25076 Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 

DEPARTMENT OF AGRICULTURE 

Rural Business-Cooperative Service 

Notice of Funds Availability (NOFA) 

Inviting Applications for Biorefineries 

AGENCY: Rural Business-Cooperative 

Service, USDA. 

ACTION: Notice. 

SUMMARY: This notice announces the 

acceptance of applications for funds 

available under the BioRefinery 

Assistance Program (the ‘‘Program’’) to 

provide guaranteed loans for the 

development and construction of 

commercial-scale biorefineries or for the 

retrofitting of existing facilities using 

eligible technology for the development 

of advanced biofuels. Applications will 

be accepted for biorefineries that 

produce transportation fuels that meet 

the Renewable Fuel Standard or are 

currently undergoing an appeal to the 

U.S. Environmental Protection Agency 

for inclusion in the Renewable Fuel 

Standard, or that produce nontransportation renewable energy that 

results in a reduction in greenhouse 

gases. There will only be one 

application window under this Notice. 

DATES: Applications for participating in 

this Program for Fiscal Year 2010 must 

be received between May 6, 2010 and 

August 4, 2010. 

ADDRESSES: Applications and forms may 

be obtained from: 

• U.S. Department of Agriculture, 

Rural Development, Energy Branch, 

Attention: BioRefinery Assistance 

Program, 1400 Independence Avenue, 

SW., STOP 3225, Washington, DC 

20250–3225. 

• Agency Web site: http:// 

www.rurdev.usda.gov. Follow 

instructions for obtaining the 

application and forms. 

Submit an original completed 

application with two copies to USDA’s 

Rural Development National Office: 

Energy Branch, Attention: BioRefinery 

Assistance Program, 1400 Independence 

Avenue, SW., STOP 3225, Washington, 

DC 20250–3225. 

FOR FURTHER INFORMATION CONTACT: 

Energy Branch, Attention: BioRefinery 

Assistance Program, 1400 Independence 

Avenue, SW., Mail Stop 3225, 

Washington, DC 20250–3225. 

Telephone: 202–720–1400. 

SUPPLEMENTARY INFORMATION: 

Programs Affected 

This Program is listed in the Catalog 

of Federal Domestic Assistance under 

Number 10.865. 

Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act (PRA), the paperwork 

burden associated with this Notice of 

Funds Availability (NOFA) has been 

approved by the Office of Management 

and Budget (OMB) under OMB Control 

Number 0570–0055. 

The PRA burden associated with the 

original Notice, published on November 

20, 2008, was approved by OMB, with 

an opportunity to comment on the 

burden associated with the program. 

Biorefineries seeking funding under 

this Notice have to submit applications 

that include specified information, 

certifications, and agreements. All of the 

forms, information, certifications, and 

agreements required to apply for this 

program under this Notice have been 

authorized under OMB Control Number 

0570–0055. 

E-Government Act Compliance 

Rural Development is committed to 

complying with the E-Government Act, 

to provide increased opportunities for 

citizen to access Government 

information and services electronically. 

I. Background 

Section 9003 of the Food, 

Conservation, and Energy Act of 2008 

(2008 Farm Bill) is intended to assist in 

the development and construction of 

commercial-scale biorefineries and the 

retrofitting of existing facilities using 

eligible technology for the development 

of advanced biofuels. Consistent with 

Congressional intent, preference will be 

given to projects where first-of-a-kind 

technology will be deployed at the 

commercial scale. To that end, the 

program will promote the development 

of the first commercial scale 

biorefineries that do not rely on corn 

kernel starch as the feedstock or 

standard biodiesel technology. 

The Agency will make guarantees 

available on loans for eligible projects 

that will provide for the development, 

construction, and/or retrofitting of 

commercial biorefineries using eligible 

technology. Eligible technology is: 

(a) Any technology that is being 

adopted in a viable commercial-scale 

operation of a biorefinery that produces 

an advanced biofuel, and 

(b) Any technology not described in 

paragraph (a) above that has been 

demonstrated to have technical and 

economic potential for commercial 

application in a biorefinery that 

produces an advanced biofuel. 

Over the life of the program, it is 

likely that guarantees will be awarded to 

projects that are first-of-a-kind and that 

may include projects with commercial 

applications that are expanded to new 

regions, modified to utilize different 

feedstocks, or substantially improved 

such that they represent a significant 

technological risk. 

A. Guaranteed Loan Funding 

This NOFA provides up to $150 

million in mandatory budget authority 

for this Program in Fiscal Year 2010 to 

support loan guarantees. 

The maximum principal amount of a 

loan guaranteed under this Program is 

$250 million; there is no minimum 

amount. The amount of a loan 

guaranteed under this Program will be 

reduced by the amount of other direct 

Federal funding that the eligible 

borrower receives for eligible project 

costs. 

The maximum guarantee under this 

Program is 80 percent of the principal 

and interest due on a loan guaranteed 

under this Program if the loan amount 

is equal to or less than $80 million. If 

the loan amount is more than $80 

million and less than $125 million, the 

maximum guarantee is 70 percent for 

the amount in excess of $80 million. If 

the loan amount is equal to or more than 

$125 million, the maximum guarantee is 

60 percent for the entire loan amount. 

The amount of a loan guaranteed for 

a project under this Program will not 

exceed 80 percent of total eligible 

project costs. Thus, the amount of 

guaranteed loan funds that may be made 

available to an applicant for an eligible 

project will not exceed 64 percent of the 

total eligible project costs. 

The interest rate for the guaranteed 

loan will be negotiated between the 

lender and the applicant and shall be in 

line with interest rates on other similar 

government guaranteed loan programs. 

The interest rate may be either fixed or 

variable, as long as it is a legal rate, and 

shall be fully amortizing. The interest 

rate for both the guaranteed and 

unguaranteed portions of the loan must 

be of the same type (i.e., both fixed or 

both variable). The interest rate charged 

will be subject to Agency review and 

approval. 

The length of a loan guaranteed under 

this Program would be for a period of 

no more than 20 years or 85 percent of 

the useful life of the project, as 

determined by the lender and confirmed 

by the Agency, whichever is less. The 

length of the loan term would be 

required to be the same for both the 

guaranteed and unguaranteed portion of 

the loan. 


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B. Eligibility Requirements for 

Guarantee Assistance 

This Notice contains eligibility 

requirements for borrowers, projects, 

and lenders, as discussed below. 

Borrower Eligibility 

To be eligible to receive a guaranteed 

loan under this Program, a borrower 

must be one of the following: 

• Individual, 

• Indian tribe, 

• Unit of State or local government, 

• Corporation, 

• Farm cooperative, 

• Farmer cooperative organization, 

• Association of agricultural 

producers, 

• National Laboratory, 

• Institution of higher education, 

• Rural electric cooperative, 

• Public power entity, or 

• Consortium of any of those entities. 

Project Eligibility 

Projects eligible for loan guarantees 

under this Notice must be located in a 

rural area and be for either: 

• The development and construction 

of commercial-scale biorefineries that 

produce transportation fuels that meet 

the Renewable Fuel Standard or are 

currently undergoing an appeal to the 

U.S. Environmental Protection Agency 

for inclusion in the Renewable Fuel 

Standard, or that produce nontransportation renewable energy that 

will result in a reduction in greenhouse 

gases using eligible technology, or 

• The retrofitting of existing facilities 

that produce transportation fuels that 

meet the Renewable Fuel Standard or 

are currently undergoing an appeal to 

the U.S. Environmental Protection 

Agency for inclusion in the Renewable 

Fuel Standard, or that produce nontransportation renewable energy that 

will result in a reduction in greenhouse 

gases using eligible technology. 

Eligible technology is defined as 

either: 

• A technology that is being adopted 

in a viable commercial-scale operation 

of a biorefinery that produces an 

advanced biofuel; or 

• A technology not described in the 

previous paragraph that has been 

demonstrated to have technical and 

economic potential for commercial 

application in a biorefinery that 

produces an advanced biofuel. 

Lender Eligibility 

Regulated or supervised lenders that 

meet the requirements specified in this 

Notice (see section I) may be eligible to 

participate in this Program. 

C. Applications 

The lender must submit a separate 

application for each project for which a 

loan guarantee is sought under this 

Notice. It is recommended that 

applicants refer to the application guide 

for this program (‘‘Instructions for 

Application for Loan Guarantee— 

Section 9003 BioRefinery Assistance 

Loan Guarantees’’), which can be found 

on the Agency’s Web site at http:// 

www.rurdev.usda.gov/rbs/busp/ 

baplg9003.htm. 

Because of factors of cost and 

complexity for eligible projects under 

this Program, the lender must include 

with the application a project-specific 

feasibility study, as defined in this 

Notice. The feasibility study must be 

prepared by a qualified consultant. The 

feasibility study must address, in part, 

both the technical and economic 

feasibility of the project. 

As noted previously, the Agency 

intends to accept applications during 

Fiscal Year 2010 from May 6, 2010 and 

August 4, 2010. 

Ineligible or incomplete applications 

will be returned to the applicant. If an 

application is determined to be 

ineligible for any reason, the Agency 

will inform the lender, in writing, of the 

reasons and provide any applicable 

appeal rights. The denial or rejection of 

an application under the Program may 

be appealed as provided in this Notice. 

D. Evaluation of Guaranteed Loan 

Applications 

Submission of an application neither 

reserves funding nor ensures funding. 

The Agency will evaluate each 

application and make a determination 

as to whether the borrower is eligible, 

whether the lender is eligible, whether 

the proposed project is eligible, the 

credit-worthiness and technical merit of 

the project, and whether the proposed 

funding request complies with all 

applicable statutes and regulations. The 

evaluation will be based on the 

information provided by the lender and 

on other sources of information, such as 

recognized industry experts in the 

applicable technology field, as 

necessary. 

The Agency will score each 

application in order to prioritize each 

proposed project. The evaluation 

criteria that the Agency will use to score 

these projects are: 

• Whether the borrower has 

established a market for the advanced 

biofuel and the byproducts produced. 

• Whether the area in which the 

borrower proposes to place the 

biorefinery has other similar advanced 

biofuel facilities. 

• Whether the borrower is proposing 

to use a feedstock not previously used 

in the production of advanced biofuels. 

• Whether the borrower is proposing 

to work with producer associations or 

cooperatives. 

• The level of financial participation 

by the borrower, including support from 

non-Federal and private sources. Such 

financial participation may take the 

form of direct financial support, 

technical support, and contributions of 

in-kind resources including such kinds 

of support from state government. Any 

direct Federal funding for eligible 

project costs from other sources will 

reduce the amount of the loan that may 

be guaranteed under this program. 

• Whether the borrower has 

established that the adoption of the 

process proposed in the application will 

have a positive impact on resource 

conservation, public health, and the 

environment. 

• Whether the borrower can establish 

that, if adopted, the biofuels production 

technology proposed in the application 

will not have any significant negative 

impacts on existing manufacturing 

plants or other facilities that use similar 

feedstocks. 

• The potential for rural economic 

development, including the number of 

local jobs created and inclusion of local 

banks or other capital sources in any 

proposed debt syndication. 

• The level of local ownership 

proposed in the application. 

• Whether the project can be 

replicated. 

• The extent to which the project 

converts cellulosic biomass feedstocks 

into advanced biofuel. 

• Whether the project is a first-of-akind technology, system, or process. 

II. Provisions for BioRefinery 

Assistance Loan Guarantees 

All guaranteed loan requests for this 

Program are subject to the provisions of 

this Notice as laid out in this section of 

the Notice. 

A. Definitions 

The following definitions are 

applicable to this Notice. 

Advanced biofuel. Fuel derived from 

renewable biomass, other than corn 

kernel starch to include: 

(1) Biofuel derived from cellulose, 

hemicellulose, or lignin; 

(2) Biofuel derived from sugar and 

starch (other than ethanol derived from 

corn kernel starch); 

(3) Biofuel derived from waste 

material, including crop residue, other 

vegetative waste material, animal waste, 

food waste, and yard waste; 


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(4) Diesel-equivalent fuel derived 

from renewable biomass, including 

vegetable oil and animal fat; 

(5) Biogas (including landfill gas and 

sewage waste treatment gas) produced 

through the conversion of organic 

matter from renewable biomass; 

(6) Butanol or other alcohols 

produced through the conversion of 

organic matter from renewable biomass; 

or 

(7) Other fuel derived from cellulosic 

biomass. 

Agency. The Rural BusinessCooperative Service or successor 

Agency assigned by the Secretary of 

Agriculture to administer the 

BioRefinery Assistance Program. 

References to the National Office, 

Finance Office, State Office or other 

Agency offices or officials should be 

read as prefaced by ‘‘Agency’’ or ‘‘Rural 

Development’’ as applicable. 

Association of agricultural producers. 

An organization that represents 

independent producers directly engaged 

in the production of agricultural 

products, including crops (including 

farming); livestock (including ranching); 

forestry products; hydroponics; nursery 

stock; or aquaculture, whereby 50 

percent or greater of their gross income 

is derived from the operations; and 

whose mission includes working on 

behalf of such producers and the 

majority of whose membership and 

board of directors are comprised of 

agricultural producers. 

Arm’s-length transaction. A 

transaction between ready, willing, and 

able disinterested parties who are not 

affiliated with or related to each other 

and have no security, monetary, or 

stockholder interest in each other. 

Assignment Guarantee Agreement. A 

signed, Agency-approved agreement 

between the Agency, the lender, and the 

holder setting forth the terms and 

conditions of an assignment of a 

guaranteed portion of a loan or any part 

thereof. 

Assurance agreement. A signed, 

Agency-approved agreement between 

the Agency and the lender that assures 

the Agency that the lender is in 

compliance with and will continue to be 

in compliance with Title VI of the Civil 

Rights Act of 1964, 7 CFR part 15, and 

Agency regulations promulgated there 

under. 

Biofuel. A fuel derived from 

renewable biomass. 

Biogas. Biomass converted to gaseous 

fuels. 

Biorefinery. A facility (including 

equipment and processes) that converts 

renewable biomass into biofuels and 

biobased products and may produce 

electricity. 

Borrower. The person that borrows, or 

seeks to borrow, money from the lender, 

including any party or parties liable for 

the guaranteed loan. 

Business plan. A comprehensive 

document that: 

(1) Describes clearly the borrower’s 

ownership structure and management, 

including experience and succession 

planning; 

(2) Discusses, if applicable, the 

borrower’s parent, affiliates, and 

subsidiaries, including their names and 

a description of the relationship; 

(3) Discusses how the borrower will 

operate the proposed project, including, 

at a minimum, a description of: 

(i) The business and its strategy; 

(ii) Possible vendors and models of 

major system components; 

(iii) The products and services to be 

provided; 

(iv) The availability of the resources 

(e.g., labor, raw materials, supplies) 

necessary to provide those products and 

services; 

(v) Site location and its relation to 

product distribution (e.g., rail lines or 

highways) and any land use or other 

permits necessary to operate the facility; 

and 

(vi) The market for the product and its 

competition, including any and all 

competitive threats and advantages; 

(4) Presents pro forma financial 

statements, including: 

(i) Balance sheet and income and 

expense for a period of not less than 3 

years of stabilized operation, and 

(ii) Cash flows for the life of the 

project; and 

(5) Describes the proposed use of 

funds. 

Collateral. The asset(s) pledged by the 

borrower in support of the loan. 

