the assets and liabilities directly attributable
to the business. Additionally, personal financial statements typically
list assets at market values. The business assets must be valued at the
lower of cost or market value*

14A

## (Added 07-26-06, PN 400)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.131 (d)(2) (Con.)

> *before calculating tangible balance sheet equity. Related party
> receivables routinely are classified as non-current assets, unless
> they will be repaid within one year. These receivables do not
> represent a liquid asset convertible to cash and available for
> business operations because of the nature of the affiliation and the
> absence of pressure to repay the receivables. The Loan Specialist
> should determine why the receivable was incurred and that repayment
> ability exists. Most banks deduct any amount due from officers or
> partners from total equity. For example, an officer may have taken a
> loan from the company instead of a salary or bonus. This receivable
> is, in effect, an expense not recognized by the company, thus
> improving its profitability. As a prudent lending practice, the Agency
> must make the appropriate adjustment in the event the lender does not.
> Obtain a copy of any applicable promissory note to document
> collectibility.*

**(3) The lender must certify that the equity requirement was determined
using balance sheets prepared in accordance with GAAP and met upon
giving effect to the entirety of the loan in the calculation, whether or
not the loan itself is fully advanced, as of the date the guaranteed
loan is closed.** *The final Loan Agreement must contain all conditions
of the Conditional Commitment, including the tangible balance sheet
equity requirement. Therefore, the business must meet the requirement
before the lender executes the final loan documents and closes the
loan.  The lender must provide a certification to the Agency that
tangible balance sheet equity was calculated from financial statements
presented in accordance with GAAP* and *supported by attaching a* *copy
of the balance sheet on which the certification is based.*

*(4) The Agency may require higher equity requirements if conditions
warrant. As a loan officer, you will expect to see tangible balance
sheet equity meeting at least the minimum requirement unless an
exception is granted by the Administrator. Riskier loans such as
startups, recreation and tourism projects, energy-related businesses and
loans without personal guarantees may necessitate a higher equity
requirement than the minimum equity requirements noted above. Solid
equity positions provide incentive for principals to remain committed to
the success of the applicant while reducing the debt burden.*

## 14B

## (Added 07-26-06, PN 400) 

RD Instruction 4279-B

§ 4279.131(d) (Con.)

**(e) [Lien priorities]{.underline}. The entire loan will be secured by
the same security with equal lien priority for the guaranteed and
unguaranteed portions of the loan. The unguaranteed portion of the loan
will neither be paid first nor given any preference or priority over the
guaranteed portion. A parity or junior position may be considered
provided that discounted collateral values are adequate to secure the
loan in accordance with paragraph (b) of this section after considering
prior liens.**

**(f) [Management]{.underline}. A thorough review of key management
personnel will be completed to ensure that the business has adequately
trained and experienced managers.** *Assessment of management in areas
such as education, experience, and motivation is an important factor in
loan analysis. Consider the lender\'s opinion on management, but do your
own independent assessment and document your findings in the loan
docket.* *Comment briefly when management capacity is clearly
satisfactory. Otherwise, address any weaknesses and document measures to
bolster deficient areas. Work closely with the lender if there are
concerns in the management of the business.*

**§§ 4279.132 - 4279.136 \[Reserved\]**

**§ 4279.137 [Financial statements]{.underline}.**

## 15

## (Revision 1)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.137 (Con.)

**(a) The lender will determine the type and frequency of submission of
financial statements by the borrower. At a minimum, annual financial
statements prepared by an accountant in accordance with Generally
Accepted Accounting Principles will be required.**

**(b) If specific circumstances warrant and the proposed guaranteed loan
will exceed \$3 million, the Agency may require annual audited financial
statements. For example, the need for audited financial statements will
be carefully considered in connection with loans that depend heavily on
inventory and accounts receivable for collateral.**

**§§ 4279.138 - 4279.142 \[Reserved\]**

**§ 4279.143 [Insurance]{.underline}.**

**(a) [Hazard]{.underline}. Hazard insurance with a standard mortgage
clause naming the lender as beneficiary will be required on every loan
in an amount that is at least the lesser of the depreciated replacement
value of the collateral or the amount of the loan. Hazard insurance
includes fire, windstorm, lightning, hail, explosion, riot, civil
commotion, aircraft, vehicle, marine, smoke, builder\'s risk during
construction by the business, and property damage.**

**(b) [Life]{.underline}. The lender may require life insurance to
insure against the risk of death of persons critical to the success of
the business. When required, coverage will be in amounts necessary to
provide for management succession or to protect the business. The cost
of insurance and its effect on the applicant\'s working capital must be
considered as well as the amount of existing insurance which could be
assigned without requiring additional expense.**

**(c) [Worker compensation]{.underline}. Worker compensation insurance
is required in accordance with State law.**

**(d) [Flood]{.underline}. National flood insurance is required in
accordance with 7 CFR, part 1806, subpart B (RD Instruction 426.2,
available in any field office or the National Office).**

**(e) [Other]{.underline}. Public liability, business interruption,
malpractice, and other insurance appropriate to the borrower\'s
particular business and circumstances will be considered and required
when needed to protect the interests of the borrower.**

## 16

## (Revision 1) 

RD Instruction 4279-B

**§ 4279.144 [Appraisals]{.underline}.**

**Lenders will be responsible for ensuring that appraisal values
adequately reflect the actual value of the collateral. All real property
appraisals associated with Agency guaranteed loanmaking and servicing
transactions will meet the requirements contained in the Financial
Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 and
the appropriate guidelines contained in Standards 1 and 2 of the Uniform
Standards of Professional Appraisal Practices (USPAP). In accordance
with USPAP, the Agency will require documentation that the appraiser has
the necessary experience and competency to appraise the property in
question. All appraisals will include consideration of the potential
effects from a release of hazardous substances or petroleum products or
other environmental hazards on the market value of the collateral. For
additional guidance and information concerning the completion of real
property appraisals, refer to "Standard Practices for Environmental Site
Assessments: Transaction Screen Questionnaire" and "Phase I
Environmental Site Assessment," both published by the American Society
of Testing and Materials. Chattels will be evaluated in accordance with
normal banking practices and generally accepted methods of determining
value. (Revised 12-22-04, PN 381.)**

**§§ 4279.145 -- 4279.148 \[Reserved\]**

**§ 4279.149 [Personal and corporate guarantees]{.underline}. (Revised
05-16-07, PN 409.)**

> **(a) Unconditional personal and corporate guarantees are part of the
> collateral for the loan, but are not considered in determining whether
> a loan is adequately secured for loanmaking purposes. Agency approved
> personal and corporate guarantees for the full term of the loan and at
> least equal to the guarantor's percent interest in the borrower, times
> the loan amount are required from those owning at least 20 percent
> interest in the borrower, unless the lender documents to the Agency's
> satisfaction that collateral, equity, cashflow, and profitability
> indicate an above-average ability to repay the loan. The guarantors
> will execute Form RD 4279-14, "Unconditional Guarantee." *A signature
> section must be created and in accordance with applicable law. The
> signature block must include the legal name of the individual or
> entity signing the Guarantee and, where applicable, the name and title
> of the authorized representative who will execute the document on its
> behalf. For instructions on how to complete an enforceable signature
> block that complies with applicable state law, consult with the
> Regional Attorney*. When warranted by an Agency assessment of
> potential financial risk, Agency approved guarantees may also be
> required of parent, subsidiaries, or affiliated companies (owning less
> than a 20 percent interest in the borrower) and require security for
> any guarantee provided under this section.**

