RD Instruction 4279-B
Table of Contents
Page 1

PART 4279 - GUARANTEED LOANMAKING

Subpart B - Business and Industry Loans

TABLE OF CONTENTS

Sec.		Page

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 fee.	2
4279.108	Eligible borrowers.	3
	
	(a)  Type of entity.	3
	(b)  Citizenship.	4
	(c)  Rural area.	4
	(d)  Other credit.	5

4279.109	- 4279.112  [Reserved]	5
4279.113	Eligible loan purposes.	5
4279.114	Ineligible purposes.	8
4279.115	Prohibition under Agency programs.	9
4279.116	- 4279.118  [Reserved]	9
4279.119	Loan guarantee limits.	10

	(a)  Loan amount.	10
	(b)  Percent of guarantee.	10

4279.120	Fees and charges.	11

	(a)  Routine lender fees.	11
	(b)  Professional services.	11
	(c)  Fee review.	11

4279.121	- 4279.124  [Reserved]	12
4279.125	Interest rates.	12
4279.126	Loan terms.	13
4279.127	- 4279.130  [Reserved]	13

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RD Instruction 4279-B
Table of Contents
Page 2

Sec.		Page

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

4279.162	- 4279.163  [Reserved]	26

RD Instruction 4279-B
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Page 3

Sec.		Page

4279.164	Preapplication processing.	26
	
	(a)  Nonrelocation.	26
	(b)  Privacy.	26
	(c)  Decision.	27
	(d)  Identification numbers.	27
	(e)  Rural Community Facilities Tracking System	28
	     (RCFTS).

4279.165	Evaluation of application.	27
	
	(a)  General review.	27
	(b)  Environmental requirements.	29
	(c)  State loan committee.	29
	(d)  Concurrence.	29

4279.166	Timeframe for processing applications.	29
4279.167	- 4279.172  [Reserved]	30
4279.173	Loan approval and obligating funds.	30
4279.174	Transfer of lenders.	31
4279.175	- 4279.179  [Reserved]	31
4279.180	Changes in borrower.	31
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

(12-23-96)  SPECIAL PN

RD Instruction 4279-B

PART 4279 - Guaranteed Loanmaking

Subpart B - Business and Industry Loans

 4279.101  Introduction.

(a)  Content.  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.  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.  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.  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:  WSDC                                      Guaranteed Loanmaking

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RD Instruction 4279-B

 4279.102  Definitions.

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

 4279.103  Exception Authority.

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

 4279.104  Appeals.

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

 4279.105 - 4279.106 [Reserved]

 4279.107  Guarantee fee.
	
	The guarantee fee will be paid to the Agency by the lender and is 
nonrefundable.  The fee may be passed on to the borrower.  Except as provided 
in this section, the guarantee fee will be 2 percent multiplied by the 
principal loan amount multiplied by the percent of guarantee and will be paid 
one time only at the time the Loan Note Guarantee is issued.  

(a)  The guarantee fee may be reduced to 1 percent if the Agency 
determines that the business meets the following criteria:

(1)  High impact business development investment (It is the goal of 
this program to encourage high impact business investment in rural 
areas.  The weight given to business investments will be in 
accordance with  4279.155(b)(5) of this subpart); and

(2)  The business is located in a community that is experiencing 
long term population decline and job deterioration; or

(3)  The business is located in a rural community that has remained 
persistently poor over the last 60 years; or

(4)  The business is located in a rural community that is 
experiencing trauma as a result of natural disaster or that is 
experiencing fundamental structural changes in its economic base.

	

2

RD Instruction 4279-B
 4279.107 (Con.)

(b)  Each fiscal year, the Agency shall 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 fee of 1 percent.  The limit 
will be announced by publishing a notice in the Federal Register.  Once 
the limit has been reached, the guarantee fee for all additional loans 
obligated during the remainder of that fiscal year will be 2 percent.

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.

 4279.108  Eligible borrowers.                                                    

(a)  Type of entity.  A borrower may be a cooperative, 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 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:

(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.

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RD Instruction 4279-B
 4279.108 (Con.)