Conditional Commitment. An 

Agency-approved form provided to the 

lender indicating the loan guarantee it 

has requested has been approved subject 

to the completion of all conditions and 

requirements contained therein. 

Deficiency balance. The balance 

remaining on a loan after all collateral 

has been liquidated. 

Deficiency judgment. A monetary 

judgment rendered by a court of 

competent jurisdiction after foreclosure 

and liquidation of all collateral securing 

the loan. 

Eligible borrower. An individual, 

Indian tribe, or unit of State or local 

government, including a corporation, 

farm cooperative, farmer cooperative 

organization, association of agricultural 

producers, National Laboratory, 

institution of higher education, rural 

electric cooperative, public power 

entity, or consortium of any of those 

entities. 

Eligible project costs. Those expenses 

approved by the Agency for the project 

as identified in paragraphs (g)(3)(i) 

through (ix) of Section Q of this Notice. 

Eligible technology. 

(1) A technology that is being adopted 

in a viable commercial-scale operation 

of a biorefinery that produces an 

advanced biofuel; or 

(2) A technology not described in 

paragraph (1) of this definition that has 

been demonstrated to have technical 

and economic potential for commercial 

application in a biorefinery that 

produces an advanced biofuel. 

Fair market value. The price that 

could reasonably be expected for an 

asset in an arm’s-length transaction 

under ordinary economic and business 

conditions. 

Farm cooperative. A farmer or rancher 

owned and controlled business from 

which benefits are derived and 

distributed equitably on the basis of use 

by each of the farmer or rancher owners. 

Farmer Cooperative Organization. A 

cooperative organization is a 

cooperative or an entity, not chartered 

as a cooperative, that operates as a 

cooperative in that it is owned and 

operated for the benefit of its members, 

including the manner in which it 

distributes its dividends and assets. 

Feasibility study. An analysis by a 

qualified consultant of the economic, 

market, technical, financial, and 

management capabilities of a proposed 

project or business in terms of its 

expectation for success. 

Finance Office. The office which 

maintains the Agency financial 

accounting records located in St. Louis, 

Missouri. 

Future recovery. Any funds collected 

by lender associated with a defaulted 

project, after final loss claim has been 

paid by USDA. 

Guaranteed loan. A loan made and 

serviced by a lender for which the 

Agency has issued a Loan Note 

Guarantee. 

Holder. A person or entity, other than 

the lender, who owns all or part of the 

guaranteed portion of the loan with no 

servicing responsibilities. When the 

single note option is used and the 

lender assigns a part of the guaranteed 

note to an assignee, the assignee 

becomes a holder only when the Agency 

receives notice and the transaction is 

completed through use of Form RD 

4279–6, ‘‘Assignment Guarantee 

Agreement,’’ or predecessor form. 

Immediate family. Individuals who 

are closely related by blood, marriage, or 

adoption, or live within the same 

household, such as a spouse, parent, 

child, brother, sister, aunt, uncle, 


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grandparent, grandchild, niece, or 

nephew. 

Indian tribe. This term has the 

meaning given it in section 4 of the 

Indian Self-Determination and 

Education Assistance Act (25 U.S.C. 

450b). 

Institution of higher education. This 

term has the meaning given it in section 

102(a) of the Higher Education Act of 

1965 (20 U.S.C. 1002(a)). 

Intellectual property. Any and all 

intangible assets that consists of human 

knowledge and ideas including, without 

limitation, patents, copyrights, 

trademarks, service marks, and trade 

secrets. 

Lender. A regulated or supervised 

lender that meets the criteria specified 

in Section I of this Notice. 

Lender’s Agreement. The Agency 

approved signed form between the 

Agency and the lender setting forth the 

lender’s loan responsibilities under an 

issued Loan Note Guarantee. 

Lender’s analysis. The analysis and 

evaluation of the credit factors 

associated with each guarantee 

application to ensure loan repayment 

through the use of credit document 

procedures and an underwriting process 

that is consistent with industry 

standards and the lender’s written 

policy and procedures. 

Liquidation value. A monetary value 

given to property that is sold or 

exchanges hands under forced or 

limiting conditions, such as bankruptcy. 

Loan agreement. The Agency 

approved agreement between the 

borrower and lender containing the 

terms and conditions of the loan and the 

responsibilities of the borrower and 

lender. 

Loan Note Guarantee. The Agency 

approved form containing the terms and 

conditions of the guarantee of an 

identified loan. 

Loan-to-cost. The ratio of the dollar 

amount of a loan to the dollar value of 

the actual eligible project cost adjusted 

for other debt, project obligations, or 

other factors as determined by USDA. 

Loan-to-value. The ratio of the dollar 

amount of a loan to the dollar value of 

the collateral pledged as security for the 

loan. 

Market value. The amount for which 

property would sell for its highest and 

best use in an arm’s length transaction. 

Negligent loan servicing. 

(1) The failure of a lender to perform 

those services that a reasonably prudent 

lender would perform in originating, 

servicing, and liquidating its own 

portfolio of unguaranteed loans; or 

(2) The failure of the lender to 

perform its origination and servicing 

responsibilities in accordance with its 

origination and servicing policies and 

procedures in use by the lender at the 

time the loan is made. 

(3) The term includes the concepts of 

failure to act, not acting in a timely 

manner, or acting in a manner contrary 

to the manner in which a reasonably 

prudent lender would act. 

Offtake agreement. The terms and 

conditions governing the sale and 

transportation of biofuels, biobased 

products, and electricity produced by 

the borrower to another party. 

Parity. A lien position whereby two or 

more lenders share a security interest of 

equal priority in collateral. In the event 

of default, each lender will be affected 

on a pro rata basis. 

Participation. Sale of an interest in a 

loan by the lender wherein the lender 

retains the note, collateral securing the 

note, and all responsibility for loan 

servicing and liquidation. 

Person. Any individual, corporation, 

company, foundation, association, labor 

organization, firm, partnership, society, 

joint stock company, group of 

organizations, public body, or State or 

local government. 

Promissory Note. A legal instrument 

that a borrower signs promising to pay 

a specific amount of money at a stated 

time. ‘‘Note’’ or ‘‘Promissory Note’’ shall 

also be construed to include ‘‘Bond’’ or 

other evidence of debt where 

appropriate. 

Protective advances. Advances made 

by the lender for the purpose of 

preserving and protecting the collateral 

where the debtor has failed to, and will 

not or cannot, meet obligations to 

protect or preserve collateral. 

Qualified consultant. An 

independent, third-party possessing the 

knowledge, expertise, and experience to 

perform in an efficient, effective, and 

authoritative manner the specific task 

required. 

Qualified Intellectual Property. Any 

intellectual property included on 

current (within one year) audited 

balance sheets for which an audit 

opinion has been received that states the 

financial reports fairly represent the 

values therein and the reported value 

has been arrived at in accordance with 

Generally Accepted Accounting 

Principles (GAAP) standards for valuing 

intellectual property. The supporting 

work papers must be satisfactory to the 

Administrator. 

Regulated or supervised lender. A 

lender that is subject to examination or 

supervision by an appropriate agency of 

the United States or a State that 

supervises or regulates credit 

institutions. 

Renewable biomass. 

(1) Materials, pre-commercial 

thinnings, or invasive species from 

National Forest System land and public 

lands (as defined in section 103 of the 

Federal Land Policy and Management 

Act of 1976 (43 U.S.C. 1702)) that: 

(i) Are byproducts of preventive 

treatments that are removed to reduce 

hazardous fuels; to reduce or contain 

disease or insect infestation; or to 

restore ecosystem health; 

(ii) Would not otherwise be used for 

higher-value products; and 

(iii) Are harvested in accordance with 

applicable law and land management 

plans and the requirements for oldgrowth maintenance, restoration, and 

management direction of paragraphs (2), 

(3), and (4) of subsection (e) of section 

102 of the Healthy Forests Restoration 

Act of 2003 (16 U.S.C. 6512) and largetree retention of subsection (f) of that 

section; or 

(2) Any organic matter that is 

available on a renewable or recurring 

basis from non-Federal land or land 

belonging to an Indian or Indian tribe 

that is held in trust by the United States 

or subject to a restriction against 

alienation imposed by the United States, 

including: 

(i) Renewable plant material, 

including feed grains; other agricultural 

commodities; other plants and trees; 

and algae; and 

(ii) Waste material, including crop 

residue; other vegetative waste material 

(including wood waste and wood 

residues); animal waste and byproducts 

(including fats, oils, greases, and 

manure); and food waste and yard 

waste. 

Renewable biomass agreement. The 

terms and conditions governing the sale 

and transportation of the renewable 

biomass to the borrower by another 

party. 

Retrofitting. The modification of a 

building or equipment to incorporate 

functions not included in the original 

design that allow for the production of 

advanced biofuels. 

Rural or rural area. Any area of a 

State not in a city or town that has a 

population of more than 50,000 

inhabitants, according to the latest 

decennial census of the United States, 

and the contiguous and adjacent 

urbanized area. In determining which 

census blocks in an urbanized area are 

not in a rural area, the Agency shall 

exclude any cluster of census blocks 

that would otherwise be considered not 

in a rural area only because the cluster 

is adjacent to not more than 2 census 

blocks that are otherwise considered not 

in a rural area under this definition. For 

the purposes of this definition, cities 

and towns are incorporated population 


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centers with definite boundaries, local 

self government, and legal powers set 

forth in a charter granted by the State. 

For Puerto Rico, Census Designated 

Place, as defined by the U.S. Census 

Bureau, will be used as the equivalent 

to city or town. For the purpose of 

defining a rural area in the Republic of 

Palau, the Federated States of 

Micronesia, and the Republic of the 

Marshall Islands, the Agency shall 

determine what constitutes rural and 

rural area based on available population 

data. 

State. Any of the 50 States of the 

United States, the Commonwealth of 

Puerto Rico, the District of Columbia, 

the U.S. Virgin Islands, Guam, 

American Samoa, the Commonwealth of 

the Northern Mariana Islands, the 

Republic of Palau, the Federated States 

of Micronesia, and the Republic of the 

Marshall Islands. 

Subordination. An agreement 

between the lender and borrower 

whereby lien priorities on certain assets 

pledged to secure payment of the 

guaranteed loan will be reduced to a 

position junior to, or on parity with, the 

lien position of another loan (see 

paragraph (h)(1) in section O). 

Technical and economic potential. A 

technology not described in paragraph 

(1) of the definition of ‘‘eligible 

technology’’ is considered to have 

demonstrated ‘‘technical and economic 

potential’’ for commercial application in 

a biorefinery that produces an advanced 

biofuel if each of the following 

conditions is met: 

(1) The advanced biofuel biorefinery’s 

likely financial and production success 

is evidenced in a thorough evaluation 

including, but not limited to: 

(i) Feedstocks; 

(ii) Process engineering; 

(iii) Siting; 

(iv) Technology; 

(v) Energy production; and 

(vi) Financial and sensitivity review 

using an banking industry software 

analysis program with appropriate 

industry standards. 

(2) The evaluation in paragraph (1) of 

this definition is completed by an 

independent third-party expert in a 

feasibility study, technical report, or 

other analysis, each of which must be 

satisfactory to the Agency, that 

demonstrates the success of the project. 

(3) The advanced biofuel technology 

has a least a 12-month (four season) 

operating cycle at semi-work scale. 

Transfer and assumption. The 

conveyance by a debtor to an assuming 

party of the assets, collateral, and 

liabilities of the loan in return for the 

assuming party’s binding promise to pay 

the outstanding debt. 

Viable commercial-scale. An 

operation is considered to a viable 

commercial-scale operation if it meets 

each of the following conditions: 

(1) Evidence that a proposed project’s 

revenue will be sufficient to recover the 

full cost of the project over the term of 

the guaranteed loan, service debt, and 

result in an anticipated annual rate of 

return sufficient to encourage investors 

or lenders to provide funding for the 

project. 

(2) Such proposed project will be able 

to operate profitably without public and 

private sector subsidies upon 

completion of construction (volumetric 

excise tax is not included as a subsidy). 

(3) Contracts for feedstocks are 

adequate to address proposed off-take 

from the biorefinery. 

(4) The proposed project demonstrates 

the ability to achieve market entry, 

suitable infrastructure to transport the 

advanced biofuel to its market is 

available, and general market 

competitiveness of the advanced biofuel 

technology and related products. 

(5) The project must demonstrate that 

it can be easily replicated and that 

replications can be sited at multiple 

facilities across a wide geographic area 

based on the proposed deployment 

plan. 

(6) The advanced biofuel technology 

has at least a 12-month (four season) 

operating history at semi-work scale, 

which demonstrates the ability to 

operate at a commercial scale. 

B. Exception Authority 

Except as specified in paragraphs (a) 

through (d) of this section, the 

Administrator may, on a case-by-case 

basis, make exceptions to any 

requirement or provision of this Notice 

only when such an exception is in the 

best financial interests of the Federal 

Government and is otherwise not in 

conflict with applicable law. 

(a) Lender and borrower eligibility. No 

exception to lender or borrower 

eligibility can be made. 

(b) Project eligibility. No exception to 

project eligibility can be made. 

(c) Term length. No exception to the 

maximum length of the loan term can be 

made with respect to loan originations. 

(d) Rural area definition. No 

exception to the definition of rural area, 

as defined in this Notice, can be made. 

C. Review or Appeals 

A person has review or appeal rights 

in accordance with 7 CFR part 11. 

D. Conflicts of Interest 

No conflict of interest or appearance 

of conflict of interest will be allowed. 

For purposes of this Notice, conflict of 

interest includes, but is not limited to, 

distribution or payment of guaranteed 

loan funds or award of project contracts 

to an individual owner, partner, 

stockholder, or beneficiary of the lender 

or borrower or an immediate family 

member of such an individual. 

E. Oversight and Monitoring 

(a) General. The lender will cooperate 

fully with Agency oversight and 

monitoring of all lenders involved in 

any manner with any guarantee under 

this Program to ensure compliance with 

the provisions in this Notice. Such 

oversight and monitoring will include, 

but is not limited to, reviewing lender 

records and meeting with lenders. 

(b) Reports and notifications. The 

Agency will require lenders to submit to 

the Agency reports and notifications to 

facilitate the Agency’s oversight and 

monitoring. These reports and 

notifications include, but are not 

necessarily limited to: 

(1) During construction, the lender 

will submit quarterly construction 

progress reports to the Agency. These 

reports will contain, at a minimum, 

construction milestone attainment, loan 

advances, and personnel hiring, 

training, and retention. 

(2) Periodic reports, to be submitted 

quarterly unless otherwise specified in 

the Conditional Commitment, regarding 

the condition of its Agency guaranteed 

loan portfolio (including borrower 

status and loan classification) and any 

material change in the general financial 

condition of the borrower since the last 

periodic report was submitted. 

(3) Monthly default reports, including 

borrower payment history, for each loan 

in monetary default using a form 

approved by the Agency. 

(4) Notification within 15 days of: 

(i) Any loan agreement violation by 

any borrower, including when a 

borrower is 30 days past due or is 

otherwise in default; 

(ii) Any permanent or temporary 

reduction in interest rate; and 

(iii) Any change in the loan 

classification of any loan made under 

this Notice. 

(5) If a lender receives a final loss 

payment, an annual report on its 

collection activities for each unsatisfied 

account for 3 years following payment 

of the final loss claim. 