17

(Revision 2)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

**§ 4279.149 (Con.)**

**(a) Exceptions to the requirement for personal guarantees must be
requested by the lender and concurred by the Agency approval official on
a case-by-case basis. The lender must document that collateral, equity,
cashflow, and profitability indicate an above-average ability to repay
the loan. Closely review collateral, equity, cashflow, and profitability
before concurring in any exception to guarantees.**

**§ 4279.150 [Feasibility studies]{.underline}.**

**A feasibility study by a qualified independent consultant may be
required by the Agency for start-up businesses or existing businesses
when the project will significantly affect the borrower's operations. An
acceptable feasibility study should include, but not be limited to,
economic, market, technical, financial, and management feasibility.**
*Feasibility studies will normally be conducted in accordance with
appendix A of this subpart.*

**§§ 4279.151 -- 4279.154 \[Reserved\]**

**§ 4279.155 [Loan priorities]{.underline}.**

**Applications and preapplications received by the Agency will be
considered in the order received; however, for the purpose of assigning
priorities as described in paragraph (b) of this section, the Agency
will compare an application to other pending applications.** *The Agency
will cooperate fully with appropriate State, regional, and local
agencies in guaranteeing loans in a manner which will ensure maximum
support of their strategies for development of rural areas.*

(a) **When applications on hand otherwise have equal priority,
    applications for loans from qualified veterans will have
    preference.**

(b) **Priorities will be assigned by the Agency to eligible applications
    on the basis of a point system as contained in this section. The
    application and supporting information will be used to determine an
    eligible proposed project's priority for available guarantee
    authority. All lender's including CLP lenders, will consider Agency
    priorities when choosing projects for guarantee. The lender will
    provide necessary information related to determining the score, as
    requested.** *The State Office will complete the priority scoresheet
    (appendix C).*

> **(1) Population priority. Projects located in an unincorporated area
> or in a city with under 25,000 population (10 points).**

18

(Revision 2)

RD Instruction 4279-B

**§ 4179.155 (b) (Con.)**

> **(2) Community priority. The priority score for community will be the
> total score for the following categories:**
>
> **(i) Located in an eligible area of long-term population decline and
> job deterioration based on reliable statistical data (5 points).**
>
> **(ii) Located in a rural community that has remained persistently
> poor over the last 60 years (5 points).**

18A

(Added 12-01-06, PN 404)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.155(b)(2) (Con.)

**(iii) Located in a rural community that is experiencing trauma as a
result of natural disaster or experiencing fundamental structural
changes in its economic base (5 points).**

**(iv) Located in a city or county with an unemployment rate 125 percent
of the statewide rate or greater (5 points).**

**(3) Empowerment Zone/Enterprise Community (EZ/EC).**

**(i) Located in an EZ/EC designated area (10 points).**

**(ii) Located in a designated Champion Community (5 points). A Champion
Community is a community which developed a strategic plan to apply for
an EZ/EC designation, but not selected as a designated EZ/EC
Community.**

**(4) Loan features. The priority score for loan features will be the
total score for the following categories.**

**(i) Lender will price the loan at the Wall Street Journal published
Prime Rate plus 1.5 percent or less (5 points).**

**(ii) Lender will price the loan at the Wall Street Journal published
Prime Rate plus 1 percent or less (5 points).**

**(iii) The Agency guaranteed loan is less than 50 percent of project
cost (5 points).**

**(iv) Percentage of guarantee is 10 or more percentage points less than
the maximum allowable for a loan of its size**

**(5 points).**

**(5) High impact business investment priorities. The priority score for
high impact business investment will be the total score for the
following three categories:**

**(i) Industry. The priority score for industry will be the total score
for the following except that the total score for industry cannot exceed
10 points:**

**(A) Industry that has 20 percent or more of its sales in international
markets (5 points).**

**(B) Industry that is not already present in the community (5
points).**

## 19

## 

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.156(b)(5) (Con.)

**(ii) Business. The priority score for business will be the total score
for the following:**

**(A) Business that offers high value, specialized products and services
that command high prices**

**(2 points).**

**(B) Business that provides an additional market for existing local
business (3 points).**

**(C) Business that is locally owned and managed**

**(3 points).**

**(D) Business that will produce a natural resource value-added product
(2 points).**

**(iii) Occupations. The priority score for occupations will be the
total score for the following, except that the total score for job
quality cannot exceed 10 points:**

**(A) Business that creates jobs with an average wage exceeding 125
percent of the Federal minimum wage**

**(5 points).**

**(B) Business that creates jobs with an average wage exceeding 150
percent of the Federal minimum wage**

**(10 points).**

**(6) Administrative points. The State Director may assign up to 10
additional points to an application to account for such factors as
statewide distribution of funds, natural or economic emergency
conditions, or area economic development strategies. An explanation of
the assigning of these points by the State Director will be appended to
the calculation of the project score maintained in the case file. If an
application is considered in the National Office, the Administrator may
also assign up to an additional 10 points. The Administrator may assign
the additional points to an application to account for items such as
geographic distribution of funds and emergency conditions caused by
economic problems or natural disasters.**

## 20

##  

RD Instruction 4279-B

**§ 4279.156 [Planning and performing development]{.underline}.**

**(a) [Design policy]{.underline}. The lender must ensure that all
project facilities must be designed utilizing accepted architectural and
engineering practices and must conform to applicable Federal, state, and
local codes and requirements. The lender will also ensure that the
project will be completed with available funds and, once completed, will
be used for its intended purpose and produce products in the quality and
quantity proposed in the completed application approved by the Agency.**

**(b) [Project control]{.underline}. The lender will monitor the
progress of construction and undertake the reviews and inspections
necessary to ensure that construction conforms with applicable Federal,
state, and local code requirements; proceeds are used in accordance with
the approved plans, specifications, and contract documents; and that
funds are used for eligible project costs.** *Normally, you should
expect the lender to:*

*(1) Have inspections made by a qualified individual prior to any
progress payment.*

*(2) Use any borrower funds in the project first.*

*(3) Make sure the borrower has 100 percent performance/payment bonds on
the contractor.*

*(4) Have a complete set of plans and specifications at the lending
institution.*

*(5) Have a firm construction contract cost and provisions for change
order approval, retainage percentage, and disbursement schedule.*

*(6) Obtain lien waivers from all contractors prior to any
disbursement*.

**(c) [Equal opportunity]{.underline}. For all construction contracts in
excess of \$10,000, the contractor must comply with Executive Order
11246, entitled \"Equal Employment Opportunity,\" as amended by
Executive Order 11375, and as supplemented by applicable Department of
Labor regulations (41 CFR, part 60). The borrower and lender are
responsible for ensuring that the contractor complies with these
requirements.**

**(d) [Americans with Disabilities Act (ADA)]{.underline}. B&I
Guaranteed Loans which involve the construction of or addition to
facilities that accommodate the public and commercial facilities, as
defined by the ADA, must comply with the ADA. The lender and borrower
are responsible for compliance.**

## 21

## (Revision 1)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.156 (Con.)

*(e) [Agency role]{.underline}. You may wish, on complicated
construction projects, to have the Agency engineer meet with the lender
and the project architect or engineer. Lenders, knowing the Agency\'s
expertise in construction monitoring, may wish you to take an active
role in job meetings and inspections. Do not do this. You must avoid
putting the Agency in a situation where it becomes responsible for
decisions on such topics. Always make it clear that your presence is
only for the Agency's benefit, not the lender's or borrower's. Use
discretion to make sure that Agency involvement does not lead to the
lender\'s abandonment of its responsibilities. Likewise, if complex
environmental issues surface, you may request that the state
environmental coordinator meet with the lender and project architect or
engineer.*