(b)  Citizenship.  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.  The business financed with a B&I Guaranteed Loan must 
be located in a rural area.  Loans to borrowers with facilities located 
in both urban and rural areas will be limited to the amount necessary to 
finance the facility located in the eligible rural area.

(1)  Rural areas include all territory of a State that is:  

(i)  Not within the outer boundary of any city having a 
population of 50,000 or more; and

(ii)  Not within an area that is urbanized or urbanizing as 
defined in this section.

(2)  All density determinations will be made on the basis of minor 
civil divisions or census county divisions as used by the Bureau of 
the Census in the latest decennial census of the U.S.  In making the 
density calculations, large nonresidential tracts devoted to urban 
land uses such as railroad yards, airports, industrial sites, parks, 
golf courses, cemeteries, office parks, shopping malls, or land set 
aside for such purposes will be excluded.
 
(3)  An urbanized area is an area immediately adjacent to a city 
with a population of 50,000 or more, that for general social and 
economic purposes forms a single community with such a city.  An 
urbanizing area is an area immediately adjacent to a city with a 
population of 50,000 or more with a population density of more than 
100 persons per square mile or is an area with a population density 
of less than 100 persons per square mile which appears likely, based 
on development and population trends, to become urbanized in the 
foreseeable future.  The corporate status of an urbanized or 
urbanizing area is not material.  An area located in recognizable 
open country or separated from any city of 50,000 or more population 
by recognizable open country or by a river, will be assumed to be 
not urbanized or urbanizing.

4

RD Instruction 4279-B
 4279.108 (Con.)

(d)  Other credit.  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.

 4279.109 - 4279.112  [Reserved]

 4279.113  Eligible loan purposes. 

	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.

(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

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RD Instruction 4279-B
 4279.113(h)(1) (Con.)

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.  
Purchase of startup cooperative stock for family-sized farms where 
commodities are produced to be processed by the cooperative.

(j)  Aquaculture, including conservation, development, and utilization 
of water for aquaculture.

(k)  Commercial fishing.

(l)  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.

(m)  Forestry, which includes businesses primarily engaged in the 
operation of timber tracts, tree farms, and forest nurseries and related 
activities such as reforestation.

(n)  The growing of mushrooms or hydroponics.

(o)  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.

(p)  Feasibility studies.

(q)  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.  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), the lender is providing better 
rates or terms, and the refinancing is a secondary part (less than 50 
percent) of the overall loan.

6

RD Instruction 4279-B
 4279.113 (Con.)

(r)  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.  

(s)  Fees and charges for professional services and routine lender fees.

(t)  Agency guarantee fee.

(u)  Tourist and recreation facilities, including hotels, motels, and 
bed and breakfast establishments, except as prohibited under ineligible 
purposes.

(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.

(v)  Educational or training facilities.

(w)  Community facility projects which are not listed as an ineligible 
loan purpose such as convention centers.

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(12-23-96)  SPECIAL PN

RD Instruction 4279-B
 4279.113 (Con.)

(x)  Constructing or equipping facilities for lease to private 
businesses engaged in commercial or industrial operations.

(y)  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.

(z)  Community antenna television services or facilities.

(aa)  Provide loan guarantees to assist industries adjusting to 
terminated Federal agricultural programs or increased foreign 
competition.

 4279.114  Ineligible purposes.

(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.  

(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.

8

RD Instruction 4279-B
 4279.114 (Con.)

(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 value of the owners 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. 

 4279.115  Prohibition under Agency programs.

	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]

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RD Instruction 4279-B

 4279.119  Loan guarantee limits.

(a)  Loan amount.  The total amount of Agency loans to one borrower, 
including the guaranteed and unguaranteed portions, the outstanding 
principal and interest balance of any existing Agency guaranteed loans, 
and new loan request, must not exceed $10 million.  The Administrator 
may, at the Administrators discretion, grant an exception to the $10 
million limit with the concurrence of the Under Secretary 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;

(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 guarantee is not approved; and

(3)  Under no circumstances will the total amount of guaranteed 
loans to one borrower, including the guaranteed and unguaranteed 
portions, the outstanding principal and interest balance of any 
existing Agency guaranteed loans, and new loan request, exceed $25 
million;

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

(5)  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.

(b)  Percent of guarantee.  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;

10

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 
Directors 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.