F. Forms, Regulations, and Instructions 

Copies of all forms, regulations, and 

instructions referenced in this Notice 

may be obtained through the Agency. 


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Basic Eligibility Requirements 

G. Borrower Eligibility 

To be eligible for a guaranteed loan 

under this Program, a borrower must 

meet each of the conditions specified in 

the following paragraphs, as applicable. 

(a) The borrower must be one of the 

following: 

(1) An individual; 

(2) An Indian tribe; 

(3) A unit of State or local 

government; 

(4) A corporation; 

(5) A farm cooperative; 

(6) A farmer cooperative organization; 

(7) An association of agricultural 

producers; 

(8) A National Laboratory; 

(9) An institution of higher education; 

(10) A rural electric cooperative; 

(11) A public power entity; or 

(12) A consortium of any of the above 

entities. 

(b) Individual borrowers must either: 

(1) Be citizens of the United States 

(U.S.), the Republic of Palau, the 

Federated States of Micronesia, the 

Republic of the Marshall Islands, or 

American Samoa, or 

(2) Reside in the U.S. after legal 

admittance for permanent residence. 

(c) Entities other than individuals 

must be at least 51 percent owned by 

persons who are either citizens as 

identified above or legally admitted 

permanent residents residing in the U.S. 

When an entity owns an interest in the 

borrower, its citizenship will be 

determined by the citizenship of the 

individuals who own an interest in the 

entity or any sub-entity based on their 

ownership interest. 

(d) Each borrower must have, or 

obtain, the legal authority necessary to 

construct, operate, and maintain the 

proposed facility and services and to 

obtain, give security for, and repay the 

proposed loan. 

(e) A borrower will be considered 

ineligible for a guarantee under this 

Program if either the borrower or any 

owner with more than 20 percent 

ownership interest in the borrower 

(i) Has an outstanding judgment 

obtained by the U.S. in a Federal Court 

(other than U.S. Tax Court), 

(ii) Is delinquent on the payment of 

Federal income taxes, 

(iii) Is delinquent on Federal debt, or 

(iv) Is debarred or suspended from 

receiving Federal assistance. 

H. Project Eligibility 

Projects eligible for loan guarantees 

under this Program must meet the 

criteria specified in this section. 

(a) The project must be located in a 

rural area. 

(b) The project must be for either: 

(1) The development and construction 

of commercial-scale biorefineries using 

eligible technology or 

(2) The retrofitting of existing 

facilities, including, but not limited to, 

wood products facilities and sugar 

mills, with eligible technology. 

(c) The project must be for the 

production of advanced biofuels that are 

either: 

(1) Transportation fuels that meet the 

Renewable Fuel Standard or are 

currently undergoing an appeal to the 

U.S. Environmental Protection Agency 

for inclusion in the Renewable Fuel 

Standard, or 

(2) Non-transportation renewable 

energy that will result in a reduction in 

greenhouse gases. 

(d) The project must meet the 

financial metric criteria specified in 

paragraphs (d)(1) through (d)(3) of this 

section. These financial metric criteria 

shall be calculated from the realistic 

information in the pro forma statements 

or borrower financial statements of a 

typical operating year after the project is 

completed and stabilized. 

(1) A debt coverage ratio of 1.0 or 

higher; 

(2) A debt-to-tangible net worth ratio 

of 4:1 or lower for start-up businesses 

and of 9:1 or lower for existing 

businesses. 

(3) A loan-to-value ratio of no more 

than 1.0. 

I. Lender Eligibility 

To be eligible to participate in this 

Program under this Notice, a lender 

must be a regulated or supervised lender 

and must maintain at all times the 

following minimum acceptable levels of 

capital: 

• Total Risk-Based Capital ratio of 10 

percent or higher; 

• Tier 1 Risk-Based Capital ratio of 6 

percent or higher; and 

• Tier 1 Leverage Capital ratio of 5 

percent or higher. 

If the regulated or supervised lender 

is a commercial bank or thrift, these 

levels would be based on those reflected 

in Call Reports and Thrift Financial 

Reports. 

Further, the Agency will approve loan 

guarantees only for lenders with 

adequate experience with similar 

projects and the expertise to make, 

secure, service, and collect loans 

approved under this Notice. Lenders 

debarred from other Federal credit 

programs will not be eligible under this 

program. 

Basic Application Provisions 

J. Loan Applications 

Applications for loan guarantees, 

which are to be filed with the USDA 

Rural Development National Office’s 

Energy Branch as shown under 

ADDRESSES, must contain the items 

identified in the paragraphs (b)(1) 

through (18), organized pursuant to a 

Table of Contents in a chapter format. 

(a) Table of Contents. 

(b) Project Summary. Provide a 

concise summary of the proposed 

project and application information, 

project purpose and need, and project 

goals, including the following: 

(1) Title. Provide a descriptive title of 

the project. 

(2) Borrower eligibility. Describe how 

the borrower meets the eligibility 

criteria identified in Section II.G of this 

Notice. 

(3) Project eligibility. Describe how 

the project meets the eligibility criteria 

identified in Section II.H of this Notice. 

This description is to provide the reader 

with a frame of reference for reviewing 

the rest of the application. Clearly state 

whether the application is for the 

construction and development of a 

biorefinery or for the retrofitting of an 

existing facility and provide a brief 

description of the project. Provide 

results from demonstration or pilot 

facilities that prove the technology 

proposed to be used meets the 

definition of eligible technology. 

Additional project description 

information will be needed later in the 

application. 

(4) Matching funds. Submit a 

spreadsheet identifying sources, 

amounts, and status of matching funds. 

The spreadsheet must also include a 

directory of matching funds source 

contact information. Attach any 

applications, correspondence, or other 

written communication between 

applicant and matching fund source. 

(5) Application for Loan Guarantee. 

Completed Form RD 4279–1, 

‘‘Application for Loan Guarantee’’ (or 

successor form). 

(6) Environmental information. Form 

RD 1940–20, ‘‘Request for 

Environmental Information;’’ omit the 

attachments specified in the 

instructions to the form; and attach an 

environmental information document 

completed pursuant to 7 CFR part 1940, 

subpart G, Exhibit H. 

(i) Civil Rights Impact Analysis. The 

Agency is responsible for ensuring that 

all requirements of RD Instruction 

2006–P, ‘‘Civil Rights Impact Analysis,’’ 

with the addition of Executive Order 

12898, Environmental Justice, are met 

and will complete the appropriate level 


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of review in accordance with that 

instruction. When guaranteed loans are 

proposed, Agency employees will 

conduct a Civil Rights Impact Analysis 

(CRIA) with regard to environmental 

justice. The CRIA must be conducted 

and the analysis documented utilizing 

Form RD 2006–38, ‘‘Civil Rights Impact 

Analysis Certification.’’ This must be 

done prior to loan approval, obligation 

of funds, or other commitments of 

agency resources, including issuance of 

a Conditional Commitment, whichever 

occurs first. 

(ii) Intergovernmental consultation. 

Intergovernmental consultation 

comments in accordance with RD 

Instruction 1940–J and 7 CFR, part 3015, 

subpart V. 

(7) Credit reports. 

(i) 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. 

(ii) Commercial credit reports 

obtained by the lender on the borrower 

and any parent, affiliate, and subsidiary 

firms. 

(8) Appraisals. Appraisals, 

accompanied by a copy of a Phase I 

Environmental Site Assessment (ESA) 

in accordance with ASTM standards. If 

the appraisal has not been completed 

when the application is filed, an 

estimated appraisal must be submitted 

with the application. In all cases, a 

completed appraisal consistent with 

paragraph (c) in section N must be 

submitted prior to the loan being closed. 

(9) Financial information. For all 

businesses, a current (not more than 90 

days old) balance sheet; a pro forma 

balance sheet at startup; projected 

balance sheets and income and expense 

statements for a period of not less than 

3 years of stabilized operation; and cash 

flow statements for the life of the 

project. Projections should be supported 

by a list of assumptions showing the 

basis for the projections. 

(10) Credit rating. For loans of $125 

million or more, an evaluation and 

credit rating of the total project’s 

indebtedness, without consideration for 

a government guarantee, from a 

nationally-recognized rating agency. 

(11) Lender’s analysis. Lender’s 

complete written analysis of the project, 

including: 

(i) A summary of the technology to be 

used in the project; 

(ii) The viability of such technology 

for the particular project application; 

(iii) Whether the project is retrofit or 

Greenfield; 

(iv) Borrower’s management; 

(v) Repayment ability (including a 

cash-flow analysis); 

(vi) Sponsor’s history of debt 

repayment; 

(vii) Necessity of any debt 

refinancing; 

(viii) The credit reports of the 

borrower, its principals, and any parent, 

affiliate, or subsidiary; and 

(ix) The credit analysis specified in 

Section II.N of this Notice. 

(12) Loan Agreement. 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; 

(iii) Limitation on the purchase or sale 

of equipment and fixed assets; 

(iv) Limitation on compensation of 

officers and owners; 

(v) Financial covenants regarding 

working capital or current ratio 

requirement, and maximum debt-to-net 

worth ratio; 

(vi) Borrower change of control; 

(vii) Repayment and amortization of 

the loan; 

(viii) List of collateral and lien 

priority for the loan; 

(ix) Type and frequency of financial 

statements to be required for the 

duration of the loan. 

(x) A section for the later insertion of 

any additional requirements imposed by 

the Agency in its Conditional 

Commitment; and 

(xi) A section for the later insertion of 

any necessary mitigation measures by 

the borrower to avoid or reduce adverse 

environmental impacts from this 

proposal’s construction or operation. 

(13) Business plan. Submit a business 

plan. Any or all of the requirements in 

the business plan may be omitted if the 

information is included in the feasibility 

study. 

(14) Feasibility study. Submit a 

feasibility study on the proposed 

project. Elements in an acceptable 

feasibility study include, but are not 

limited to, the elements outlined in 

Table 1. In addition, as part of the 

feasibility study, both a technical 

assessment and economic analysis of 

the project are required. These two 

assessments are discussed in detail in 

paragraphs (d) and (e) of this section. 

TABLE 1—FEASIBILITY STUDY COMPONENTS

(A) Executive Summary: 

Introduction/Project Overview (Brief general overview of project location, size, etc.) 

Economic feasibility determination. 

Technical feasibility determination. 

Market feasibility determination. 

Financial feasibility determination. 

Management feasibility determination. 

Recommendations for implementation. 

(B) Economic Feasibility: 

Information regarding project site. 

Availability of trained or trainable labor. 

Availability of infrastructure, including utilities, and rail, air and road service to the site. 

Feedstock: 

Feedstock source management. 

Estimates of feedstock volumes and costs. 

Collection, Pre-Treatment, Transportation, and Storage. 

Document that any and all woody biomass feedstock cannot be used as a higher value wood-based product. 

Impacts on existing manufacturing plants or other facilities that use similar feedstock if the applicant’s proposed biofuel production technology is adopted. 

Project impact on resource conservation, public health, and the environment. 

Overall economic impact of the project including any additional markets created for agricultural and forestry products and agricultural waste 

material and potential for rural economic development. 


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TABLE 1—FEASIBILITY STUDY COMPONENTS—Continued 

Feasibility/plans of project to work with producer associations or cooperatives including estimated amount of annual feedstock and biofuel 

and byproduct dollars from producer associations and cooperatives. 

(C) Market Feasibility: 

Information on the sales organization and management. 

Nature and extent of market and market area. 

Marketing plans for sale of projected output—principle products and by-products. 

Extent of competition including other similar facilities in the market area. 

Commitments from customers or brokers—principle products and by-products. 

Risks Related to the Advanced Biofuel Industry, including industry status. 

(D) Technical Feasibility: 

Suitability of the selected site for the intended use including the information documents Form RD 1940–20 and required narrative in the 7 

CFR part 1940, subpart G Exhibit H format. 

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. Describe the scale of 

development for which the process technology has been proven, i.e. lab (or bench), pilot, or demonstration scale; and the specific volume of the process (expressed either as volume of feedstock processed—tons per unit of time, or as product—gallons per unit of time). 

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. 

Report shall also identify and estimate project operation and development costs and specify the level of accuracy of these estimates and 

the assumptions on which these estimates have been based. 

The Project engineer or architect is considered an independent party provided neither the principal of the firm nor any individual of the firm 

who participates in the technical feasibility report has a financial interest in the project if no other individual or firm with the expertise necessary to make such a determination is reasonably available to perform the function, an individual or firm that is not independent may be 

used. 

Ability of the proposed system to be Commercially Replicated. 

Supports the Renewable Fuel Standards of the U.S. Environmental Protection Agency. 

Risks Related to: 

Construction of the Advanced Biofuel Plant, 

Advanced Biofuel Production, and 

Regulation and Governmental Action. 

(E) Financial Feasibility: 

Reliability of the financial projections and assumptions on which the financial statements are based including all sources of project capital 

both private or public, such as Federal funds. Three Years (minimum) projected Balance Sheets and Income Statements. Cash Flow projections for the life of the project. 

Ability of the business to achieve the projected income and cash flow. 

Assessment of the cost accounting system. 

Availability of short-term credit or other means to meet seasonable business costs. 

Adequacy of raw materials and supplies. 

Sensitivity Analysis—including feedstock and energy costs, product/co-product prices. 

Risks Related to: 

The Project, 

Applicant Financing Plan, 

The operational units, and 

Tax Issues. 

(F) Management Feasibility: 

Continuity and adequacy of management. 

Projected total supply from members and non-members. 

Projected competitive demand for raw materials. 

Procurement plan and projected procurement costs. 

Form of commitment of raw materials (marketing agreements, etc.). 

Identify applicant and/or management’s previous experience concerning the receipt of federal financial assistance, including amount of 

funding, date received, purpose, and outcome. 

Risks Related to: 

Applicant as a Company (i.e. Development-Stage) and Conflicts of Interest. 

(G) Qualifications: 

A resume or statement of qualifications of the author of the feasibility study, including prior experience, should be submitted. 

(15) Lender certifications. 

(i) A certification by the lender stating 

that it has completed a comprehensive 

analysis of the proposal, the borrower is 

eligible, the loan is for an eligible 

project, and there is reasonable 

assurance of repayment ability based on 

the borrower’s history, projections and 

equity, and the collateral to be obtained. 

(ii) A certification by the lender that 

the proposed project will be in 

compliance with all applicable State 

and Federal environmental laws and 

regulations. 

(16) DUNS Number. A Dun and 

Bradstreet Universal Numbering System 

(DUNS) number. 

(17) Bioenergy experience. Identify 

applicant, including principals, prior 

experience in bioenergy projects and the 

receipt of Federal financial assistance, 

including amount of funding, date 

received, purpose, and outcome, for 

such projects. 

(18) Each applicant must provide 

documentation from an Agencyapproved recognized published source 

quantifying the reduction in greenhouse 

gas emissions that results from the 

displacement of fossil fuels. 

(19) Other. Any additional 

information required by the Agency. 