**§§ 4279.157 - 4279.160 \[Reserved\]**

**§ 4279.161 [Filing preapplications and applications]{.underline}**.

**Borrowers and lenders are encouraged to file preapplications and
obtain Agency comments before completing an application. However, if
they prefer,**

**they may file a complete application as the first contact with the
Agency. Neither preapplications nor applications will be accepted or
processed unless a lender has agreed to finance the proposal. Guaranteed
loans of \$600,000 and less may be processed under paragraph (b) or (c)
of this section, but guaranteed loans exceeding \$600,000 must be
processed under paragraph (b) of this section. (Revised (Revised
12-22-04, PN 381.)**

**(a) [Preapplications]{.underline}. Lenders may file preapplications by
submitting the following to the Agency:**

**(1) A letter signed by the borrower and lender containing the
following:**

**(i) Borrower\'s name, organization type, address, contact person, and
federal tax identification and telephone numbers.**

**(ii) Amount of the loan request, percent of guarantee requested, and
the proposed rates and terms.**

**(iii) Name of the proposed lender, address, telephone number, contact
person, and lender\'s Internal Revenue Service (IRS) identification
number.**

**(iv) Brief description of the project, products, services provided,
and availability of raw materials and supplies.**

**(v) Type and number of jobs created or saved.**

## 22

## (Revision 1) 

RD Instruction 4279-B

§ 4279.161(a)(1) (Con.)

**(vi) Amount of borrower\'s equity and a description of collateral,
with estimated values, to be offered as security for the loan.**

**(vii) If a corporate borrower, the names and addresses of the
borrower\'s parent, affiliates, and subsidiary firms, if any, and a
description of the relationship.**

**(2) A completed Form 4279-2, \"Certification of Non-Relocation and
Market Capacity Information Report,\" if the proposed loan is in excess
of \$1 million and will increase direct employment by more than 50
employees.**

**(3) For existing businesses, a current balance sheet and a profit and
loss statement not more than 90 days old and financial statements for
the borrower and any parent, affiliates, and subsidiaries for at least
the 3 most recent years.**

**(4) For start-up businesses, a preliminary business plan must be
provided.**

**(b) [Applications]{.underline}. Except for CLP lenders, applications
will be filed with the Agency by submitting the following information:
(CLP applications will be completed in accordance with § 4279.43(g)(1)
of subpart A of this part but CLP** **lenders must have the material
listed in this paragraph in their files.)**

**(1) A completed Form 4279-1, \"Application for Loan Guarantee
(Business and Industry)".**

**(2) The information required for filing a preapplication, as listed
above, if not previously filed or if the information has changed.**

**(3) Form RD 1940-20, \"Request for Environmental Information,\" and
attachments, unless the project is categorically excluded under Agency
environmental regulations.**

**(4) A personal credit report from an acceptable credit reporting
company for a proprietor (owner), each partner, officer, director, key
employee, and stockholder owning 20 percent or more interest in the
applicant, except for those corporations listed on a major stock
exchange. Credit reports are not required for elected and appointed
officials when the applicant is a public body.**

## 23

## 

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.161(b) (Con.)

**(5) Intergovernmental consultation comments in accordance with** *RD
Instruction 1940-J and* **7 CFR, part 3015, subpart V.**

**(6) Appraisals, accompanied by a copy of the appropriate environmental
site assessment,** **if available. (Agency approval in the form of a
Conditional Commitment may be issued subject to receipt of adequate
appraisals.)**

**(7) For all businesses, a current (not more than 90 days old) balance
sheet, a [pro]{.underline} [forma]{.underline} balance sheet at startup,
and projected balance sheets, income and expense statements, and cash
flow statements for the next 2 years. Projections should be supported by
a list of assumptions showing the basis for the projections.**

**(8) Lender\'s complete written analysis, including spreadsheets of the
balance sheets and income statements for the 3 previous years (for
existing businesses), pro forma balance sheet at startup, and 2 years
projected yearend balance sheets and income statements, with appropriate
ratios and comparisons with industrial standards (such as Dun &
Bradstreet or Robert Morris Associates). All data must be shown in total
dollars and also in common size form, obtained by expressing all balance
sheet items as a percentage of assets and all income and expense items
as a percentage of sales. The lender\'s credit analysis must address the
borrower\'s management, repayment** **ability including a cash-flow
analysis, history of debt repayment, necessity of any debt refinancing,
and the credit reports of the borrower, its principals, and any parent,
affiliate, or subsidiary.**

**(9) Commercial credit reports obtained by the lender on the borrower
and any parent, affiliate, and subsidiary firms.**

**(10) Current personal and corporate financial statements of any
guarantors.**

**(11) A proposed Loan Agreement or a sample Loan Agreement with an
attached list of the proposed Loan Agreement provisions. The Loan
Agreement must be executed by the lender and borrower before the Agency
issues a Loan Note Guarantee. The following requirements must be
addressed in the Loan Agreement:**

**(i) Prohibition against assuming liabilities or obligations of
others.**

**(ii) Restriction on dividend payments.**

## 24

##  

RD Instruction 4279-B

§ 4279.161(b)(11) (Con.)

**(iii) Limitation on the purchase or sale of equipment and fixed
assets.**

**(iv) Limitation on compensation of officers and owners.**

**(v) Minimum working capital or current ratio requirement.**

**(vi) Maximum debt-to-net worth ratio.**

**(vii) Restrictions concerning consolidations, mergers, or other
circumstances.**

**(viii) Limitations on selling the business without the concurrence of
the lender.**

**(ix) Repayment and amortization of the loan.**

**(x) List of collateral and lien priority for the loan including a list
of persons and corporations guaranteeing the loan with a schedule for
providing the lender with personal and corporate financial statements.
Financial statements on the corporate and personal guarantors must be
updated at least annually.**

**(xi) Type and frequency of financial statements to be required for the
duration of the loan.**

**(xii) The final Loan Agreement between the lender and borrower will
contain any additional requirements imposed by the Agency in its
Conditional Commitment.**

**(xiii) A section** *within the Loan Agreement will be established at
this time* **for the later insertion of any necessary measures by the
borrower to avoid or reduce adverse environmental impacts from this
proposal's construction or operation. Such measures, if necessary, will
be determined by the Agency through the completion of the environmental
review process.**

**(12) A business plan, which includes, at a minimum, a description of
the business and project, management experience, products and services,
proposed use of funds, availability of labor, raw materials and
supplies, and the names of any corporate parent, affiliates, and
subsidiaries with a description of the relationship. Any or all of these
requirements may be omitted if the information is included in a
feasibility study.**

## 25

## (Revision 1)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.161(b) (Con.)

**(13) Independent feasibility study, if required.**

**(14) For companies listed on a major stock exchange or subject to the
Securities and Exchange Commission regulations, a copy of SEC Form 10-K,
\"Annual Report Pursuant to sections 13 or 15D of the Act of 1934.\"**

**(15) For health care facilities, a certificate of need, if required by
statute.**

**(16) A certification by the lender that it has completed a
comprehensive analysis of the proposal, the applicant is eligible, the
loan is for authorized purposes, and there is reasonable assurance of
repayment ability based on the borrower\'s history, projections and
equity, and the collateral to be obtained.**

**(17) Any additional information required by the Agency.**

17. 