(a)  Routine lender fees.  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.  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.  You should review fees in the application but rely on 
the opinion of the lender as to their reasonableness.

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RD Instruction 4279-B

 4279.121 - 4279.124  [Reserved]

 4279.125  Interest rates.

	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.

(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.

	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 lenders analysis and related materials, pay 
particular attention to working capital since it is usually critical to 
project success.

(a)  Cash flow.  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 
of the business is the most important consideration in the loanmaking 
process.  You should not approve loan guarantee requests that do not

13

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RD Instruction 4279-B
 4279.131(a) (Con.)

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.  

(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.  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.  A minimum of 10 percent tangible balance sheet equity will 
be required for existing businesses at the time the Loan Note Guarantee 
is issued.  A minimum of 20 percent tangible balance sheet equity will 
be required for new businesses at the time the Loan Note Guarantee is 
issued.  Tangible balance sheet equity will be determined in accordance 
with Generally Accepted Accounting Principles.  Modifications to the 
equity requirements may be granted by the Administrator or designee.  
For the Administrator to consider a reduction in the equity requirement, 
the borrower must furnish the following:

14

RD Instruction 4279-B
 4279.131(d) (Con.)

(1)  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

(2)  Pro forma and historical financial statements which indicate 
the business to be financed meets or exceeds the median quartile (as 
identified in Robert Morris Associates Annual Statement Studies or 
similar publication) for the current ratio, quick ratio, debt-to-
worth ratio, debt coverage ratio, and working capital.

(3)  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 or designee.  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. 

(e)  Lien priorities.  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.  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.  

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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.

(a)  Hazard.  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.  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.  Worker compensation insurance is required in 
accordance with State law.

(d)  Flood.  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.  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

RD Instruction 4279-B

 4279.144  Appraisals.

	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).  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 subpart A of part 1922 of this title and 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.

 4279.145 - 4279.148  [Reserved]

 4279.149  Personal and corporate guarantees.

(a)  Personal and corporate guarantees, when obtained, are part of the 
collateral for the loan.  However, the value of such guarantee is not 
considered in determining whether a loan is adequately secured for 
loanmaking purposes.  

(b)  Personal and corporate guarantees for those owning greater than 20 
percent of the borrower will be required where legally permissible, 
except as provided for in this section.  Guarantees of parent, 
subsidiaries, or affiliated companies and secured guarantees may also be 
required.  

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

17

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RD Instruction 4279-B

 4279.150  Feasibility studies.

	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.
	
	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 lenders, 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).

(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).

18

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).

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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.

(a)  Design policy.  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.  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.  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).  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.

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RD Instruction 4279-B
 4279.156 (Con.)

(e)  Agency role.  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 
Agencys benefit, not the lenders or borrowers.  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.

	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.

(a)  Preapplications.  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

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.  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

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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 forma 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
 4279.164(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 proposals 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.

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RD Instruction 4279-B
 4279.164(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.

 4279.162 - 4279.163  [Reserved]

 4279.164  Preapplication processing.

	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.  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.  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.

26

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.

(1)  Favorable response.  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.  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.  

(1)  Case number.  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.  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).  Update RCFTS 
upon receipt of a preapplication and when any significant processing 
actions take place.

 4279.165  Evaluation of application.

(a)  General review.  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 RCFTS and update as information or the 
application status changes.

(b)  Environmental requirements.  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 is available through the State 
Environmental Coordinator and should be obtained whenever any complex or 
controversial environmental issues are expected.

(c)  State loan committee.  The State Director may establish a State 
loan committee on an ad hoc basis to review any B&I application.  The 
makeup of such a committee is at the discretion of the State Director.  
If you hold a loan review meeting, minutes of the meeting, including any 
recommendations of the group, will be filed in the case file.  Only 
Agency employees will be voting members of a State loan review 
committee.  However, such a committee is advisory in nature.  The State 
Director is solely responsible for all decisions, not the committee.

(d)  Concurrence.  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 
officers.  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.

 4279.166  Timeframe for processing applications.

	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.

29

(12-23-96)  SPECIAL PN

RD Instruction 4279-B
 4279.166 (Con.)

(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.

(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.  