(c) Form modifications. The 

BioRefinery Assistance Program will be 

using the same forms as the Business 

and Industry and Section 9006 programs 

with the understanding that: 

(1) All references in those forms to the 

Business and Industry program or the 

Section 9006 program in whatever 


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manner, and whether referenced 

singularly or jointly, shall be deemed to 

be references to the BioRefinery 

Assistance Program described in this 

Notice, and 

(2) All references to the Business and 

Industry or Section 9006 regulations in 

those forms in whatever manner, 

whether general or specific, whether 

singularly or jointly, and whether or not 

specific Code of Federal Regulation 

citations are used, shall be deemed to be 

a reference to the requirements of the 

BioRefinery Assistance Program 

described in this Notice. In addition, the 

following modifications are to be used 

for this Program. 

(i) Application for Loan Guarantee 

(Form RD 4279–1) is modified as 

described below. 

(A) Part A, Block 10, Type of 

Borrower, do not fill out if your entity 

is not listed. 

(B) Part A, Block 11. Instead of the 

Standard Industrial Classification (SIC) 

Code, fill in your North American 

Industry Classification System (NAICS). 

(C) Part A, Block 22 is not applicable. 

(D) Part A, Block 29, Financial 

Statements. Comply with the financial 

statement requirements in this Notice 

rather than in Block 29. 

(E) Part A, Block 30, which deals with 

guarantors, is not applicable. 

(F) Part A, Block 33, Technical 

Report. Replace Technical Report with 

Feasibility Study, which will include a 

technical assessment of the project. 

(G) Part B, Block 17, which addresses 

equity. Do not fill in this block, but 

instead provide similar information 

according to the equity requirements 

contained in this Notice. 

(H) Part B, Block 22, which addresses 

the lender’s analysis. Attach the lender’s 

analysis as described in this Notice. 

(3) Lender’s Agreement (Form RD 

4279–4), Section I, Item B, is applicable 

with the addition that negligent 

servicing includes any instance where a 

lender fails to ensure that all 

environmental laws are being complied 

with by any person receiving guaranteed 

loan funds under this Program. 

(4) Loan Note Guarantee (Form RD 

4279–5), Section 3, Full Faith and 

Credit, under Conditions of Guarantee is 

applicable with the addition that 

negligent servicing includes any 

instance where a lender fails to ensure 

that all environmental laws are being 

complied with by a person receiving 

guaranteed loan funds under this 

Program. 

(d) Technical Assessment. As part of 

the feasibility study, a detailed technical 

assessment is required for each project. 

The technical assessment must 

demonstrate that the project design, 

procurement, installation, startup, 

operation and maintenance of the 

project will operate or perform as 

specified over its useful life in a reliable 

and a cost effective manner, and must 

identify what the useful life of the 

project is. The technical assessment 

must also identify all necessary project 

agreements, demonstrate that those 

agreements will be in place on or before 

the time of loan closing, and 

demonstrate that necessary project 

equipment and services will be 

available over the useful life. All 

technical information provided must 

follow the format specified in 

paragraphs (d)(1) through (9) below. 

Supporting information may be 

submitted in other formats. Design 

drawings and process flow charts are 

encouraged as exhibits. A discussion of 

each topic identified in paragraphs 

(d)(1) through (9) is not necessary if the 

topic is not applicable to the specific 

project. Questions identified in the 

Agency’s technical review of the project 

must be answered to the Agency’s 

satisfaction before the application will 

be approved. All projects require the 

services of a professional engineer (PE). 

(1) Qualifications of project team. The 

project team will vary according to the 

complexity and scale of the project. The 

project team must have demonstrated 

expertise in similar advanced biofuel 

technology development, engineering, 

installation, and maintenance. 

Authoritative evidence that project team 

service providers have the necessary 

professional credentials or relevant 

experience to perform the required 

services for the development, 

construction, and retrofitting, as 

applicable, of technology for producing 

advanced biofuels must be provided. In 

addition, authoritative evidence that 

vendors of proprietary components can 

provide necessary equipment and spare 

parts for the biorefinery to operate over 

its useful life must be provided. The 

application must: 

(i) Discuss the proposed project 

delivery method. Such methods include 

a design, bid, build where a separate 

engineering firm may design the project 

and prepare a request for bids and the 

successful bidder constructs the project 

at the borrower’s risk, and a design 

build method, often referred to as 

turnkey, where the borrower establishes 

the specifications for the project and 

secures the services of a developer who 

will design and build the project at the 

developer’s risk; 

(ii) Discuss the advanced biofuels 

technology equipment manufacturers of 

major components being considered in 

terms of the length of time in business 

and the number of units installed at the 

capacity and scale being considered; 

(iii) Discuss the project team 

members’ qualifications for engineering, 

designing, and installing advanced 

biofuels refineries including any 

relevant certifications by recognized 

organizations or bodies. Provide a list of 

the same or similar projects designed, 

installed, or supplied and currently 

operating and with references if 

available; and 

(iv) Describe the advanced biofuels 

refinery operator’s qualifications and 

experience for servicing, operating, and 

maintaining such equipment or projects. 

Provide a list of the same or similar 

projects designed, installed, or supplied 

and currently operating and with 

references if available. 

(2) Agreements and permits. All 

necessary agreements and permits 

required for the project and the status 

and schedule for securing those 

agreements and permits, including the 

items specified in paragraphs (2)(i) 

through (vi), must be identified in the 

application. 

(i) Advanced biofuels refineries must 

be installed in accordance with 

applicable local, State, and national 

codes and regulations. Identify zoning 

and code issues, and required permits 

and the schedule for meeting those 

requirements and securing those 

permits. 

(ii) Identify licenses where required 

and the schedule for obtaining those 

licenses. 

(iii) Identify land use agreements 

required for the project and the 

schedule for securing the agreements 

and the term of those agreements. 

(iv) Identify any permits or 

agreements required for solid, liquid, 

and gaseous emissions or effluents and 

the schedule for securing those permits 

and agreements. 

(v) Identify available component 

warranties for the specific project 

location and size. 

(vi) Identify all environmental issues, 

including environmental compliance 

issues, associated with the project. 

(3) Resource assessment. Adequate 

and appropriate evidence of the 

availability of the feedstocks required 

for the advanced biofuels refinery to 

operate as designed must be provided in 

the application. Indicate the type and 

quantity of the feedstock including 

storage, where applicable. Indicate 

shipping or receiving method and 

required infrastructure for shipping, and 

other appropriate transportation 

mechanisms. For proposed projects with 

an established resource, provide a 

summary of the resource. 


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(4) Design and engineering. 

Authoritative evidence that the 

advanced biofuels refinery will be 

designed and engineered so as to meet 

its intended purposes, will ensure 

public safety, and will comply with 

applicable laws, regulations, 

agreements, permits, codes, and 

standards must be provided in the 

application. Projects shall be engineered 

by a qualified entity. Biorefineries must 

be engineered as a complete, integrated 

facility. The engineering must be 

comprehensive including site selection, 

systems and component selection, and 

systems monitoring equipment. 

Biorefineries must be constructed by a 

qualified entity. 

(i) The application must include a 

concise but complete description of the 

project including location of the project; 

resource characteristics, including the 

kind and amount of feedstocks; 

biorefinery specifications; kind, amount, 

and quality of the output; and 

monitoring equipment. Address 

performance on a monthly and annual 

basis. Describe the uses of or the market 

for the advanced biofuels produced by 

the biorefinery. Discuss the impact of 

reduced or interrupted feedstock 

availability on the biorefinery’s 

operations. 

(ii) The application must include a 

description of the project site and 

address issues such as site access, 

foundations, backup equipment when 

applicable, and the environmental 

information documents Form RD 1940– 

20 and required narrative in the 7 CFR 

part 1940, subpart G, Exhibit H format. 

Identify any unique construction and 

installation issues. 

(iii) Sites must be controlled by the 

eligible borrower for at least the 

proposed project life or for the financing 

term of any associated federal loans or 

loan guarantees. 

(5) Project development schedule. 

Each significant task, its beginning and 

end, and its relationship to the time 

needed to initiate and carry the project 

through startup and shakedown must be 

provided in the application. Provide a 

detailed description of the project 

timeline including resource assessment, 

project and site design, permits and 

agreements, equipment procurement, 

and project construction from 

excavation through startup and 

shakedown. 

(6) Equipment procurement. A 

demonstration that equipment required 

by the biorefinery is available and can 

be procured and delivered within the 

proposed project development schedule 

must be provided in the application. 

Biorefineries may be constructed of 

components manufactured in more than 

one location. Provide a description of 

any unique equipment procurement 

issues such as scheduling and timing of 

component manufacture and delivery, 

ordering, warranties, shipping, 

receiving, and on-site storage or 

inventory. 

(7) Equipment installation. A full 

description of the management of and 

plan for site development and systems 

installation, details regarding the 

scheduling of major installation 

equipment needed for project 

construction, and a description of the 

startup and shakedown specification 

and process and the conditions required 

for startup and shakedown for each 

equipment item individually and for the 

biorefinery as a whole must be provided 

in the application. 

(8) Operations and maintenance. The 

operations and maintenance 

requirements of the biorefinery 

necessary for the biorefinery to operate 

as designed over the useful life must be 

provided in the application. The 

application must also include: 

(i) Information regarding available 

biorefinery and component warranties 

and availability of spare parts; 

(ii) A description of the routine 

operations and maintenance 

requirements of the proposed 

biorefinery, including maintenance 

schedule for the mechanical, piping, 

and electrical systems and system 

monitoring and control requirements, as 

well as provision of information that 

supports expected useful life of the 

biorefinery and timing of major 

component replacement or rebuilds; 

(iii) A discussion of the costs and 

labor associated with operations and 

maintenance of the biorefinery and 

plans for in-sourcing or outsourcing. A 

description of the opportunities for 

technology transfer for long term project 

operations and maintenance by a local 

entity or owner/operator; and 

(iv) Provision and discussion of the 

risk management plan for handling 

large, unanticipated failures of major 

components. 

(9) Decommissioning. When 

uninstalling or removing the project, a 

description of the decommissioning 

process. A description of any issues, 

requirements, and costs for removal and 

disposal of the biorefinery. 

(e) Economic Analysis. The feasibility 

study must also contain a detailed 

economic analysis of the project. The 

economic analysis must describe the 

costs and revenues of the proposed 

project to demonstrate the financial 

performance of the project by: 

(1) Providing a detailed analysis and 

description of project costs including 

project management, resource 

assessment, project design, project 

permitting, land agreements, equipment, 

site preparation, systems installation, 

startup and shakedown, warranties, 

insurance, financing, professional 

services, and operations and 

maintenance costs; 

(2) Providing a detailed analysis and 

description of annual project revenues 

and expenses over the useful life of the 

project; 

(3) Providing a detailed description of 

applicable investment incentives, 

productivity incentives, loans, and 

grants; and 

(4) Identifying any other project 

authorities and subsidies that affect the 

project. 

K. Evaluation of Guaranteed Loan 

Applications 

(a) General review. The Agency will 

utilize a panel of reviewers, including 

Rural Development field staff and U.S. 

Department of Energy staff, to review 

each application. Each application will 

be evaluated to confirm that both the 

borrower and project are eligible, the 

project has technical merit, there is 

reasonable assurance of repayment, 

there is sufficient collateral and equity, 

and the proposed project complies with 

all applicable statutes and regulations. 

(1) 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. 

(2) In the case where an Agency 

receives an application that is 

undergoing an appeal before the U.S. 

Environmental Protection Agency for 

inclusion in the Renewable Fuel 

Standard, the Agency will be unable to 

finalize processing of the application 

until the appeal has been completed. 

(b) Ineligible applications. If the 

borrower, lender, or the project is 

determined to be ineligible for any 

reason, the Agency will inform the 

lender, in writing, of the reasons and 

provide any applicable appeal rights. No 

further evaluation of the application 

will occur. 

(c) Incomplete applications. If the 

application is incomplete, the Agency 

will identify those parts of the 

application that are incomplete and 

return it, with a written explanation, to 

the lender for possible future 

resubmission. Upon receipt of a 

complete application, if submitted 

within the proper deadlines noted in 

this Notice, the Agency will complete 

its evaluation. 

(d) Technical merit determination. 

The Agency’s determination of a 

project’s technical merit will be based 

on the information in the application. 


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The Agency may engage the services of 

other government agencies or 

recognized industry experts in the 

applicable technology field, at its 

discretion, to evaluate and rate the 

application. The Agency may use this 

evaluation and rating to determine the 

level of technical merit of the proposed 

project. Projects determined by the 

Agency to be without technical merit 

will not be selected for funding. 

(e) Evaluation criteria. The Agency 

will score each eligible application that 

meets the minimum requirements for 

financial and technical feasibility, based 

on the evaluation criteria identified 

below. A minimum score of 40 points is 

required in order to be considered for a 

guarantee. The Agency will give priority 

to those applications with the highest 

scores above the minimum threshold. A 

maximum of 100 points is possible. 

(1) Whether the borrower has 

established a market for the advanced 

biofuel and the byproducts produced. A 

maximum of 5 points can be awarded. 

Points to be awarded will be determined 

as follows: 

(i) If the business has less than or 

equal to a 50 percent commitment for 

feedstocks, marketing agreements for the 

advanced biofuel, and the byproducts 

produced, 0 points will be awarded. 

(ii) If the business has a greater than 

50 percent commitment for feedstocks, 

marketing agreements for the advanced 

biofuel and the byproducts produced, 5 

points will be awarded. 

(2) Whether the area in which the 

borrower proposes to place the 

biorefinery has other similar advanced 

biofuel facilities. A maximum of 5 

points can be awarded. Points to be 

awarded will be determined as follows: 

(i) If the biorefinery will be located in 

a trade area that has other advanced 

biofuel facilities, with area defined as 

‘‘within the area supplying the 

feedstock,’’ 0 points will be awarded. 

(ii) If the biorefinery will be located 

in a trade area that does not have other 

advanced biofuel facilities, with area 

defined as ‘‘within the area supplying 

the feedstock,’’ 5 points will be awarded. 

(3) Whether the borrower is proposing 

to use a feedstock not previously used 

in the production of advanced biofuels. 

A maximum of 14 points can be 

awarded. Points to be awarded will be 

determined as follows: 

(i) If the borrower proposes to use a 

feedstock previously used in the 

production of advanced biofuels in a 

commercial facility, 0 points will be 

awarded. 

(ii) If the borrower proposes to use a 

feedstock not previously used in 

production of advanced biofuels in a 

commercial facility, 14 points will be 

awarded. 

(4) Whether the borrower is proposing 

to work with producer associations or 

cooperatives. A maximum of 5 points 

can be awarded. Points to be awarded 

will be determined as follows: 

(i) If the borrower procurement or 

marketing agreements amount to less 

than or equal to 50 percent of annual 

feedstock and biofuel and byproduct 

dollars with producer associations or 

cooperatives, 0 points will be awarded. 

(ii) If the borrower procurement or 

marketing agreements amount to more 

than 50 percent of annual feedstock and 

biofuel and byproduct dollars with 

producer associations or cooperatives, 5 

points will be awarded. 

(5) The level of financial participation 

by the borrower, including support from 

non-Federal and private sources. Such 

financial participation may take the 

form of direct financial support, 

technical support, and contributions of 

in-kind resources including financial or 

other support from state or local 

government. A maximum of 20 points 

can be awarded. Other Direct Federal 

funding will not be considered as part 

of the borrower’s cash equity 

participation. Points to be awarded will 

be determined as follows: 

(i) If the borrower’s cash equity 

injection plus other sources is equal to 

or greater than 30 percent, but less than 

40 percent, tangible balance sheet 

equity, 10 points will be awarded. 