**(c) [Applications of \$600,000 and less]{.underline}. Guaranteed loan
applications may be processed under this paragraph if the request does
not exceed \$400,000. Beginning in fiscal year 2004, this limit may be
increased on a case-by-case basis to \$600,000 provided that the Agency
determines that there is not a significant increased risk of a default
on the loan.** *State Offices should document in the case file why there
is not a significant increased risk of a default on the guaranteed
loan.* **Applications may be resubmitted under paragraph (b) of this
section when the application under this paragraph contains insufficient
information for the Agency to guarantee the loan. Applications submitted
under this paragraph must use the Agency's short application form**
*\[Form 4279-1A, "Application for Loan Guarantee (Business and Industry
Short Form -- One-Doc)\]* **and include the information contained in
paragraphs (b)(3), (5), (7), (8), and (11) of this section. The lender
must have the documentation identified in paragraph (b) of this section,
with the exception of paragraphs (b)(1), (2), (14), and (15), available
in its file for review.** *State Offices will spot check the lenders'
files, especially appraisals for compliance with § 4279.144 of this
subpart, for loans processed under this paragraph during lender visits.
If documentation is not present or is not adequate, that lender should
be required to submit all of the documentation required to be in its
file as outlined above for future applications.* **(Added (Revised
12-22-04,\
PN 381.)**

**§§ 4279.162 - 4279.163 \[Reserved\]**

26

## (Revision 1) 

RD Instruction 4279-B

*§ 4279.164 [Preapplication processing]{.underline}.*

*The purpose of a preapplication is to allow a lender and borrower to
submit a limited amount of information, most of which should be easily
obtained, so that the Agency can determine and advise the lender whether
the request is likely to meet the requirements of the B&I program. The
review and response to any complete preapplication must be timely. When
you receive a preapplication, check to make sure the material is
complete and signed by the appropriate parties. Do not accept any
request not signed by a lender. Do the following when you receive a
complete preapplication:*

*(a) [Nonrelocation]{.underline}. If the loan is in excess of \$1
million and will increase direct employment by more than 50 employees,
immediately send seven copies of the completed Form 4279-2 to the
National Office. You should discuss this issue with the lender to ensure
employment projections are realistic to avoid delays in loan processing
as a result of unnecessary Department of Labor clearances.*

*(b) [Privacy]{.underline}. If the loan applicant is either an
individual or a partnership of five or fewer members, take the following
actions:*

*(1) Send Form RD 410-7, \"Notification to Applicant on Use of Financial
Information from Financial Institution,\" to the applicant within 3
days.*

## 26A

## (Added 12-22-04, PN 381)

## (12-23-96) SPECIAL PN 

RD Instruction 4279-B

§ 4279.164(b) (Con.)

*(2) When requesting financial records from the lender or any other
financial institution, send the following notification with the
request:*

*I certify that the United States Department of Agriculture, has
complied with the applicable provisions of Title XI, Public Law 95-630,
in seeking financial information regarding (borrower) .*

*(3) Provide any source from whom you obtain information concerning an
individual with one copy of Form RD 410-10, \"Privacy Act Statement to
References,\" and document delivery for the file.*

*(c) [Decision]{.underline}.*

*(1) [Favorable response]{.underline}. Encourage the lender, in writing,
to file a complete application if the project appears likely to meet the
requirements to receive a B&I guarantee. Make it clear in your letter
that your response is not an approval and list any major concerns that
you have. Make sure that the lender knows exactly what items are
required for a full application.*

*(2) [Unfavorable response]{.underline}. Discourage the lender, in
writing, from filing a complete application if your review indicates
that the project will not meet minimum credit standards for a sound
loan, if it is ineligible, if it lacks sufficient priority, or if there
are other reasons, such as lack of funds, that will preclude the timely
approval of the request. List all reasons for discouraging the
application in your letter to the lender. Such a letter is not a denial
and cannot be appealed. The lender and borrower may file a complete
application in spite of receiving a letter of discouragement from the
Agency, and you must accept and process it.*

*(d) [Identification numbers]{.underline}.*

*(1) [Case number]{.underline}. Use the state and county code number
followed by:*

*(i) The Social Security Number of a borrower applying as a
proprietorship. If the borrower is a husband and wife, either Social
Security Number may be used.*

*(ii) The IRS tax identification number of an organization-type
borrower.*

## 27

## 

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.164(d) (Con.)

*(2) [Lender and holder identification]{.underline}. A lender\'s and
holder\'s IRS tax identification number will be used when an
identification number is needed.*

*(e) [Rural Community Facilities Tracking System (RCFTS)]{.underline}.
Update RCFTS upon receipt of a preapplication and when any significant
processing actions take place.*

**§ 4279.165 [Evaluation of application]{.underline}.**

**(a) [General review]{.underline}. The Agency will evaluate the
application and make a determination whether the borrower is eligible,
the proposed loan is for an eligible purpose, there is reasonable
assurance of repayment ability, there is sufficient collateral and
equity, and the proposed**

**loan complies with all applicable statutes and regulations. If the
Agency determines it is unable to guarantee the loan, the lender will be
informed in writing. Such notification will include the reasons for
denial of the guarantee.**

*(1) Some lenders and borrowers will skip the preapplication process and
submit a full application as the first contact with the Agency. In such
cases, make sure that you take the nonrelocation and privacy actions
described under preapplication review.*

*(2) Complete the priority worksheet (appendix C of this subpart) in
accordance with § 4279.155 of this subpart. Enter the results in RCFTS.*

*(3) Use a processing checklist to review the application for
completeness. Develop a processing checklist specific to the State or
use appendix D of this subpart. Complete Part C of Form 4279-1
carefully. Ensure that the proposed borrower has adequate repayment
ability based on a thorough analysis by the lender.*

*(4) As you review the application, attempt to review any concerns with
the lender and develop any loan conditions that are necessary to meet
Agency requirements in such a manner that they are also acceptable to
the lender and the borrower.*

*(5) You or a designee must visit the project site and discuss the
proposal with the lender and borrower. If there are multiple sites,
visit a representative sample to develop a better understanding of the
project operation. For businesses without a developed project site, you
only need visit the lender and borrower. Document all visits in
writing.*

## 28

##  

RD Instruction 4279-B

§ 4279.165(a) (Con.)

*(6) Organize applications into a case folder in accordance with\
RD Instruction 2033-A.*

*(7) Enter all appropriate information about the borrower, lender, and
loan guarantee request in GLS and update as information or the
application status changes.*

**(b) [Environmental requirements]{.underline}. The environmental review
process must be completed, in accordance with subpart G of part 1940,
prior to the issuance of the Conditional Commitment, loan approval, or
obligation of funds, whichever occurs first.** *The environmental review
process must be initiated as early as possible. The Agency should ensure
that the lender and the borrower understand the environmental review
process and their respective responsibilities for assisting the Agency
in this process. Technical advice and guidance are available through the
State Environmental Coordinator and should be obtained whenever any
complex or controversial environmental issues are expected.*

*(c) [State loan committee]{.underline}. The State Director will
establish a State loan committee to review all B&I loan applications,
changes in conditions, and loan servicing actions of a monetary-type
nature. The makeup of such a committee is at the discretion of the State
Director; however, only Agency employees will be members of a State loan
committee. This committee is advisory in nature as the State Director is
solely responsible for all decisions. Each State Office will develop and
maintain written procedures that identify elements of the State loan
committee process, such as the members of the committee, what documents
are to be prepared for and signed by the committee, and procedures for
resolving any differences of opinion among members. A State loan
committee operational file should be established that contains copies of
loan packages and related materials. However, minutes of the meeting,
including recommendations of the committee, should also be filed in the
individual case file. (Revised 03-23-05, PN 384.)*

> *(d) [Concurrence]{.underline}. If concurrence of the National Office
> is necessary, promptly send the whole case file, with recommendations
> and the environmental review documents, for review and concurrence. To
> help ensure a quick response, make sure the file is well organized and
> that pertinent information is easily accessible for National Office
> loan specialists. If public comments on environmental issues or
> assessments are required, you should attempt to have the comment
> period completed as early as possible. However, if the comment period
> is the only loan docket item not completed, do not wait to submit the
> file to the National Office. The National Office will commence its
> review but withhold its concurrence until the expiration of the
> comment period and the resolution of any comments.*

