§ 4274.332 Post award requirements. ( a ) *Applicability.* Intermediaries receiving loans under this program shall be governed by these regulations, the loan agreement, the approved work plan, security interests, and any other conditions which the Agency may impose in making a loan. Whenever this subpart imposes a requirement on loans made from the “IRP revolving loan fund,” such requirement shall apply to all loans made by an intermediary to an ultimate recipient from the intermediary's IRP revolving fund for as long as any portion of the intermediary's IRP loan from the Agency remains unpaid. This includes revolved funds. Whenever this subpart imposes a requirement on loans made by intermediaries from “Agency IRP loan funds,” without specific reference to the IRP revolving loan fund, such requirement shall apply only to loans made by an intermediary using Agency IRP loan funds and will not apply to loans made from revolved funds.
( b ) *Maintenance of IRP revolving loan fund.* For as long as any part of an Agency IRP loan to an intermediary remains unpaid, the intermediary must maintain the IRP revolving loan fund. All Agency IRP loan funds received by an intermediary must be deposited in an IRP revolving loan fund. The IRP revolving loan fund can only be used for receiving advances from the Agency, making payments to the Agency, disbursing ultimate recipient loans, and collecting ultimate recipient loan repayments. This includes transferred IRP revolving loan funds from another intermediary as a result of a transfer and assumption. Interest earned, cash obtained from fees assessed from activities of the IRP revolving loan fund, etc. must remain part of the IRP revolving loan fund though these monies may be used to pay administrative expenses as provided below. All Agency IRP loan activity must be managed through the IRP revolving loan fund. The intermediary may transfer additional assets into the IRP revolving loan fund to cover any shortage at any time. The intermediary must deposit all cash of the IRP revolving loan fund in a separate bank account or accounts. The intermediary is prohibited from commingling other funds of the intermediary with the funds in the IRP revolving loan fund. Intermediaries may use an operating account, general fund, or Automated Clearing House (ACH) account to initially collect payments from ultimate recipients, as long as those payments are transferred to the IRP revolving loan fund within 10 working days of receipt or by the end of the Federal fiscal quarter, whichever occurs first. All moneys deposited to the IRP revolving loan fund bank account or accounts must be money of the IRP revolving loan fund, and such accounts must be properly secured in accordance with § 4274.330(e). The receivables created by making loans to ultimate recipients, the intermediary's security interest in collateral pledged by ultimate recipients, collections on the receivables, interest, fees, and any other income or assets derived from the operation of the IRP revolving loan fund are a part of the IRP revolving loan fund. ( 1 ) The intermediary can use the portion of the IRP revolving loan fund that consists of Agency IRP loan funds only for making loans in accordance with § 4274.320. The intermediary may use the portion of the IRP revolving loan fund that consists of revolved funds for debt service reserve and reasonable administrative costs, in accordance with this section, or for making additional ultimate recipient loans.
( 2 ) The intermediary must submit for Agency approval an annual budget of proposed IRP revolving loan fund income and expenses including expected administrative costs. The annual budget must itemize income, including interest received from ultimate recipients, interest earnings on deposits, fees, and other income excluding principal recaptured from ultimate recipients, and expenses including interest repaid to the Agency, administrative expenses, liquidation expenses, loan write-offs, and other fees and costs excluding principal repaid to the Agency. The intermediary cannot use proceeds received from the collection of principal repayment by an ultimate recipient for administrative expenses. The amount removed by the intermediary from the IRP revolving loan fund for administrative costs in any year must be reasonable, must not exceed the actual cost of operating the IRP revolving loan fund, including loan servicing, and providing technical assistance, and must not exceed the amount approved by the Agency in the intermediary's annual budget. The administrative expenses that the intermediary charges to the IRP fund may never exceed the actual income earned on an annual basis. An intermediary can contract personnel for hire per § 4274.340(a)(1)(ii); but the intermediary may not routinely contract loan underwriting, management, or day-to-day operations. Essential activities of the IRP revolving loan funds must be conducted in-house.
( 3 ) The intermediary must establish a debt service reserve fund. The purpose of the debt service reserve fund is to ensure that adequate cash is available for the annual IRP loan installment(s) in the event that the IRP revolving loan fund has insufficient cash to make these payments. The minimum amount of cash in the debt service reserve fund must be at least equal to the intermediary's cumulative, annual debt service requirements for all Agency IRP loans outstanding. This account should be established by the date of loan closing, but the minimum required cash balance does not have to be reached until the third anniversary of an Agency IRP loan closing. The minimum required balance must be maintained for the life of the Agency IRP loan thereafter. The debt service reserve funds can only be withdrawn when there is insufficient cash in the IRP revolving loan fund's other account(s) to make the annual Agency IRP loan installments, and such withdrawals require the prior written concurrence of the Agency. Any withdrawal that causes the cash balance to drop below the minimum amount required must be repaid to the debt service reserve fund as soon as possible, but in no event can such repayment be longer than six months from the date of withdrawal. The funding of this debt service reserve fund may not come from Agency IRP loan funds and must come from an unencumbered source.