(ii) If the borrower’s cash equity 

injection plus other sources is equal to 

or greater than 40 percent tangible 

balance sheet equity, 20 points will be 

awarded. 

(iii) If a project uses other Federal 

direct funding, 10 points will be 

deducted. 

(6) Whether the borrower has 

established that the adoption of the 

process proposed in the application will 

have a positive impact on resource 

conservation, public health, and the 

environment. A maximum of 9 points 

can be awarded. Points to be awarded 

will be determined as follows: 

(i) If process adoption will have a 

positive impact on resource 

conservation, 3 points will be awarded. 

(ii) If process adoption will have a 

positive impact on public health, 3 

points will be awarded. 

(iii) If process adoption will have a 

positive impact on environment, 3 

points will be awarded. 

(7) Whether the borrower can 

establish that, if adopted, the biofuels 

production technology proposed in the 

application will not have any significant 

negative impacts on existing 

manufacturing plants or other facilities 

that use similar feedstocks. A maximum 

of 5 points can be awarded. Points to be 

awarded will be determined as follows: 

(i) If the borrower has not established, 

through an independent third party, that 

the biofuels production technology 

proposed in the application, if adopted, 

will not have any significant negative 

impacts on existing manufacturing 

plants or other facilities that use similar 

feed stocks, 0 points will be awarded. 

(ii) Applicant has established, through 

an independent third party, that the 

biofuels production technology 

proposed in the application, if adopted, 

will not have any significant negative 

impacts on existing manufacturing 

plants or other facilities that use similar 

feed stocks, 5 points will be awarded. 

(8) The potential for rural economic 

development. If the business creates 

jobs with an average wage that exceeds 

both the State and County median 

household wages, 3 points will be 

awarded. 

(9) The level of local ownership 

proposed in the application. A 

maximum of 13 points can be awarded. 

Points to be awarded will be determined 

as follows: 

(i) If local ownership is greater than 

20 percent, with area defined as ‘‘within 

the area supplying the feedstock,’’ up to 

6 points will be awarded. 

(ii) If local ownership is greater than 

50 percent, with area defined as ‘‘within 

the area supplying the feedstock,’’ 13 

points will be awarded. 

(10) Whether the project can be 

replicated. A maximum of 5 points can 

be awarded. Points to be awarded will 

be determined as follows: 

(i) If the project can be commercially 

replicated regionally (e.g., Northeast, 

Southwest, etc.), 2 points will be 

awarded. 

(ii) If the project can be commercially 

replicated nationally, up to 5 points will 

be awarded. 

(11) The extent to which the project 

converts cellulosic biomass feedstocks 

into advanced biofuels. A maximum of 

6 points can be awarded. 

(i) If 50% or less of the amount of 

advanced biofuels produced by the 

project is derived from cellulosic 

renewable biomass feedstocks, then 0 

points will be awarded. 

(ii) If more than 50% of the amount 

of advanced biofuels produced by the 

project is from cellulosic renewable 

biomass feedstocks, then 6 points will 

be awarded. 

(12) If the project is a first-of-a-kind 

technology, system, or process, 10 

points will be awarded. 


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L. Loan Approval and Obligating Funds 

(a) Environmental review. The Agency 

has reviewed the types of applicant 

proposals that may qualify for assistance 

under this section and has determined, 

in accordance with 7 CFR Part 1940–G, 

that all proposals shall be reviewed as 

a Class II Environmental Assessment 

(EA) as the development of new and 

emerging technologies would not meet 

the classification of a Categorical 

Exclusion (CE) in accordance with 7 

CFR Part 1940.310 or a Class I EA in 

accordance with 7 CFR Part 1940.311. 

Furthermore, if after Agency review of 

proposals the Agency has determined 

that the proposal could result in 

significant environmental impacts on 

the quality of the human environment, 

an Environmental Impact Statement 

may be required pursuant to 7 CFR Part 

1940.313. 

(b) Conditional Commitment. Upon 

approval of a loan guarantee, the 

Agency will issue a Conditional 

Commitment to the lender containing 

conditions, including all applicable 

regulatory, statutory, and other 

requirements, under which a Loan Note 

Guarantee will be issued. One of the 

conditions shall be that the project 

receiving guaranteed loan funds under 

this Program will be in compliance with 

all applicable State and Federal 

environmental laws and regulations. 

The Conditional Commitment is a 

binding obligation by the Agency. 

However, if the terms of the Conditional 

Commitment are not satisfied, the 

Commitment is no longer binding on the 

Agency. 

(c) Alternate conditions. 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. 

(d) Wage rates. As a condition of 

receiving a loan guaranteed under this 

Program, each borrower shall ensure 

that all laborers and mechanics 

employed by contractors or 

subcontractors in the performance of 

construction work financed in whole or 

in part with Guaranteed Loan Funds 

under this Notice shall be paid wages at 

rates not less than those prevailing on 

similar construction in the locality as 

determined by the Secretary of Labor in 

accordance with sections 3141 through 

3144, 3146, and 3147 of title 40, U.S.C. 

Awards under this Notice are further 

subject to the relevant regulations 

contained in title 29 of the Code of 

Federal Regulations. 

M. Lender’s Functions and 

Responsibilities—General 

All lenders requesting or obtaining a 

loan guarantee under this Notice are 

responsible for: 

(a) Processing applications for 

guaranteed loans; 

(b) Developing and maintaining 

adequately documented loan files; 

(c) Recommending only loan 

proposals that are eligible and 

financially feasible; 

(d) Obtaining valid evidence of debt 

and collateral in accordance with sound 

lending practices; 

(e) Supervising construction; 

(f) Distribution of loan funds; 

(g) Servicing guaranteed loans in a 

prudent manner, including liquidation 

if necessary; 

(h) Following Agency regulations; and 

(i) Obtaining Agency approvals or 

concurrence as required. 

N. Lender’s Functions and 

Responsibilities—Origination 

(a) Credit evaluation. The lender must 

determine credit quality of the 

borrower, including the following: 

(1) The lender must address all of the 

elements of credit quality in a written 

credit analysis, including cash flow, 

collateral, and adequacy of equity. 

(i) Cash flow. All efforts will be made 

to structure debt so that the business has 

adequate debt coverage and the ability 

to accommodate expansion. 

(ii) Collateral. Collateral must have 

documented value sufficient to protect 

the interest of the lender and the 

Agency, as determined by the Agency. 

(iii) Equity. Borrowers shall 

demonstrate evidence of cash equity 

injection in the project of not less than 

20 percent of eligible project costs. The 

fair market value of equity in real 

property that is to be pledged as 

collateral for the loan may be 

substituted in whole or in part to meet 

the cash equity requirement. However, 

the appraisal completed to establish the 

fair market value of the real property 

must not be more than 1 year old and 

must meet Agency appraisal standards. 

Otherwise, cash equity injection must 

be in the form of cash. 

(2) The credit analysis must also 

include spreadsheets of the balance 

sheets and income statements of the 

borrower for the 3 previous years (for 

existing businesses), pro forma balance 

sheets at startup, and projected yearend 

balance sheets and income statements 

for a period of not less than 3 years of 

stabilized operation, with appropriate 

ratios and comparisons with industrial 

standards (such as Dun & Bradstreet or 

Robert Morris Associates) to the extent 

available. 

(3) 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. 

(b) 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 or be secured by 

separate collateral. The guarantee will 

be secured by a first lien on all collateral 

necessary to run the project in the event 

of the borrower’s default including, 

without limitation, all real property, 

contracts and permits, and all 

furnishings, fixtures, and equipment of 

the project. In addition, the lender and 

the Agency should be shown as an 

additional insured on insurance policies 

(or other risk sharing instruments) that 

benefit the project and must be able to 

assume any contracts that are material 

to running the project including any 

feedstock or offtake agreements. 

(c) Appraisals. Lenders are required to 

provide real property and chattel 

collateral appraisals conducted by an 

independent qualified appraiser in 

accordance with the Uniform Standards 

of Professional Appraisal Practices or 

successor standards. 

(1) All appraisals used to establish the 

fair market value of the real property 

must not be more than 1 year old. 

(2) 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. 

(3) A complete self-contained 

appraisal must be conducted. 

(4) Lenders must complete, for all 

applications, a Phase I Environmental 

Site Assessment (ESA) in accordance 

with ASTM standards, which should be 

provided to the appraiser for completion 

of the self-contained appraisal. Lenders 

shall use specialized appraisers. 

(d) Construction planning and 

performing development. 

(1) Design Policy. The lender must 

ensure that all project facilities will 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 using the 

available funds and, once completed, 

will be used for its intended purpose 


jlentini on DSKJ8SOYB1PROD with NOTICES2
25088 Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 

and produce products in the quality and 

quantity proposed in the completed 

application approved by the Agency. 

(2) Project Control. The lender will 

monitor the progress of construction 

and undertake the reviews and 

inspections necessary to ensure that 

construction conforms to 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. The lender will provide a 

resident inspector. 

(3) Changes or cost overruns. The 

borrower shall be responsible for any 

changes or cost overruns. If any such 

change or cost overrun occurs, then any 

change order must be expressly 

approved by the Agency which approval 

shall not be unreasonably withheld, and 

neither the lender nor borrower will 

divert funds from purposes identified in 

the guaranteed loan application to pay 

for any such change or cost overrun 

without the express written approval of 

the Agency. In no event will the current 

loan be modified or a subsequent 

guaranteed loan be approved to cover 

any such changes or costs. Failure to 

comply with the terms of this paragraph 

will be considered a material adverse 

change in the borrower’s financial 

condition, and the lender must address 

this matter, in writing, to the Agency’s 

satisfaction. In the event any of the 

aforementioned increases in costs and/ 

or expenses are incurred by the 

borrower, the borrower must provide for 

such increases in a manner that there is 

no diminution of the borrower’s 

operating capital. 

(4) New draws. The following two 

certifications are required for each new 

draw: 

(i) Certification by the project 

engineer to the lender that the work 

referred to in the draw has been 

successfully completed; and 

(ii) Certification from the lender that 

all debts have been paid and all 

mechanics’ liens have been waived. 

(e) Laws that contain other 

compliance requirements. Each lender 

and borrower must comply with: 

(1) Equal Credit Opportunity Act. In 

accordance with title V of Public Law 

93–495, the Equal Credit Opportunity 

Act, with respect to any aspect of a 

credit transaction, neither the lender nor 

the Agency will discriminate against 

any applicant on the basis of race, color, 

religion, national origin, sex, marital 

status or age (providing the applicant 

has the capacity to contract), or because 

all or part of the applicant’s income 

derives from a public assistance 

program, or because the applicant has, 

in good faith, exercised any right under 

the Consumer Protection Act. The 

lender will comply with the 

requirements of the Equal Credit 

Opportunity Act as contained in the 

Federal Reserve Board’s Regulation 

implementing that Act (see 12 CFR part 

202). Such compliance will be 

accomplished prior to loan closing. 

(2) Equal opportunity. For all 

construction contracts in excess of 

$10,000, the contractor must comply 

with Executive Order 11246, ‘‘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. 

(3) Americans with Disabilities Act 

(ADA). Guaranteed loans that 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. 

(4) Environmental analysis. Each 

lender and borrower must comply with 

the environmental analysis identified in 

7 CFR part 1940, subpart G, which 

outlines environmental procedures and 

requirements for this Notice. Each 

proposal will be evaluated to determine 

the proper level of National 

Environmental Policy Act (NEPA) 

review on a case-by-case basis by the 

Agency’s environmental staff. The 

lender’s borrower will cooperate with 

the Agency in the preparation of the 

environmental review. Prospective 

borrowers are advised to contact the 

Agency to determine environmental 

requirements as soon as practicable after 

they decide to pursue any form of 

financial assistance directly or 

indirectly available through the Agency. 

(i) Any required environmental 

review must be completed by the 

Agency prior to the Agency obligating 

any funds. 

(ii) The borrower will be notified of 

all specific compliance requirements, 

including, but not limited to, the 

publication of public notices, and 

consultation with State Historic 

Preservation Offices and the U.S. Fish 

and Wildlife Service. 

(iii) A site visit by the Agency may be 

scheduled, if necessary, to determine 

the scope of the review. 

(iv) A borrower taking any actions or 

incurring any obligations prior to or 

during application review and 

processing that would either limit the 

range of alternatives to be considered or 

that would have an adverse effect on the 

environment, such as the initiation of 

construction, may result in project 

ineligibility. 

(f) Environmental responsibilities. 

Lenders have a responsibility to become 

familiar with Federal environmental 

requirements; to consider, in 

consultation with the prospective 

borrower, the potential environmental 

impacts of their proposals at the earliest 

planning stages; and to develop 

proposals that minimize the potential to 

adversely impact the environment. 

Lenders must alert the Agency to any 

controversial environmental issues 

related to a proposed project or items 

that may require extensive 

environmental review at the time of the 

application as well as after the loan 

closes if unforeseen events take place. 

Lenders must ensure that their 

borrowers complete Form RD 1940–20; 

omit the attachments specified in the 

instructions to the form; and attach an 

environmental information document 

completed pursuant to 7 CFR part 1940, 

subpart G, Exhibit H; assist in the 

collection of additional data when the 

Agency needs such data to complete its 

environmental review of the proposal; 

and assist in the resolution of 

environmental problems. 

(g) Loan closing. The lender or its 

designated representative is responsible 

for loan closings. At the closing, the 

lender will ensure that all the 

conditions in the Agency’s Conditional 

Commitment have been met. 

O. Lender’s Functions and 

Responsibilities—Servicing 

General 

(a) Routine servicing. The lender is 

responsible for servicing the entire loan 

and for taking all servicing actions that 

a prudent lender would perform in 

servicing its own portfolio of loans that 

are not guaranteed. 

(1) The lender must service the entire 

loan and must remain mortgagee and 

secured party of record notwithstanding 

the fact that another party may hold a 

portion of the loan. 

(2) The Loan Note Guarantee is 

unenforceable by the lender to the 

extent any loss is occasioned by 

violation of usury laws, use of loan 

funds for unauthorized purposes, 

negligent servicing, or failure to obtain 

the required security interest regardless 

of the time at which the Agency 

acquires knowledge of the foregoing. 

This responsibility includes, but is not 

limited to, the collection of payments, 

obtaining compliance with the 

covenants and provisions in the loan 

agreement, obtaining and analyzing 

financial statements, checking on 

payment of taxes and insurance 


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premiums, and maintaining liens on 

collateral. 

(b) Loan classification. Within 90 

days of receipt of the Loan Note 

Guarantee, the lender must notify the 

Agency of the loan’s classification or 

rating under its regulatory standards. 

Should the classification be changed at 

a future time, the Agency must be 

notified within 15 days. 

(c) Insurance requirements. The 

lender must ensure that the borrower 

has obtained, and will maintain for the 

life of the guaranteed loan, all necessary 

insurance coverage appropriate to the 

proposed project, in accordance with 

the lender’s loan origination policies 

and procedures or what a reasonably 

prudent lender requires, whichever is 

more stringent. 

(d) Financial reports. The lender must 

obtain and forward to the Agency the 

financial statements required by the 

loan agreement or the Conditional 

Commitment. 

(1) The lender must submit to the 

Agency: 

(i) Quarterly financial statements 

within 45 days of the end of each 

quarter and 

(ii) Annual audited financial 

statements within 120 days of the end 

of the borrower’s fiscal year. 