## 29

## (Revision 2)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.165 (Con.)

*(e) [National Office Loan Committees.]{.underline} The Administrator
will establish a National Office Executive Loan (NOEL) Committee and a
National Office Business and Industry (NOBI) Committee to review all B&I
loan applications, changes in conditions, and loan servicing actions of
a monetary-type nature that are* *in excess of authorities delegated to
State Directors. The core of the NOEL Committee will be composed of the
Administrator, as the chairperson and approval official, Deputy
Administrator for Business Programs, and Deputy Administrator for
Cooperative Services. The core of the NOBI Committee will be composed of
the Deputy Administrator for Business Programs, as the chairperson and
approval official, the B&I Division Director and the Special
Projects/Programs Oversight Division Director. Other members of the
committees may be designated, in writing, by the Administrator as he/she
determines to be appropriate; however, only Agency employees may be
voting members. These committees are advisory in nature as the approval
official is responsible for the decisions. All recommendations will be
in written form based on an objective analysis conducted by a National
Office loan specialist. All requests for exceptions being considered by
the Administrator will be reviewed by the NOEL Committee in accordance
with RD Instruction 4279-A, § 4279.15. Written procedures that identify
elements of the loan committee process will be developed and maintained
by the B&I Division. (Revised 03-23-05, PN 384.)*

**§ 4279.166 [Timeframe for processing applications*.*]{.underline}**

**All guaranteed loan applications should be approved or disapproved,
and the lender notified in writing not later than 60 days after receipt
of a completed application, unless approval is prevented by lack of
guarantee authority.**

*(a) If an application is not complete, the lender will be notified in
writing not later than 20 days after receipt of the application by the
Agency of the reasons the application is incomplete.*

*(b) When an application is disapproved, the written notification to the
lender will state the reasons for disapproval and appropriate appeal
rights will be provided.*

**§§ 4279.167 - 4279.172 \[Reserved\]**

**§ 4279.173 [Loan approval and obligating funds]{.underline}.**

**(a) Upon approval of a loan guarantee, the Agency will issue a
Conditional Commitment to the lender containing conditions under which a
Loan Note Guarantee will be issued.**

## 30

## (Revision 2) 

## RD Instruction 4279-B

§ 4279.173 (Con.)

**(b) If certain conditions of the Conditional Commitment cannot be met,
the lender and applicant may propose alternate conditions. Within the
requirements of the applicable regulations and instructions and prudent
lending practices, the Agency may negotiate with the lender and the
applicant regarding any proposed changes to the Conditional
Commitment.**

*(c) The Conditional Commitment is a key processing step in the B&I
process. The Conditional Commitment should be issued to the lender and
borrower on or after the obligation date. You should tailor each
Conditional Commitment to the project and ensure that the lender
understands each item. All required measures identified in* *the
Agency's environmental assessment for this proposal and established for
the purpose of avoiding or reducing adverse environmental impacts of the
proposal's construction or operation must be listed in the Conditional
Commitment and understood by both the lender and the borrower.
Requirements of the Conditional Commitment, including the equity
requirement, must be incorporated into the Loan Agreement in accordance
with § 4279.161(b)(11)(xii). (Revised 03-23-05, PN 384.)*

*(d) Make sure that the lender understands that the Agency expects
strong servicing of the loan and that the Agency will, except in the
case of delinquencies and liquidations, play a very minimal servicing
role. The lender should service the loan the way it does any loan in its
portfolio. Make lenders aware of the ramifications of negligent
servicing.*

*(e) The following information will be submitted to the National Office,
Attn: Director, B&I Division, upon approval (signing of Form RD 1940-3,
"Request for Obligation of Funds Guaranteed Loan") of the loan: (Revised
03-23-05, PN 384.)*

*(1) A copy of the Project Summary, including the justification required
for any debt refinancing, and financial analysis software reports and
spreads analyzed by the State Office.*

*(2) A copy of the State loan committee minutes.*

*(3) A copy of the lender's credit analysis as required by\
§ 4279.161(b)(8), including the pro forma balance sheet projected for
loan closing and spreads of historic and projected financial
statements.*

## 30A

## (Revision 1)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

*§ 4279.173(e) (Con.)*

*(4) Summary pages of the appraisal report(s), including the
qualifications of the appraiser and a copy of the desk or technical
review by the State Review Appraiser, if applicable.*

*(5) A copy of the Conditional Commitment.*

*(6) A copy of the proposed Loan Agreement between the lender and the
borrower.*

**§ 4279.174 [Transfer of lenders]{.underline}.**

**(a) The loan approval official may approve the substitution of a new
eligible lender in place of a former lender who holds an outstanding
Conditional Commitment when the Loan Note Guarantee has not yet been
issued provided that there are no changes in the borrower\'s ownership
or control, loan purposes, or scope of project and loan conditions in
the Conditional Commitment and the Loan Agreement remain the same.**

**(b) The new lender\'s servicing capability, eligibility, and
experience will be analyzed by the Agency prior to approval of the
substitution. The original lender will provide the Agency with a letter
stating the reasons it no longer desires to be a lender for the project.
The substituted lender must execute a new part B of Form 4279-1.**

**§ 4279.175 [Domestic lamb industry adjustment assistance program
set]{.underline}**

**[aside]{.underline}. (Added 10-30-00, SPECIAL PN.)**

A 3-year set aside of B&I Guaranteed Loan Program funds has been
established in the National Office to fund loans to lamb processors for
real estate purchases and improvements, working capital, debt
refinancing, and upgrading, replacing, and installing new processing and
packaging equipment for domestic lamb packing and processing plants. The
set aside is \$15 million

31

(Revision 2)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.175 (Con.)

**for FY 2001, \$5 million for FY 2002, and \$5 million for FY 2003.
These funds will be available through the third quarter of each year
and, if not used, will revert to the general account.**

**§§ 4279.176 - 4279.179 \[Reserved\]**

**§ 4279.180 [Changes in borrower]{.underline}.**

**Any changes in borrower ownership or organization prior to the
issuance of the Loan Note Guarantee must meet the eligibility
requirements of the program and be approved by the Agency loan approval
official.**

**§ 4279.181 [Conditions precedent to issuance of Loan Note
Guarantee]{.underline}.**

**The Loan Note Guarantee will not be issued until the lender, including
a CLP lender, certifies to the following:**

**(a) No major changes have been made in the lender\'s loan conditions
and requirements since the issuance of the Conditional Commitment,
unless such changes have been approved by the Agency.**

**(b) All planned property acquisition has been or will be completed,
all development has been or will be substantially completed in
accordance with plans and specifications, conforms with applicable
Federal, state, and local codes, and costs have not exceeded the amount
approved by the lender and the Agency.**

**(c) Required hazard, flood, liability, worker compensation, and
personal life insurance, when required, are in effect.**

**(d) Truth-in-lending requirements have been met.**

**(e) All equal credit opportunity requirements have been met.**

**(f) The loan has been properly closed, and the required security
instruments have been obtained or will be obtained on any acquired
property that cannot be covered initially under State law.**

**(g) The borrower has marketable title to the collateral then owned by
the borrower, subject to the instrument securing the loan to be
guaranteed and to any other exceptions approved in writing by the
Agency.**

32

(Revision 2)

RD Instruction 4279-B

**§** 4279.181 (Con.)

**(h) When required, the entire amount of the loan for working capital
has been disbursed except in cases where the Agency has approved
disbursement over an extended period of time.**

**(i) When required, personal, partnership, or corporate guarantees have
been obtained.**

**(j) All other requirements of the Conditional Commitment have been
met.**

**(k) Lien priorities are consistent with the requirements of the
Conditional Commitment. No claims or liens of laborers, subcontractors,
suppliers of machinery and equipment, or other parties have been or will
be filed against the collateral and no suits are pending or threatened
that would adversely affect the collateral when the security instruments
are filed.**

## 32A

## (Added 10-30-00, SPECIAL PN.)

(12-23-96) SPECIAL PN

RD Instruction 4279-B

§ 4279.181 (Con.)