(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.  You should make sure that the lender knows each condition of 
the guarantee listed in the commitment.  You should tailor each 
Conditional Commitment to the project and go over each item in person 
with the lender's loan officers.  All required measures identified in 
the Agencys environmental impact analysis for this proposal and 
established for the purpose of avoiding or reducing adverse 
environmental impacts of the proposals construction or operation must 
be listed in the Conditional Commitment and understood by both the 
lender and the borrower.  Most Conditional Commitment items should be 
incorporated into the Loan Agreement.

(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 new lenders aware of the ramifications of negligent 
servicing.

(e)  On loan applications within the State Directors loan approval 
authority, the State Director will submit to the National Office, Attn:   
Director, Business Programs Processing Division, the following 
information within 30 days after the Form 4279-3, Conditional 
Commitment, has been accepted:

30

RD Instruction 4279-B
 4279.173(e) (Con.)

(1)  A copy of Form 4279-3, Conditional Commitment, as accepted by 
the lender and borrower.

(2)  A copy of the State loan committee minutes, if available.

(3)  A copy of the lenders credit analysis, financials, appraisals, 
etc.

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

(5)  When debt refinancing is involved, a copy of the justification 
for refinancing.

(6)  The cover memorandum must indicate whether Form 4279-5, Loan 
Note Guarantee, has been issued.  If the Loan Note Guarantee has 
been issued, enclose a copy of the Lender Certification required by 
 4279.181 of this subpart, and if not, a proposed date for issuance 
of the Loan Note Guarantee.

 4279.174  Transfer of lenders.

(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 - 4279.179  [Reserved]

 4279.180  Changes in borrower.

	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.

31

(12-23-96)  SPECIAL PN

RD Instruction 4279-B

 4279.181  Conditions precedent to issuance of Loan Note Guarantee. 

	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.

(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.

32

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 
Agencys 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 Agencys 
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 proposals 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 lenders 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.

(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.

	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.

	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.  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.  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.  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.  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.  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.

(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.  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.  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.  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.

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

2.  Community priority.

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).  (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.  

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 (Total score for 
    the following three categories:

A.  Industry.                

(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.      
 
(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 (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

________________________________________________________________________
|                         |    FORM    |   TO BE     |TARGET   |DATE   |
|  DOCUMENT               |     NO.    |PREPARED BY  |DATE     |REC'D  |
|                         |            |             |         |       |
|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   |            |             |         |       |
|                         |            |             |         |       |

(12-23-96)  SPECIAL PN

RD Instruction 4279-B
Appendix D
Page 2

LOAN PROCESSING (CONTINUED)

________________________________________________________________________
|                         |    FORM    |   TO BE     |TARGET   |DATE   |
|  DOCUMENT               |     NO.    |PREPARED BY  |DATE     |REC'D  |
|                         |            |             |         |       |
|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            |            |             |         |       |
|                         |            |             |         |       |

RD Instruction 4279-B
Appendix D
Page 3

LOAN PROCESSING (CONTINUED)

________________________________________________________________________
|                         |    FORM    |   TO BE     |TARGET   |DATE   |
|  DOCUMENT               |     NO.    |PREPARED BY  |DATE     |REC'D  |
|                         |            |             |         |       |
|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         |            |             |         |       |
|                         |            |             |         |       |

(12-23-96)  SPECIAL PN

RD Instruction 4279-B
Appendix D
Page 4

LOAN CLOSING

________________________________________________________________________
|                         |    FORM    |   TO BE     |TARGET   |DATE   |
|  DOCUMENT               |     NO.    |PREPARED BY  |DATE     |REC'D  |
|                         |            |             |         |       |
|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           |            |             |         |       |
|                         |            |             |         |       |

RD Instruction 4279-B
Appendix D
Page 5

LOAN CLOSING (CONTINUED)

________________________________________________________________________
|                         |    FORM    |   TO BE     |TARGET   |DATE   |
|  DOCUMENT               |     NO.    |PREPARED BY  |DATE     |REC'D  |
|                         |            |             |         |       |
|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)            |            |             |         |       |
|                         |            |             |         |       |

Note:  The above are nationwide requirements and may be supplemented as
        needed to meet State needs.

oOo

(12-23-96)  SPECIAL PN