(2) The lender must analyze the 

financial statements and provide the 

Agency with a written summary of the 

lender’s analysis and conclusions, 

including trends, strengths, weaknesses, 

extraordinary transactions, and other 

indications of the financial condition of 

the borrower. Spreadsheets of the new 

financial statements must be included. 

(e) Requirements after construction. 

(1) Reports. In addition to complying 

with the requirements for loan 

servicing, once the project has been 

constructed, the lender must provide 

the Agency periodic reports from the 

borrower commencing the first full 

calendar year following the year in 

which project construction was 

completed and continuing for the life of 

the guaranteed loan. The borrower’s 

reports will include, but not be limited 

to, the information specified in the 

following paragraphs, as applicable. 

(i) The actual amount of advanced 

biofuels produced to assess whether 

project goals are being met. 

(ii) If applicable, documentation that 

identified health and/or sanitation 

problem has been solved. 

(iii) A summary of the cost of 

operating and maintaining the facility. 

(iv) Description of any maintenance or 

operational problems associated with 

the facility. 

(v) Demonstration that the project is 

and has been in compliance with all 

applicable State and Federal 

environmental laws and regulations. 

(vi) The number of jobs created. 

(vii) A description on the status of the 

project’s feedstock including, but not 

limited to, the feedstock being used, 

outstanding feedstock contracts, 

feedstock changes and interruptions, 

and quality of the feedstock. 

(2) Inspections. The lender shall 

conduct annual inspections of the 

project for the life of the guaranteed 

loan. 

(f) Release of collateral. 

(1) All releases of collateral with a 

value exceeding $100,000 must be 

supported by a current appraisal on the 

collateral released. The appraisal will be 

at the expense of the borrower and must 

meet the appraisal requirements 

contained in this Notice. The remaining 

collateral must be sufficient to provide 

for repayment of the Agency’s 

guaranteed loan. The Agency may, at its 

discretion, require an appraisal of the 

remaining collateral in cases where it is 

determined that the Agency may be 

adversely affected by the release of 

collateral. Sale or release of collateral 

must be based on an arm’s-length 

transaction. 

(2) Within the parameters of the 

paragraph (f)(1): 

(i) Lenders may, over the life of the 

guaranteed loan, release collateral with 

a cumulative value of up to 20 percent 

of the original loan amount without 

Agency concurrence if the proceeds 

generated are used to reduce the 

guaranteed loan or to buy replacement 

collateral. 

(ii) Release of collateral with a 

cumulative value in excess of 20 percent 

of the original loan or when the 

proceeds will not be used to reduce the 

guaranteed loan or to buy replacement 

collateral, must be requested, in writing, 

by the lender and concurred by the 

Agency, in writing, in advance of the 

release. A written evaluation will be 

completed by the lender to justify the 

release. 

(g) Loan transfer and assumption. 

(1) Subject to approval by the lender 

and the Agency and the payment to the 

Agency of a one percent fee, loans are 

assumable. Assumption shall be deemed 

to occur in the event of a change in the 

control of the borrower. For purposes of 

the loan, change of control means the 

merger, sale of all or substantially all of 

the assets of the borrower, or the sale of 

more than 25 percent of the stock or 

other equity interest of either the 

borrower or its corporate parent. 

(2) All loan transfers and assumptions 

must comply with the following: 

(i) Documentation of request. All 

transfers and assumptions must be 

approved, in writing, by the Agency and 

must be to eligible borrowers. 

(ii) Terms. Loan terms must not be 

changed unless the change is approved, 

in writing, by the Agency with the 

concurrence of any holder and the 

transferor, if they have not been or will 

not be released from liability. Any new 

loan terms must be within the terms 

authorized by this Notice. The Agency 

cannot approve deals unless all 

statutory, regulatory, and budgetary 

requirements are met. The lender’s 

request for approval of new loan terms 

will be supported by an explanation of 

the reasons for the proposed change in 

loan terms. The Agency will not 

approve any change in terms that results 

in an increase in the cost of the loan 

guarantee, unless the Agency can secure 

any additional budget authority that 

would be required. 

(iii) Release of liability. The transferor 

may be released from liability only with 

prior Agency written concurrence and 

only when the value of the collateral 

being transferred is at least equal to the 

amount of the loan being assumed and 

is supported by a current appraisal and 

a current financial statement. The 

Agency will not pay for the appraisal. If 

the transfer is for less than the debt, the 

lender must demonstrate to the Agency 

that the transferor has no reasonable 

debt-paying ability considering their 

assets and income in the foreseeable 

future. 

(iv) Proceeds. Any proceeds received 

from the sale of collateral before a 

transfer and assumption will be credited 

to the transferor’s guaranteed loan debt 

in inverse order of maturity before the 

transfer and assumption are closed. 

(v) Additional loans. Loans to provide 

additional funds in connection with a 

transfer and assumption must be 

considered as a new loan application 

under the provisions of this Notice. 

(vi) Credit quality. The lender must 

make a complete credit analysis of the 

proposed borrower and the project 

which is subject to Agency review and 

approval. 

(vii) Documents. Prior to Agency 

approval, the lender must advise the 

Agency, in writing, that the transaction 

can be properly and legally transferred, 

and the conveyance instruments will be 

filed, registered, or recorded as 

appropriate. 

(A) The assumption will be done on 

the lender’s form of assumption 

agreement and will contain the Agency 

case number of the transferor and 

transferee. The lender will provide the 

Agency with a copy of the transfer and 

assumption agreement. The lender must 

ensure that all transfers and 


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assumptions are noted on all original 

Loan Note Guarantees. 

(B) The lender will provide to the 

Agency a written certification that the 

transfer and assumption is valid, 

enforceable, and complies with all 

Agency regulations. 

(viii) Loss resulting from transfer. If a 

loss should occur upon consummation 

of a complete transfer and assumption 

for less than the full amount of the debt 

and the transferor is released from 

liability, the lender, if it holds the 

guaranteed portion, may file Form RD 

449–30, ‘‘Loan Note Guaranteed Report 

of Loss,’’ to recover its pro rata share of 

the actual loss. If a holder owns any of 

the guaranteed portion, such portion 

must be repurchased by the lender or 

the Agency in accordance with the 

provisions of this Notice. In completing 

the report of loss the amount of the debt 

assumed will be entered as net collateral 

(recovery). Approved protective 

advances and accrued interest thereon 

made during the arrangement of a 

transfer and assumption will be 

included in the calculations. 

(ix) Related party. If the transferor and 

transferee are affiliated or related 

parties, any transfer and assumption 

must be for the full amount of the debt. 

(x) Cash downpayment. When the 

transferee will be making a cash 

downpayment as part of the transfer and 

assumption: 

(A) The lender must have an 

appropriate appraiser, acceptable to 

both the transferee and transferor and 

currently authorized to perform 

appraisals, determine the value of the 

collateral securing the loan. The 

appraisal fee and any other costs will 

not be paid by the Agency. 

(B) The market value of the collateral, 

plus any additional property the 

transferee proposes to offer as collateral, 

must be adequate to secure the balance 

of the guaranteed loans, as determined 

by the Agency. 

(C) Cash downpayments may be paid 

directly to the transferor provided: 

(1) The lender recommends that the 

cash be released, and the Agency 

concurs prior to the transaction being 

completed. The lender may wish to 

require that an amount be retained for 

a defined period of time as a reserve 

against future defaults. Interest on such 

account may be paid periodically to the 

transferor or transferee as agreed; 

(2) The lender determines that the 

transferee has the repayment ability to 

meet the obligations of the assumed 

guaranteed loan as well as any other 

indebtedness; 

(3) Any payments by the transferee to 

the transferor will not suspend the 

transferee’s obligations to continue to 

meet the guaranteed loan payments as 

they come due under the terms of the 

assumption; and 

(4) The transferor agrees not to take 

any action against the transferee in 

connection with the assumption 

without prior written approval of the 

lender and the Agency. 

(h) Subordination of lien position. A 

subordination of the lender’s lien 

position must be requested, in writing, 

by the lender and concurred, in writing, 

by the Agency in advance of the 

subordination. Agency concurrence 

requires that: 

(1) The subordination be in the best 

financial interests of the Federal 

government; 

(2) The lien to which the guaranteed 

loan is subordinated is for a fixed dollar 

limit; 

(3) Lien priorities remain for the 

portion of the loan that was not 

subordinated; and 

(4) The subordination does not extend 

the term of the guaranteed loan, and in 

no event exceeds more than 3 years. 

(i) Repurchase from holder. 

(1) Repurchase by lender. A lender 

has the option to repurchase the unpaid 

guaranteed portion of the loan from a 

holder within 30 days of written 

demand by the holder when the 

borrower is in default not less than 60 

days on principal or interest due on the 

loan; or the lender has failed to remit to 

the holder its pro rata share of any 

payment made by the borrower within 

30 days of the lender’s receipt thereof. 

The repurchase by the lender will be for 

an amount equal to the unpaid 

guaranteed portion of principal and 

accrued interest less the lender’s 

servicing fee. The holder must 

concurrently send a copy of the demand 

letter to the Agency. The guarantee will 

not cover the note interest to the holder 

on the guaranteed loan accruing after 90 

days from the date of the demand letter 

to the lender requesting the repurchase. 

The lender will accept an assignment 

without recourse from the holder upon 

repurchase. The lender is encouraged to 

repurchase the loan to facilitate the 

accounting of funds, resolve the 

problem, and prevent default, where 

and when reasonable. The lender will 

notify the holder and the Agency of its 

decision. 

(2) Agency purchase. 

(i) If the lender does not repurchase 

the unpaid guaranteed portion of the 

loan as provided in paragraph (1) of this 

section, the Agency will purchase from 

the holder the unpaid principal balance 

of the guaranteed portion together with 

accrued interest to the date of 

repurchase, less the lender’s servicing 

fee, within 30 days after written demand 

to the Agency from the holder. (This is 

in addition to the copy of the written 

demand on the lender.) The guarantee 

will not cover the note interest to the 

holder on the guaranteed loan accruing 

after 90 days from the date of the 

original demand letter of the holder to 

the lender requesting the repurchase. 

(ii) The holder’s demand to the 

Agency must include a copy of the 

written demand made upon the lender. 

The holder must also include evidence 

of its right to require payment from the 

Agency. Such evidence will consist of 

either the original of the Loan Note 

Guarantee properly endorsed to the 

Agency or the original of the 

Assignment Guarantee Agreement 

properly assigned to the Agency without 

recourse including all rights, title, and 

interest in the loan. The holder must 

include in its demand the amount due 

including unpaid principal, unpaid 

interest to date of demand, and interest 

subsequently accruing from date of 

demand to proposed payment date. The 

Agency will be subrogated to all rights 

of the holder. 

(iii) The Agency will notify the lender 

of its receipt of the holder’s demand for 

payment. The lender must promptly 

provide the Agency with the 

information necessary for the Agency to 

determine the appropriate amount due 

the holder. Upon request by the Agency, 

the lender will furnish a current 

statement certified by an appropriate 

authorized officer of the lender of the 

unpaid principal and interest then owed 

by the borrower on the loan and the 

amount then owed to any holder. Any 

discrepancy between the amount 

claimed by the holder and the 

information submitted by the lender 

must be resolved between the lender 

and the holder before payment will be 

approved. Such conflict will suspend 

the running of the 30 day payment 

requirement. 

(iv) Purchase by the Agency neither 

changes, alters, nor modifies any of the 

lender’s obligations to the Agency 

arising from the loan or guarantee nor 

does it waive any of Agency’s rights 

against the lender. The Agency will 

have the right to set off against the 

lender all rights inuring to the Agency 

as the holder of the instrument against 

the Agency’s obligation to the lender 

under the guarantee. 

(3) Repurchase for servicing. If, in the 

opinion of the lender, repurchase of the 

guaranteed portion of the loan is 

necessary to adequately service the loan, 

the holder must sell the guaranteed 

portion of the loan to the lender for an 

amount equal to the unpaid principal 

and interest on such portion less the 

lender’s servicing fee. The guarantee 


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will not cover the note interest to the 

holder on the guaranteed loan accruing 

after 90 days from the date of the 

demand letter of the lender or the 

Agency to the holder requesting the 

holder to tender its guaranteed portion. 

The lender must not repurchase from 

the holder for arbitrage or other 

purposes to further its own financial 

gain. Any repurchase must only be 

made after the lender obtains the 

Agency’s written approval. If the lender 

does not repurchase the portion from 

the holder, the Agency may, at its 

option, purchase such guaranteed 

portion for servicing purposes. 

(j) Additional loans. The lender may 

make additional expenditures or new 

loans to a borrower with an outstanding 

loan guaranteed under this Notice only 

with prior written Agency approval. The 

Agency will only approve additional 

expenditures or new loans to the extent 

such actions where the expenditure or 

loan will not violate one or more of the 

loan covenants of the borrower’s loan 

agreement. In all instances, the lender 

must notify the Agency when they make 

any additional expenditures or new 

loans. In all cases, any additional 

expenditure or loan made by the lender 

must be junior in priority to the loan 

guaranteed hereunder. 

(k) Default by borrower. 

(1) The lender must notify the Agency 

when a borrower is 30 days past due on 

a payment or is otherwise in default of 

the loan agreement. Form RD 1980–44, 

‘‘Guaranteed Loan Borrower Default 

Status,’’ will be used and the lender will 

continue to submit this form bimonthly 

until such time as the loan is no longer 

in default. If a monetary default exceeds 

60 days, the lender will arrange a 

meeting with the Agency and the 

borrower to resolve the problem. 

(2) In considering options, the 

prospect for providing a permanent cure 

without adversely affecting the risk to 

the Agency and the lender is the 

paramount objective. 

(i) Curative actions include but are 

not limited to: 

(A) Deferment of principal (subject to 

rights of any holder); 

(B) An additional unguaranteed loan 

by the lender to bring the account 

current; 

(C) Reamortization of or rescheduling 

the payments on the loan (subject to 

rights of any holder); 

(D) Transfer and assumption of the 

loan in accordance with the provisions 

in this Notice; 

(E) Reorganization; 

(F) Liquidation; 

(G) Subsequent loan guarantees; and 

(H) Changes in interest rates with the 

Agency’s, the lender’s, and holder’s 

approval, provided that the interest rate 

is adjusted proportionately between the 

guaranteed and unguaranteed portion of 

the loan. 

(ii) In the event a deferment, 

rescheduling, reamortization, or 

moratorium is accomplished, it will be 

limited to the remaining life of the 

collateral or remaining limits as 

contained in the loan term provisions in 

this Notice, whichever is less. 

(l) Protective advances. Protective 

advances are advances made by the 

lender for the purpose of preserving and 

protecting the collateral where the 

debtor has failed to, will not, or cannot 

meet its obligations. Sound judgment 

must be exercised in determining that 

the protective advance preserves 

collateral and recovery is actually 

enhanced by making the advance. 

Protective advances will not be made in 

lieu of additional loans. 

(1) The maximum loss to be paid by 

the Agency will never exceed the 

original principal plus accrued interest 

regardless of any protective advances 

made. 

(2) Protective advances and interest 

thereon at the note rate will be 

guaranteed at the same percentage of 

loss as provided in the Loan Note 

Guarantee. 