**(l) The loan proceeds have been or will be disbursed for purposes and
in amounts consistent with the Conditional Commitment and Form 4279-1. A
copy of the detailed loan settlement of the lender must be attached to
support this certification.**

**(m) There has been neither any material adverse change in the
borrower\'s financial condition nor any other material adverse change in
the borrower, for any reason, during the period of time from the
Agency's issuance of the Conditional Commitment to issuance of the Loan
Note Guarantee regardless of the cause or causes of the change and
whether or not the change or causes of the change were within the
lender\'s or borrower\'s control. The lender must address any
assumptions or reservations in the requirement and must address all
adverse changes of the borrower, any parent, affiliate, or subsidiary of
the borrower, and guarantors.**

**(n) None of the lender\'s officers, directors, stockholders, or other
owners (except stockholders in an institution that has normal stockshare
requirements for participation) has a substantial financial interest in
the borrower and neither the borrower nor its officers, directors,
stockholders, or other owners has a substantial financial interest in
the lender. If the borrower is a member of the board of directors or an
officer of a Farm Credit System (FCS) institution that is the lender,
the lender will certify that an FCS institution on the next highest
level will independently process the loan request and act as the
lender\'s agent in servicing the account.**

**(o) The Loan Agreement includes all measures identified in the
Agency's environmental impact analysis for this proposal (measures with
which the borrower must comply) for the purpose of avoiding or reducing
adverse environmental impacts of the proposal's construction or
operation.**

*(p) For projects other than turnkey operations where the Loan Note
Guarantee will be issued at the time of loan closing, there are added
risks to the Agency. During the review, the Agency should consider the
added risk associated with issuing the Loan Note Guarantee prior to the
substantial completion of the project. When negotiating the percent of
guarantee with the lender, these risks should be considered in
conjunction with the credit risks and the lender's experience in
financing the type of project.*

**§§ 4279.182 - 4279.185 \[Reserved\]**

## 33

## 

(12-23-96) SPECIAL PN

RD Instruction 4279-B

**§ 4279.186 [Issuance of the guarantee]{.underline}.**

**(a) When loan closing plans are established, the lender will notify
the Agency. Coincident with, or immediately after loan closing, the
lender will provide the following to the Agency:**

**(1) Lender\'s certifications as required by § 4279.181 of this
subpart.**

**(2) Executed Lender\'s Agreement.**

**(3) Form RD 1980-19, \"Guaranteed Loan Closing Report,\" and
appropriate guarantee fee.**

**(b) When the Agency is satisfied that all conditions for the guarantee
have been met, the Loan Note Guarantee and the following documents, as
appropriate, will be issued:**

**(1) Assignment Guarantee Agreement. In the event the lender uses the
single note option and assigns the guaranteed portion of the loan to a
holder, the lender, holder, and the Agency will execute the Assignment
Guarantee Agreement; and**

**(2) Certificate of Incumbency. If requested by the lender, the Agency
will provide the lender with a certification on Form 4279-7,
"Certificate of Incumbency and Signature (Business and Industry),\" of
the signature and title of the Agency official who signs the Loan Note
Guarantee, Lender\'s Agreement, and Assignment Guarantee Agreement.**
*Form 4279-7 will be signed by the supervisor of the Agency official who
signs the Loan Note Guarantee, Lender\'s Agreement, and Assignment
Guarantee Agreement.*

**(c) The Agency may, at its discretion, request copies of loan
documents for its file.**

**(d) There may be instances when not all of the working capital has
been disbursed, and it appears practical to disburse the balance over a
period of time. The State Director, after review of a disbursement plan,
may amend the Conditional Commitment in accordance with the disbursement
plan and issue the guarantee.**

## 34

##  

RD Instruction 4279-B

**§ 4279.187 [Refusal to execute Loan Note Guarantee]{.underline}.**

**If the Agency determines that it cannot execute the Loan Note
Guarantee, the Agency will promptly inform the lender of the reasons and
give the lender a reasonable period within which to satisfy the
objections. If the lender requests additional time in writing and within
the period allowed, the Agency may grant the request. If the lender
satisfies the objections within the time allowed, the guarantee will be
issued.**

**§§ 4279.188 - 4279.199 \[Reserved\]**

**§ 4279.200 [OMB control number]{.underline}.**

The information collection requirements contained in this regulation
have been approved by OMB and have been assigned OMB control number
0575-0170. Public reporting burden for this collection of information is
estimated to vary from 30 minutes to 54 hours per response, with an
average of 27 hours per response, including time for reviewing the
collection of information. Send comments regarding this burden estimate
or any other aspect of this collection of information, including
suggestions for reducing this burden, to the Department of Agriculture,
Clearance Officer, OIRM, Stop 7630, Washington, D.C. 20250. You are not
required to respond to this collection of information unless it displays
a currently valid OMB control number.

*Attachments: Appendices A, B, C, and D.*

**oOo**

## 35

## 

(12-23-96) SPECIAL PN

RD Instruction 4279-B

Appendix A

## *Guide for Completion of Feasibility Studies*

## 

*A feasibility study by a recognized independent consultant may be
required by the Agency for start-up businesses or existing businesses
when the project will significantly affect the borrower\'s financial
operations. An acceptable feasibility study should include, but not be
limited to:*

*(a) [Economic feasibility]{.underline}. Information related to the
project site; availability of trained or trainable labor; utilities;
rail, air, and road service to the site; and the overall economic impact
of the project.*

*(b) [Market feasibility]{.underline}. Information on the sales
organization and management, nature and extent of market and market
area, marketing plans for sale of projected output, extent of
competition, and commitments from customers or brokers.*

*(c) [Technical feasibility]{.underline}. Technical feasibility reports
shall be prepared by individuals who have previous experience in the
design and analysis of similar facilities or processes proposed in the
application. The technical feasibility reports shall address the
suitability of the selected site for the intended use including an
environmental impact analysis. The report shall be based upon verifiable
data and contain sufficient information and analysis so that a
determination may be made on the technical feasibility of achieving the
levels of income or production that are projected in the financial
statements. The report shall also identify any constraints or
limitations in these financial projections and any other facility or
design-related factors which might affect the success of the enterprise.
The report shall also identify and estimate project operating and
development costs and specify the level of accuracy of these estimates
and the assumptions on which these estimates have been based. For the
purpose of the technical feasibility reports, the project engineer or
architect may be considered an independent party provided neither the
principals of the firm nor any individual of the firm who participates
in the technical feasibility report has a financial interest in the
project, and provided further that no other individual or firm with the
expertise necessary to make such a determination is reasonably available
to perform the function.*

*(d) [Financial feasibility]{.underline}. An opinion on the reliability
of the financial projections and the ability of the business to achieve
the projected income and cash flow. An assessment of the cost accounting
system, the availability of short-term credit for seasonal business, and
the adequacy of raw materials and supplies.*

*(e) [Management feasibility]{.underline}. Evidence that continuity and
adequacy of management has been evaluated and documented as being
satisfactory.*