( 4 ) The intermediary must make any cash in the IRP revolving loan fund that is not needed for debt service or approved administrative costs available for additional loans to ultimate recipients. If the Agency determines that the intermediary has substantial amounts of Agency IRP loan funds available for lending that is not being regularly loaned out to ultimate recipients, the Agency may require, at its discretion, that those funds be returned to the Agency in accordance with paragraph (b)(8) of this section.
( 5 ) The intermediary must deposit all reserves and other cash of the IRP revolving loan fund not immediately needed for loans to ultimate recipients or other authorized uses in accounts in banks or other financial institutions. Such accounts must be fully covered by Federal deposit insurance or fully collateralized with other securities in accordance with normal banking practices and all applicable State laws. The account must be interest-bearing if feasible and any interest earned thereon remains a part of the IRP revolving loan fund. The intermediary cannot use funds for any certificates of deposit over a 30-day duration or for investments in securities. All instruments associated with the revolving loan fund must be liquid and not impose fees associated with the withdrawal or movement of cash.
( 6 ) If an intermediary receives more than one IRP loan, the intermediary does not need to establish and maintain a separate IRP revolving loan fund for each loan. Instead, the intermediary may combine them and maintain only one IRP revolving loan fund, unless the Agency requires separate IRP revolving loan funds because there are significant differences in the loan purposes, work plans, loan agreements, or requirements for the loans. The Agency may allow loans with different requirements to be combined into one IRP revolving loan fund if the intermediary agrees in writing to operate the combined revolving funds in accordance with the most stringent requirements of the Agency. The combining of multiple loans in one IRP revolving loan fund does not preclude the intermediary from being able to individually track the activity of each Agency IRP loan. The Agency must be able to readily determine the ultimate recipient loans made from each Agency IRP loan.
( 7 ) The intermediary may deposit their full equity contribution for the entire Agency IRP loan before the initial advance of Agency IRP loan funds or it may deposit its matching percent at each interval that loan advances are made by the Agency.
( 8 ) IRP revolving loan fund funds are intended to be active mechanisms to enhance business development in rural communities. If Agency IRP loan funds have been unused for a period of six months or more, those funds in excess of $250,000 will be returned to the Agency unless the Agency concurs with an intermediary's request for an exception. Any exception would be based on evidence satisfactory to the Agency that every effort is being made by the intermediary to utilize the IRP revolving loan fund funding for loans to ultimate recipients in conformance with program objectives.
( 9 ) The full measure of collateral must be made up of cash available in the IRP revolving loan fund, the debt service reserve, and the total outstanding balance of ultimate recipient loans. At all times, the sum of the IRP revolving loan fund, debt service reserve, and principal amount outstanding on performing ultimate recipient loans must equal 100 percent of what is owed to the Agency by the intermediary plus any equity contribution amount. Therefore, if any part of the collateral fluctuates to the extent that the minimum retention requirement falls below the 100 percent plus the equity contribution threshold, the intermediary must inject cash into the IRP revolving loan fund and or debt service reserve fund to ensure that the total collateral is maintained at the minimum required level.
( 10 ) The intermediary must also file a Uniform Commercial Code (UCC) financing statement at closing in order to perfect the Agency's security interest in the ultimate recipient's promissory notes. The intermediary is responsible for covering the costs of filing as well as ensuring the necessary filings are renewed and recorded with the Secretary of State, or the equivalent tribal official as appropriate.
( c ) *Agency oversight.* The Agency will monitor each intermediary based on progress reports submitted by the intermediary, audit findings, disbursement transactions, visitations, and other contact with the intermediary as necessary. The Agency will send written notices on payments coming due to the intermediary approximately 15 days in advance of the payment due date.
( d ) *Return of equity.* An intermediary with an IRP loan(s) where the cash portion of the IRP revolving loan fund includes fees, principal and interest payments received from ultimate recipients and is not composed of any original Agency IRP loan funds, may annually request a partial or full return of their contributed equity under the following conditions: ( 1 ) The intermediary is current in all payments to the Agency and in compliance with all elements of their loan agreement and Agency reporting requirements;
( 2 ) The ratio of intermediary equity to the Agency loan after the return of equity remains consistent with the initial equity injection percentage by the intermediary; and
( 3 ) Any return of an intermediary's equity from the revolving loan fund must be approved by the Agency in writing and is limited to an amount that the Agency determines will not cause additional credit risk to the revolving loan fund or the Agency and is in compliance with paragraph (b)(9) of this section.