(3) Protective advances must 

constitute an indebtedness of the 

borrower to the lender and be secured 

by the security instruments. Agency 

written authorization is required when 

cumulative protective advances exceed 

$200,000. 

(m) Liquidation. In the event of one or 

more incidents of default or third-party 

actions that the borrower cannot or will 

not cure or eliminate within a 

reasonable period of time, liquidation 

may be considered. If the lender 

concludes that liquidation is necessary, 

it must request the Agency’s 

concurrence. The lender will liquidate 

the loan unless the Agency, at its 

option, carries out liquidation. When 

the decision to liquidate is made, if the 

loan has not already been repurchased, 

provisions will be made for repurchase 

in accordance with the repurchase from 

holder provisions in this Notice. 

(1) Decision to liquidate. A decision to 

liquidate shall be made when it is 

determined that the default cannot be 

cured through actions identified in this 

Notice or it has been determined that it 

is in the best financial interest of the 

Federal government and the lender to 

liquidate. The decision to liquidate or 

continue with the borrower must be 

made as soon as possible when any of 

the following exist: 

(i) A loan has been delinquent 90 days 

and the lender and borrower have not 

been able to cure the delinquency 

through one of the actions identified in 

this Notice. 

(ii) It has been determined that 

delaying liquidation will jeopardize full 

recovery on the loan. 

(iii) The borrower or lender has been 

uncooperative in resolving the problem 

and the Agency or the lender has reason 

to believe the borrower is not acting in 

good faith, and it would enhance the 

position of the guarantee to liquidate 

immediately. 

(2) Liquidation by the Agency. The 

Agency may require the lender to assign 

the security instruments to the Agency 

if the Agency, at its option, decides to 

liquidate the loan. When the Agency 

liquidates, reasonable liquidation 

expenses will be assessed against the 

proceeds derived from the sale of the 

collateral. Form RD 1980–45, ‘‘Notice of 

Liquidation Responsibility,’’ will be 

forwarded to the Finance Office when 

the Agency liquidates the loan. 

(3) Submission of liquidation plan. 

The lender will, within 30 days after a 

decision to liquidate, submit to the 

Agency, in writing, its proposed 

detailed method of liquidation. Upon 

approval by the Agency of the 

liquidation plan, the lender will 

commence liquidation. 

(4) Lender’s liquidation plan. The 

liquidation plan must include, but is not 

limited to, the following: 

(i) Such proof as the Agency requires 

to establish the lender’s ownership of 

the guaranteed loan promissory note 

and related security instruments and a 

copy of the payment ledger if available 

which reflects the current loan balance 

and accrued interest to date and the 

method of computing the interest. 

(ii) A full and complete list of all 

collateral. 

(iii) The recommended liquidation 

methods for making the maximum 

collection possible on the indebtedness 

and the justification for such methods, 

including recommended action for 

acquiring and disposing of all collateral. 

(iv) Necessary steps for preservation 

of the collateral. 

(v) Copies of the borrower’s latest 

available financial statements. 

(vi) An itemized list of estimated 

liquidation expenses expected to be 

incurred along with justification for 

each expense. 

(vii) A schedule to periodically report 

to the Agency on the progress of 

liquidation. 

(viii) Estimated protective advance 

amounts with justification. 

(ix) Proposed protective bid amounts 

on collateral to be sold at auction and 

a breakdown to show how the amounts 

were determined. 


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(x) If a voluntary conveyance is 

considered, the proposed amount to be 

credited to the guaranteed debt. 

(xi) Legal opinions, if needed. 

(xii) The lender will obtain an 

independent appraisal report meeting 

the requirements of appraisal 

requirements in this Notice on all 

collateral securing the loan which will 

reflect the fair market value and 

potential liquidation value. In order to 

formulate a liquidation plan which 

maximizes recovery, collateral must be 

evaluated for the release of hazardous 

substances, petroleum products, or 

other environmental hazards which may 

adversely impact the market value of the 

collateral. Both the estimate and the 

appraisal shall consider this aspect. The 

independent appraiser’s fee, including 

the cost of a Phase I Environmental Site 

Assessment (ESA) in accordance with 

ASTM standards, will be shared equally 

by the Agency and the lender. 

(5) Approval of liquidation plan. The 

Agency will inform the lender, in 

writing, whether it concurs in the 

lender’s liquidation plan. Should the 

Agency and the lender not agree on the 

liquidation plan, negotiations will take 

place between the Agency and the 

lender to resolve the disagreement. 

When the liquidation plan is approved 

by the Agency, the lender will proceed 

expeditiously with liquidation. 

(i) A transfer and assumption of the 

borrower’s operation can be 

accomplished before or after the loan 

goes into liquidation. However, if the 

collateral has been purchased through 

foreclosure or the borrower has 

conveyed title to the lender, no transfer 

and assumption is permitted. 

(ii) A protective bid may be made by 

the lender, with prior Agency written 

approval, at a foreclosure sale to protect 

the lender’s and the Agency’s interest. 

The protective bid will not exceed the 

amount of the loan, including expenses 

of foreclosure, and should be based on 

the liquidation value considering 

estimated expenses for holding and 

reselling the property. These expenses 

include, but are not limited to, expenses 

for resale, interest accrual, length of 

time necessary for resale, maintenance, 

guard service, weatherization, and prior 

liens. 

(iii) Under no circumstances will the 

Agency pay more than 90 days of 

additional accrued interest once the 

liquidation plan is approved. 

(6) Acceleration. The lender, or the 

Agency if it liquidates, will proceed to 

accelerate the indebtedness as 

expeditiously as possible when 

acceleration is necessary including 

giving any notices and taking any other 

legal actions required. A copy of the 

acceleration notice or other acceleration 

document will be sent to the Agency (or 

lender if the Agency liquidates). The 

guaranteed loan will be considered in 

liquidation once the loan has been 

accelerated and a demand for payment 

has been made upon the borrower. 

(7) Filing an estimated loss claim. 

When the lender is conducting the 

liquidation and owns any or all of the 

guaranteed portion of the loan, the 

lender will file an estimated loss claim 

once a decision has been made to 

liquidate if the liquidation will exceed 

90 days. The estimated loss payment 

will be based on the liquidation value 

of the collateral. For the purpose of 

reporting and loss claim computation, 

the lender will discontinue interest 

accrual on the defaulted loan in 

accordance with Agency procedures, 

and the loss claim will be promptly 

processed in accordance with applicable 

Agency regulations. 

(8) Accounting and reports. When the 

lender conducts liquidation, it will 

account for funds during the period of 

liquidation and will provide the Agency 

with reports at least quarterly on the 

progress of liquidation including 

disposition of collateral, resulting costs, 

and additional procedures necessary for 

successful completion of the 

liquidation. 

(9) Transmitting payments and 

proceeds to the Agency. When the 

Agency is the holder of a portion of the 

guaranteed loan, the lender will 

transmit to the Agency its pro rata share 

of any payments received from the 

borrower; liquidation; or other proceeds 

using Form RD 1980–43, ‘‘Lender’s 

Guaranteed Loan Payment to USDA.’’ 

(10) Abandonment of collateral. There 

may be instances when the cost of 

liquidation would exceed the potential 

recovery value of the collection. The 

lender, with proper documentation and 

concurrence of the Agency, may 

abandon the collateral in lieu of 

liquidation. A proposed abandonment 

will be considered a servicing action 

requiring the appropriate environmental 

review by the Agency in accordance 

with subpart G of part 1940 of this title. 

Examples where abandonment may be 

considered include, but are not limited 

to: 

(i) The cost of liquidation is increased 

or the value of the collateral is 

decreased by environmental issues; 

(ii) The collateral is functionally or 

economically obsolete; 

(iii) The collateral has deteriorated; or 

(iv) The collateral is specialized and 

there is little or no demand for it. 

(11) Recovery and deficiency 

judgments. The lender should take 

action to maximize recovery from all 

collateral. The lender will seek a 

deficiency judgment when there is a 

reasonable chance of future collection of 

the judgment. The lender must make a 

decision whether or not to seek a 

deficiency judgment when: 

(i) A borrower voluntarily liquidates 

the collateral, but the sale fails to pay 

the guaranteed indebtedness; 

(ii) The collateral is voluntarily 

conveyed to the lender; or 

(iii) A liquidation plan is being 

developed for forced liquidation. 

(12) Compromise settlement. A 

compromise settlement may be 

considered at any time. 

(i) The lender and the Agency must 

receive complete financial information 

on all parties obligated for the loan and 

must be satisfied that the statements 

reflect the true and correct financial 

position of the debtor including all 

assets. Adequate consideration must be 

received before a release from liability is 

issued. Adequate consideration includes 

money, additional security, or other 

benefit to the goals and objectives of the 

Agency. 

(ii) Once the Agency and the lender 

agree on a reasonable amount that is fair 

and adequate, the lender can proceed to 

effect the compromise settlement. 

(iii) A compromise will only be 

accepted if it is in the best financial 

interest of the Federal government. 

(n) Determination of loss and 

payment. In all liquidation cases, final 

settlement will be made with the lender 

after the collateral is liquidated, unless 

otherwise designated as a future 

recovery or after settlement and 

compromise of all parties has been 

completed. The Agency will have the 

right to recover losses paid under the 

guarantee from any party which may be 

liable. 

(1) Report of loss form. Form RD 449– 

30 will be used for calculations of all 

estimated and final loss determinations. 

Estimated loss payments may only be 

approved by the Agency after the 

Agency has approved a liquidation plan. 

(2) Estimated loss. In accordance with 

the requirements of 7 CFR part 4287, an 

estimated loss claim based on 

liquidation appraisal value will be 

prepared and submitted by the lender. 

(i) The estimated loss payment shall 

be applied as of the date of such 

payment. The total amount of the loss 

payment remitted by the Agency will be 

applied by the lender on the guaranteed 

portion of the loan debt. Such 

application does not release the 

borrower from liability. 

(ii) An estimated loss will be applied 

first to reduce the principal balance on 

the guaranteed loan and the balance, if 

any, to accrued interest. Interest accrual 


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on the defaulted loan will be 

discontinued. 

(iii) A protective advance claim will 

be paid only at the time of the final 

report of loss payment, except in certain 

transfer and assumption situations as 

specified in 7 CFR part 4287. 

(3) Final loss. Within 30 days after 

liquidation of all collateral is 

completed, a final report of loss must be 

prepared and submitted by the lender to 

the Agency. The Agency will not 

guarantee interest beyond this 30-day 

period other than for the period of time 

it takes the Agency to process the loss 

claim. Before approval by the Agency of 

any final loss report, the lender must 

account for all funds during the period 

of liquidation, disposition of the 

collateral, all costs incurred, and any 

other information necessary for the 

successful completion of liquidation. 

Upon receipt of the final accounting and 

report of loss, the Agency may audit all 

applicable documentation to determine 

the final loss. The lender will make its 

records available and otherwise assist 

the Agency in making any investigation. 

The documentation accompanying the 

report of loss must support the amounts 

shown on Form RD 449–30. 

(i) The lender must document that all 

of the collateral has been accounted for 

and properly liquidated and that 

liquidation proceeds have been properly 

accounted for and applied correctly to 

the loan. 

(ii) The lender will show a breakdown 

of any protective advance amount as to 

the payee, purpose of the expenditure, 

date paid, and evidence that the amount 

expended was proper and that payment 

was actually made. 

(iii) The lender will show a 

breakdown of liquidation expenses as to 

the payee, purpose of the expenditure, 

date paid, and evidence that the amount 

expended was proper and that payment 

was actually made. Liquidation 

expenses are recoverable only from 

collateral proceeds. Attorney fees may 

be approved as liquidation expenses 

provided the fees are reasonable and 

cover legal issues pertaining to the 

liquidation that could not be properly 

handled by the lender and its in-house 

counsel. 

(iv) Accrued interest will be 

supported by documentation as to how 

the amount was accrued. If the interest 

rate was a variable rate, the lender will 

include documentation of changes in 

both the selected base rate and the loan 

rate. 

(v) Loss payments will be paid by the 

Agency within 60 days after the review 

of the final loss report and accounting 

of the collateral. 

(4) Loss limit. The amount payable by 

the Agency to the lender cannot exceed 

the limits set forth in the Loan Note 

Guarantee. 

(5) Rent. Any net rental or other 

income that has been received by the 

lender from the collateral will be 

applied on the guaranteed loan debt. 

(6) Liquidation costs. Liquidation 

costs will be deducted from the 

proceeds of the disposition of collateral. 

If changed circumstances after 

submission of the liquidation plan 

require a substantial revision of 

liquidation costs, the lender will 

procure the Agency’s written 

concurrence prior to proceeding with 

the proposed changes. No in-house 

expenses of the lender will be allowed. 

In-house expenses include, but are not 

limited to, employee’s salaries, staff 

lawyers, travel, and overhead. 

(7) Payment. When the Agency finds 

the final report of loss to be proper in 

all respects, it will approve Form RD 

449–30 and proceed as follows: 

(i) If the loss is greater than any 

estimated loss payment, the Agency will 

pay the additional amount owed by the 

Agency to the lender. 

(ii) If the loss is less than the 

estimated loss payment, the lender will 

reimburse the Agency for the 

overpayment plus interest at the note 

rate from the date of payment. 

(iii) If the Agency has conducted the 

liquidation, it will pay the lender in 

accordance with the Loan Note 

Guarantee. 

(o) Future recovery. After a loan has 

been liquidated and a final loss has been 

paid by the Agency, any future funds 

which may be recovered by the lender 

will be pro-rated between the Agency 

and the lender based on the original 

percentage of guarantee. 

(p) Bankruptcy. The lender is 

responsible for protecting the 

guaranteed loan and all collateral 

securing the loan in bankruptcy 

proceedings. 

(1) Lender’s responsibilities. It is the 

lender’s responsibility to protect the 

guaranteed loan debt and all of the 

collateral securing it in bankruptcy 

proceedings. These responsibilities 

include, but are not limited to, the 

following: 

(i) The lender will file a proof of claim 

where necessary and all the necessary 

papers and pleadings concerning the 

case. 

(ii) The lender will attend and, where 

necessary, participate in meetings of the 

creditors and all court proceedings. 

(iii) When permitted by the 

Bankruptcy Code, the lender will 

request modification of any plan of 

reorganization whenever it appears that 

additional recoveries are likely. 

(iv) The Agency will be kept 

adequately and regularly informed, in 

writing, of all aspects of the 

proceedings. 

(v) In a Chapter 11 reorganization, if 

an independent appraisal of collateral is 

necessary in the Agency’s opinion, the 

Agency and the lender will share such 

appraisal fee equally. 

(2) Reports of loss during bankruptcy. 

When the loan is involved in 

reorganization proceedings, payment of 

loss claims may be made as provided in 

this section. For a liquidation 

proceeding, only paragraphs (p)(2)(iii) 

and (v) of this section are applicable. 

(i) Estimated loss payments. 

(A) If a borrower has filed for 

protection under Chapter 11 of the 

United States Code for a reorganization 

(but not Chapter 13) and all or a portion 

of the debt has been discharged, the 

lender will request an estimated loss 

payment of the guaranteed portion of 

the accrued interest and principal 

discharged by the court. Only one 

estimated loss payment is allowed 

during the reorganization. All 

subsequent claims of the lender during 

reorganization will be considered 

revisions to the initial estimated loss. A 

revised estimated loss payment may be 

processed by the Agency, at its option, 

in accordance with any court-approved 

changes in the reorganization plan. 