*oOo*

*(12-23-96) SPECIAL PN*

*RD Instruction 4279-B*

*Appendix B*

*Guide for Sale or Structure of Guaranteed Loans*

*A. [Methods of structuring loans]{.underline}.*

*(1) Treat the entire financial package of the borrower as one loan.
Loan purposes may include one or any combination of working capital,
machinery and equipment, real estate, etc.*

*(i) The loan must be amortized to provide repayment within the time
limits established by Agency regulations.*

*(ii) One interest rate may be used for the entire loan or one interest
rate on the unguaranteed portion and a lower interest rate on the
guaranteed portion. A combination of fixed and variable rates will be
allowed only when the guaranteed portion is the fixed rate.*

*(2) Treat the financial package of the borrower as separate loans that
are processed as a single application.*

*(i) A separate loan is made for each term. For example, an approved
application could include provisions for working capital and real
estate. One loan for the working capital could be amortized over 7 years
with another loan for the real estate amortized over 30 years.*

*(ii) Separate Form 4279-3, \"Conditional Commitment,\" and Forms\
RD 1940-3, \"Request for Obligation of Funds - Guaranteed Loans,\" and
RD 1980-19, \"Guaranteed Loan Closing Report,\" are required for each
loan.*

*B. [Methods for structuring notes for sale]{.underline}. Sale or
assignment of the guaranteed portion of the loan must be in compliance
with Agency regulations. The loan may be structured as follows:*

*(1) [Single note system]{.underline}. The entire loan is evidenced by
one note and one Loan Note Guarantee is issued. The lender may assign
all or part of the guaranteed portion of the loan to one or more holders
by using the Agency\'s Assignment Guarantee Agreement. The holder, upon
written notice to the lender and the Agency, may reassign the
unguaranteed portion of the loan sold under the Assignment Guarantee
Agreement. Upon notice to the Agency and completion of the assignment
through the use of Form 4279-6, \"Assignment Guarantee Agreement
(Business and Industry),\" the assignee shall succeed to all rights and
obligations of the holder thereunder. If this option is selected, the
lender may not at a later date cause any additional notes to be issued.*

(12-23-96) SPECIAL PN

RD Instruction 4279-B

Appendix B

Page 2

*Guide for Sal(2) [Multinote system]{.underline}. Under this option the
lender may provide for one note for the unguaranteed portion of the loan
and no more than 10 notes for the guaranteed portion. When this option
is selected by the lender, upon disposition the holder will receive one
of the borrower\'s executed notes and a Loan Note Guarantee. The Agency
will issue a Loan Note Guarantee for each note, including the
unguaranteed note, to be attached to the note. An Assignment Guarantee
Agreement will never be used when the multinote option is utilized.*

*oOo*

RD Instruction 4279-B

Appendix C

Page 1

*BUSINESS AND INDUSTRY*

*APPLICATION PRIORITY POINTS SCORING*

*Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Name\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*State \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*List the maximum points the applicant is eligible for under each
category. See § 4279.155 of this subpart for information on how to
determine points.*

*1. [Population priority]{.underline}.*

*Located in an unincorporated area or in a city with under 25,000
population. (10 points) \_\_\_\_*

*2. [Community priority]{.underline}.*

*A. Located in an eligible area of long term population decline*

*and job deterioration based on reliable statistical data.*

*(5 points) \_\_\_\_*

*B. Located in a rural community that has remained persistently*

*poor over the last 60 years. (5 points) \_\_\_\_*

*C. Located in a rural community that is experiencing trauma as*

*the result of a natural disaster or experiencing fundamental structural
changes in its economic base. (5 points) \_\_\_\_*

*D. Located in a city or county with an unemployment rate 125 percent of
the statewide rate or greater. (5 points) \_\_\_\_*

*3. [Empowerment Zone/Enterprise Community (EZ/EC).]{.underline} (Cannot
exceed a total of 10 points).*

*A. Located in EZ/EC designated area. (10 points) \_\_\_\_*

*B. Located in a non-designated EZ/EC applicant community.*

*(5 points) \_\_\_\_*

(12-23-96) SPECIAL PN

RD Instruction 4279-B

Appendix C

Page 2

*4. [Loan features.]{.underline}*

*A. Lender will price the loan at the Wall Street Journal*

*published Prime Rate plus 1.5 percent or less. (5 points) \_\_\_\_*

*B. Lender will price the loan at the Wall Street Journal*

*published Prime Rate plus 1 percent or less. (5 points) \_\_\_\_*

*C. The Agency guaranteed loan is less than 50 percent of*

*project cost. (5 points) \_\_\_\_*

*D. Percentage of guarantee is 10 or more percentage points less than
the maximum allowable for a loan of its size. (5 points) \_\_\_\_*

*5. [High impact business investment priorities]{.underline} (Total
score for*

*the following three categories:*

*A. [Industry]{.underline}.*

*(i) Industry that has 20 percent or more of its sales in international
attractions. (5 points) \_\_\_\_*

*(ii) Industry that is not already present in the*

*community. (5 points) \_\_\_\_*

*B. [Business]{.underline}.*

*(i) Business that offers high value, specialized*

*products and services that command high prices.*

*(2 points) \_\_\_\_*

*(ii) Business that provides an additional market for*

*existing local businesses. (3 points) \_\_\_\_*

*(iii) Business that is locally owned and managed.*

*(3 points) \_\_\_\_*

*(iv) Business that will produce a natural resource value-*

*added product. (2 points) \_\_\_\_*

RD Instruction 4279-B

Appendix C

Page 3

*C. [Occupations]{.underline} (Cannot exceed 10 points).*

*(i) Business that creates jobs with an average wage*

*exceeding 125 percent of the Federal minimum wage.*

*(5 points) \_\_\_\_*

*(ii) Business that creates jobs with an average wage*

*exceeding 150 percent of the Federal minimum wage.*

*(10 points) \_\_\_\_*

*6. State Director\'s administrative points: (May be up to*

*10 points). Attach justification. \_\_\_\_*

*Total points \_\_\_\_*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Signature Date*

*\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Title*

## oOo

(12-23-96) SPECIAL PN

RD Instruction 4279-B

Appendix D

Page 1

*BUSINESS AND INDUSTRY LOAN PROCESSING CHECKLIST*

*Borrower
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
State \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Phone \# \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Lender \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Type of Project \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

*Purpose
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_*

[LOAN PROCESSING]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\| \| FORM \| TO BE \|TARGET \|DATE \|

[\| DOCUMENT \| NO. \|PREPARED BY \|DATE \|REC\'D \|]{.underline}

\| \| \| \| \| \|

\|Application for Loan \|4279-1 \| \| \| \|

\|Guarantee (Business and \| Part A \| \| \| \|

\|Industry) \| Part B \| \| \| \|

\| \| Part C \| \| \| \|

\| \| \| \| \| \|

\|Site Visit Report \| \| \| \| \|

\| \| \| \| \| \|

\|Business and Industry \|Appendix C \| \| \| \|

\|Application Priority \|RD Instruc- \| \| \| \|

\|Points Scoresheet \|tion 4279-B \| \| \| \|

\| \| \| \| \| \|

\|Request for Environmental\|RD 1940-20 \| \| \| \|

\|Information \| \| \| \| \|

\| \| \| \| \| \|

\|Environmental Assessment \|RD 1940-21 \| \| \| \|

\|for Class I Action \| \| \| \| \|

\| \| \| \| \| \|

\|Environmental Assessment \|Exhibit H \| \| \| \|

\|for Class II Action \|RD Instruc- \| \| \| \|

\| \|tion 1940-G \| \| \| \|

\| \| \| \| \| \|

\|Environmental Checklist \|RD 1940-22 \| \| \| \|

\|for Categorical \| \| \| \| \|

\|Exclusions \| \| \| \| \|

\| \| \| \| \| \|

\|Civil Rights Impact \|RD 2006-38 \| \| \| \|

\|Analysis Certification \| \| \| \| \|

[\| \| \| \| \| \|]{.underline}

(12-23-96) SPECIAL PN

RD Instruction 4279-B

Appendix D

Page 2

[LOAN PROCESSING (CONTINUED)]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\| \| FORM \| TO BE \|TARGET \|DATE \|

[\| DOCUMENT \| NO. \|PREPARED BY \|DATE \|REC\'D \|]{.underline}

\| \| \| \| \| \|

\|Certification of \|4279-2 \| \| \| \|

\|Non-Relocation and \| \| \| \| \|

\|Market and Capacity \| \| \| \| \|

\|Information Report \| \| \| \| \|

\| \| \| \| \| \|

\|Intergovernmental \| \| \| \| \|

\|Consultation Comments \| \| \| \| \|

\| \| \| \| \| \|

\|Financial Statements \| \| \| \| \|

\|for past 3 years \| \| \| \| \|

\| Balance Sheet & \| \| \| \| \|

\| Profit & Loss \| \| \| \| \|

\| Statement \| \| \| \| \|

\| \| \| \| \| \|

\| 2 years of Projected \| \| \| \| \|

\| Financial Statements \| \| \| \| \|

\| Pro-forma \| \| \| \| \|

\| Balance Sheet & \| \| \| \| \|

\| Profit and Loss \| \| \| \| \|

\| Statement \| \| \| \| \|

\| \| \| \| \| \|

\|Guarantor\'s Financial \| \| \| \| \|

\|Statements \| \| \| \| \|

\| \| \| \| \| \|

\|Copy of Lender\'s \| \| \| \| \|

\|Loan Analysis \| \| \| \| \|

\| \| \| \| \| \|

\|Credit Reports \| \| \| \| \|

\| Business \| \| \| \| \|

\| Personal \| \| \| \| \|

\| \| \| \| \| \|

\|Interim Financial \| \| \| \| \|

\|Statements \| \| \| \| \|

\| \| \| \| \| \|

\|Feasibility Study or \| \| \| \| \|

\|Business Plan \| \| \| \| \|

[\| \| \| \| \| \|]{.underline}

RD Instruction 4279-B

Appendix D

Page 3

[LOAN PROCESSING (CONTINUED)]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\| \| FORM \| TO BE \|TARGET \|DATE \|

[\| DOCUMENT \| NO. \|PREPARED BY \|DATE \|REC\'D \|]{.underline}

\| \| \| \| \| \|

\|Appraisals \| \| \| \| \|

\| Real Property- \| \| \| \| \|

\| General Real \| \| \| \| \|

\| Property Appraiser \| \| \| \| \|

\| Certification \| \| \| \| \|

\| \| \| \| \| \|

\|Lender\'s Proposed \| \| \| \| \|

\|Loan Agreement \| \| \| \| \|

\| \| \| \| \| \|

\|Securities & Exchange \| \| \| \| \|

\|Commission Report \| \| \| \| \|

\| \| \| \| \| \|

\|Conditional Commitment \|4279-3 \| \| \| \|

\| \| \| \| \| \|

\|State Loan \| \| \| \| \|

\|Committee Minutes \| \| \| \| \|

\| \| \| \| \| \|

\|State Director\'s \| \| \| \| \|

\|Cover memorandum \| \| \| \| \|

\|to National Office \| \| \| \| \|

\| \| \| \| \| \|

\|Project Announcement \|Exhibit B of\| \| \| \|

\|to Congressional Liaison \|RD Instruc- \| \| \| \|

\| \|tion 2015-C \| \| \| \|

\| \| \| \| \| \|

\|Request for \|RD 1940-3 \| \| \| \|

\|Obligation of Funds \| \| \| \| \|

\|Guaranteed Loans \| \| \| \| \|

[\| \| \| \| \| \|]{.underline}

(12-23-96) SPECIAL PN

RD Instruction 4279-B

Appendix D

Page 4

[LOAN CLOSING]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\| \| FORM \| TO BE \|TARGET \|DATE \|

[\| DOCUMENT \| NO. \|PREPARED BY \|DATE \|REC\'D \|]{.underline}

\| \| \| \| \| \|

\|Lender Certification \| \| \| \| \|

\| §4279.181 of this \| \| \| \| \|

\| subpart \| \| \| \| \|

\| \| \| \| \| \|

\| No major changes \| \| \| \| \|

\| \| \| \| \| \|

\| Planned acquisitions \| \| \| \| \|

\| and development \| \| \| \| \|

\| complete \| \| \| \| \|

\| \| \| \| \| \|

\| Required insurance \| \| \| \| \|

\| in effect \| \| \| \| \|

\| \| \| \| \| \|

\| Truth in Lending \| \| \| \| \|

\| \| \| \| \| \|

\| Equal credit opportun- \| \| \| \| \|

\| nity requirements met \| \| \| \| \|

\| \| \| \| \| \|

\| Loan properly closed \| \| \| \| \|

\| \| \| \| \| \|

\| Marketable title to \| \| \| \| \|

\| all collateral \| \| \| \| \|

\| \| \| \| \| \|

\| Entire loan advanced \| \| \| \| \|

\| \| \| \| \| \|

\| Personal/corporate \| \| \| \| \|

\| guarantees obtained \| \| \| \| \|

\| \| \| \| \| \|

\| All requirements of \| \| \| \| \|

\| the Conditional \| \| \| \| \|

\| Commitment are met \| \| \| \| \|

\| \| \| \| \| \|

\| Required liens \| \| \| \| \|

\| obtained \| \| \| \| \|

\| \| \| \| \| \|

\| Loan proceeds \| \| \| \| \|

\| advanced for \| \| \| \| \|

\| approved purposes \| \| \| \| \|

\| \| \| \| \| \|

\| No adverse change \| \| \| \| \|

\| in borrower \| \| \| \| \|

[\| \| \| \| \| \|]{.underline}

RD Instruction 4279-B

Appendix D

Page 5

[LOAN CLOSING (CONTINUED)]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\| \| FORM \| TO BE \|TARGET \|DATE \|

[\| DOCUMENT \| NO. \|PREPARED BY \|DATE \|REC\'D \|]{.underline}

\| \| \| \| \| \|

\|Loan Settlement \| \| \| \| \|

\|Statement \| \| \| \| \|

\| \| \| \| \| \|

\|Promissory Note \| \| \| \| \|

\| \| \| \| \| \|

\|Security Documents \| \| \| \| \|

\| \| \| \| \| \|

\|Current financial \| \| \| \| \|

\|statement obtained \| \| \| \| \|

\| \| \| \| \| \|

\|Guaranteed Loan \|RD 1980-19 \| \| \| \|

\|Closing Report \| \| \| \| \|

\| \| \| \| \| \|

\|Lender\'s Agreement \|4279-4 \| \| \| \|

\|(Business and Industry) \| \| \| \| \|

\| \| \| \| \| \|

\|Loan Note Guarantee \|4279-5 \| \| \| \|

\|(Business and Industry) \| \| \| \| \|

\| \| \| \| \| \|

\|Assignment Guarantee \|4279-6 \| \| \| \|

\|Agreement (Business \| \| \| \| \|

\|and Industry) \| \| \| \| \|

[\| \| \| \| \| \|]{.underline}

Note: The above are nationwide requirements and may be supplemented as

needed to meet State needs.

oOo

(12-23-96) SPECIAL PN