Once the reorganization plan has been 

completed, the lender is responsible for 

submitting the documentation necessary 

for the Agency to review and adjust the 

estimated loss claim to reflect any actual 

discharge of principal and interest and 

to reimburse the lender for any courtordered interest-rate reduction under 

the terms of the reorganization plan. 

(B) The lender will use Form RD 449– 

30 to request an estimated loss payment 

and to revise any estimated loss 

payments during the course of the 

reorganization plan. The estimated loss 

claim, as well as any revisions to this 

claim, will be accompanied by 

documentation to support the claim. 

(C) Upon completion of a 

reorganization plan, the lender will 

complete a Form RD 1980–44 and 

forward this form to the Finance Office. 

(ii) Interest loss payments. 

(A) Interest losses sustained during 

the period of the reorganization plan 

will be processed in accordance with 

paragraph (p)(2)(i) of this section. 

(B) Interest losses sustained after the 

reorganization plan is completed will be 

processed annually when the lender 

sustains a loss as a result of a permanent 

interest rate reduction which extends 


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beyond the period of the reorganization 

plan. 

(C) If an estimated loss claim is paid 

during the operation of the Chapter 11 

reorganization plan and the borrower 

repays in full the remaining balance 

without an additional loss sustained by 

the lender, a final report of loss is not 

necessary. 

(iii) Final loss payments. Final loss 

payments will be processed when the 

loan is liquidated. 

(iv) Payment application. The lender 

must apply estimated loss payments 

first to the unsecured principal of the 

guaranteed portion of the debt and then 

to the unsecured interest of the 

guaranteed portion of the debt. In the 

event a bankruptcy court attempts to 

direct the payments to be applied in a 

different manner, the lender will 

immediately notify the Agency servicing 

office. 

(v) Overpayments. Upon completion 

of the reorganization plan, the lender 

will provide the Agency with the 

documentation necessary to determine 

whether the estimated loss paid equals 

the actual loss sustained. If the actual 

loss sustained as a result of the 

reorganization is less than the estimated 

loss, the lender will reimburse the 

Agency for the overpayment plus 

interest at the note rate from the date of 

payment of the estimated loss. If the 

actual loss is greater than the estimated 

loss payment, the lender will submit a 

revised estimated loss in order to obtain 

payment of the additional amount owed 

by the Agency to the lender. 

(vi) Protective advances. If approved 

protective advances were made prior to 

the borrower having filed bankruptcy, 

these protective advances and accrued 

interest will be considered in the loss 

calculations. 

(3) Legal expenses during bankruptcy 

proceedings. 

(i) When a bankruptcy proceeding 

results in a liquidation of the borrower 

by a trustee, legal expenses will be 

handled as directed by the court. 

(ii) Chapter 11 pertains to a 

reorganization of a business 

contemplating an ongoing business 

rather than a termination and 

dissolution of the business where legal 

protection is afforded to the business as 

defined under Chapter 11 of the 

Bankruptcy Code. Consequently, 

expenses incurred by the lender in a 

Chapter 11 reorganization can never be 

liquidation expenses unless the 

proceeding becomes a Chapter 11 

liquidation. If the proceeding should 

become a Liquidating 11, reasonable 

and customary liquidation expenses 

may be deducted from proceeds of 

collateral as provided in the Lender’s 

Agreement. Chapter 7 pertains to a 

liquidation of the borrower’s assets. If, 

and when, liquidation of the borrower’s 

assets under Chapter 7 is conducted by 

the bankruptcy trustee, then the lender 

cannot claim expenses. 

P. Basic Borrower Provisions 

(a) The borrower must allow the 

Agency access to the project and its 

performance information until the loan 

is repaid in full and permit periodic 

inspection of the project by a 

representative of the Agency. 

(b) The borrower must permit 

representatives of the Agency (or other 

agencies of the U.S.) to inspect and 

make copies of any records pertaining to 

any Agency guaranteed loan during 

regular office hours of the borrower or 

at any other time upon agreement 

between the borrower and the Agency, 

as appropriate. 

Q. Basic Guarantee and Loan Provisions 

(a) Conditions of guarantee. A loan 

guarantee under this Notice will be 

evidenced by a Loan Note Guarantee 

issued by the Agency. Each lender will 

execute a Lender’s Agreement. If a valid 

Lender’s Agreement already exists, it is 

not necessary to execute a new Lender’s 

Agreement with each loan guarantee. 

The provisions of this Notice will apply 

to all outstanding guarantees. In the 

event of a conflict between the 

guarantee documents and this Notice as 

they exist at the time the documents are 

executed, the Notice will control. To the 

extent that the Agency publishes a 

regulation whose provisions are 

inconsistent with the terms of this 

Notice, the terms of this Notice shall 

control for loan guarantees entered into 

pursuant to this Notice. 

(b) Full faith and credit. A guarantee 

under this Notice constitutes an 

obligation supported by the full faith 

and credit of the United States and is 

incontestable except for fraud or 

misrepresentation of which a lender or 

holder has actual knowledge at the time 

it becomes such lender or holder or 

which a lender or holder participates in 

or condones. The guarantee will be 

unenforceable to the extent that any loss 

is occasioned by a provision for interest 

on interest. In addition, the guarantee 

will be unenforceable by the lender to 

the extent any loss is occasioned by the 

violation of usury laws, negligent 

servicing, or failure to obtain the 

required security regardless of the time 

at which the Agency acquires 

knowledge thereof. Any losses 

occasioned will be unenforceable to the 

extent that loan funds are used for 

purposes other than those specifically 

approved by the Agency in its 

Conditional Commitment. The Agency 

will guarantee payment as follows: 

(1) To any holder, 100 percent of any 

loss sustained by the holder on the 

guaranteed portion of the loan and on 

interest due on such portion. 

(2) To the lender, the lesser of: 

(i) Any loss sustained by the lender 

on the guaranteed portion, including 

principal and interest evidenced by the 

notes or assumption agreements and 

secured advances for protection and 

preservation of collateral made with the 

Agency’s authorization; or 

(ii) The guaranteed principal 

advanced to or assumed by the borrower 

and any interest due thereon. 

(c) Soundness of guarantee. All loans 

guaranteed under this Notice must be 

financially sound and feasible, with 

reasonable assurance of repayment. 

(d) Rights and liabilities. When a 

portion of the guaranteed loan is sold to 

a holder, the holder shall succeed to all 

rights of the lender under the Loan Note 

Guarantee to the extent of the portion 

purchased. The lender will remain 

bound to all obligations under the Loan 

Note Guarantee, Lender’s Agreement, 

and the Agency program regulations. A 

guarantee and right to require purchase 

will be directly enforceable by a holder 

notwithstanding any fraud or 

misrepresentation by the lender or any 

unenforceability of the guarantee by the 

lender, except for fraud or 

misrepresentation of which the holder 

has actual knowledge at the time it 

becomes the holder or in which the 

holder participates or condones. 

(1) In the event of material fraud, 

negligence or misrepresentation by the 

lender or the lender’s participation in or 

condoning of such material fraud, 

negligence or misrepresentation, the 

lender will be liable for payments made 

by the Agency to any holder. 

(2) A lender will receive all payments 

of principal and interest on account of 

the entire loan and will promptly remit 

to the holder its pro rata share thereof, 

determined according to its respective 

interest in the loan, less only the 

lender’s servicing fee. 

(e) Interest rates. 

(1) General. The interest rate for the 

guaranteed loan will be negotiated 

between the lender and the applicant. 

The interest rate charged must be in line 

with interest rates on other similar 

government guaranteed loan programs, 

and is subject to Agency review and 

approval. 

(i) The interest rate may be either 

fixed or variable, as long as it is a legal 

rate, and shall be fully amortizing. 

(ii) The interest rate for both the 

guaranteed and unguaranteed portions 


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of the loan must be of the same type 

(i.e., both fixed or both variable). 

(iii) The guaranteed and unguaranteed 

portions of the loan can bear interest at 

different rates, provided that the 

blended rate on the entire guaranteed 

loan shall not exceed the rate on the 

guaranteed portion of the loan by more 

than one (1) percent. 

(iv) Both portions of the loan must 

amortize at the same rate. 

(2) Variable rates. A variable interest 

rate agreed to by the lender and 

borrower must be based on published 

indices, such as the Prime Rate, 

applicable Treasury rate, or the London 

Inter Bank Offering Rate (LIBOR), and 

agreed to by the lender and the Agency. 

Variable rates should have either an 

internal or external interest rate cap. 

(i) 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 no less than yearly to prevent 

negative amortization, and must be 

specified in the loan agreement. 

(ii) Variable rate loans will not 

provide for negative amortization nor 

will they give the borrower the ability 

to choose its payment among various 

options. 

(iii) 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. 

(iv) 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. 

(3) Interest changes. 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. Such 

changes are subject to the restrictions 

set forth in the following paragraphs. 

(i) Reductions. The borrower, lender, 

and holder (if any) may collectively 

initiate a permanent or temporary 

reduction in the interest rate of the 

guaranteed loan at any time during the 

life of the loan upon written agreement 

among these parties. The Agency must 

be notified by the lender, in writing, 

within 15 days of the change. If any of 

the guaranteed portion has been 

purchased by the Agency, then the 

Agency will affirm or reject interest rate 

change proposals in writing. The 

Agency will concur in such interest-rate 

changes only when it is demonstrated to 

the Agency that the change is a more 

viable alternative than initiating or 

proceeding with liquidation of the loan 

or continuing with the loan in its 

present state. 

(A) Fixed rates can be changed to 

variable rates to reduce the borrower’s 

interest rate only when the variable rate 

has a ceiling for the life of the 

guaranteed loan that is less than or 

equal to the original fixed rate. 

(B) The interest rates, after 

adjustments, must comply with the 

requirements for interest rates on new 

loans as established under this Notice. 

(C) The lender is responsible for the 

legal documentation of interest-rate 

changes by an endorsement or any other 

legally effective amendment to the 

promissory note; however, no new notes 

may be issued. Copies of all legal 

documents must be provided to the 

Agency. 

(ii) Increases. Increases in interest 

rates are not permitted beyond what is 

provided in the loan documents. 

Increases from a variable interest rate to 

a higher interest rate that is a fixed rate 

are allowed, subject to concurrence by 

the Agency. 

(f) Term length, schedule, and 

repayment. 

(1) The repayment term for a loan 

under this Notice will be for a 

maximum period of 20 years or 85 

percent of the useful life of the project, 

as determined by the lender and 

confirmed by the Agency, whichever is 

less. The length of the loan term shall 

be the same for both the guaranteed and 

unguaranteed portion of the loan. 

(2) The first installment of principal 

may be scheduled for payment after the 

project is operational and has begun to 

generate income. However, the first full 

installment of principal must be due 

and payable within 3 years from the 

date of the Promissory Note and be paid 

at least annually thereafter. Interest 

payments will be paid at least annually 

from the date of the note. 

(3) Only loans that require a periodic 

payment schedule that will retire the 

debt over the term of the loan without 

a balloon payment will be guaranteed 

(i.e., the loan will fully amortize over its 

life without any balloon payment due at 

maturity). 

(4) The maturity of a loan will be 

based on the use of proceeds, the useful 

life of the assets being financed, and the 

borrower’s ability to repay. The lender 

may apply the maximum guidelines 

specified above only when the loan 

cannot be repaid over a shorter term. 

(5) Guarantees must be provided only 

after consideration is given to the 

borrower’s overall credit quality and to 

the terms and conditions of any 

applicable subsidies, tax credits, and 

other such incentives. 

(6) A principal plus interest 

repayment schedule is permissible. 

(7) The lender will determine the 

particular prepayment provisions to 

offer, subject to concurrence by the 

Agency. 

(g) Guaranteed Loan Funding. 

(1) Maximum amount. The maximum 

principal amount of a loan guaranteed 

under this Program is $250 million. 

There is no minimum amount. The 

amount of a loan guaranteed under this 

Program will be reduced by the amount 

of other direct Federal funding that the 

eligible borrower receives for eligible 

project costs. 

(2) Maximum guarantee. The 

maximum guarantee on the principal 

and interest due on a loan guaranteed 

under this Program is as follows: 

(i) If the loan amount is equal to or 

less than $80 million, 80%; 

(ii) If the loan amount is more than 

$80 million and less than $125 million, 

80% on the first $80 million and 70% 

on the loan amount that is greater than 

$80 million; and 

(iii) If the loan amount is equal to or 

more than $125 million, 60%. 

(3) Percentage of eligible project cost. 

The amount of a loan guaranteed for a 

project under this Program will not 

exceed 80 percent of total eligible 

project costs. Eligible project costs are 

only those costs associated with the 

items listed in paragraphs (g)(3)(i) 

through (ix) below, as long as the items 

are an integral and necessary part of the 

total project. 

(i) Purchase and installation of 

equipment (new, refurbished, or 

remanufactured), except agricultural 

tillage equipment, used equipment, and 

vehicles. 

(ii) Construction or retrofitting, except 

residential. 

(iii) Permit and license fees; 

(iv) Professional service fees, except 

for application preparation; 

(v) Feasibility studies; 

(vi) Business plans; 

(vii) Working capital; 

(viii) Land acquisition; and 

(ix) Cost of financing, excluding 

guarantee and renewal fees. 

(h) Guarantee and other fees 

(1) Guarantee fee. For any loan, the 

guarantee fee will be paid to the Agency 

by the lender at the time the Loan Note 

Guarantee is requested, and is 

nonrefundable. 

(i) The guarantee fee will be 

calculated by multiplying the 

outstanding principal balance by the 

percentage of the loan that is guaranteed 

under this program by the guarantee fee 


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rate shown below. The guarantee fee 

rate shall be determined as follows: 

(A) Two percent for guarantees on 

loans greater than 75 percent of eligible 

project cost. 

(B) One and one-half percent for 

guarantees on loans of greater than 65 

percent but less than or equal to 75 

percent of eligible project cost. 

(C) One percent for guarantees on 

loans of 65 percent or less of eligible 

project cost. 

(ii) The guarantee fee may be passed 

on to the borrower. 

(2) Annual renewal fee. The annual 

renewal fee will be calculated on the 

unpaid principal balance as of close of 

business on December 31 of each year. 

Annual renewable fees are due on 

January 31. For loans where the Loan 

Note Guarantee is issued between 

October 1 and December 31, the first 

annual renewal fee payment will not be 

due until the January 31st immediately 

following the first anniversary of the 

date the Loan Note Guarantee was 

issued. 

(i) Payments not received by April 1 

are considered delinquent and, at the 

Agency’s discretion, may result in 

cancellation of the guarantee to the 

lender. Holders’ rights will continue in 

effect as specified in the Loan Note 

Guarantee and Assignment Guarantee 

Agreement. Any delinquent annual 

renewal fees will bear interest at the 

note rate and will be deducted from any 

loss payment due the lender. 

(ii) The annual renewal fee will be 

calculated by multiplying the 

outstanding principal balance by the 

percentage of the loan that is guaranteed 

under this program by the annual 

renewal fee rate shown below. The 

renewal fee rate shall be as follows: 

(A) One hundred basis points (1 

percent) for guarantees on loans that 

were originally greater than 75 percent 

of eligible project costs. 

(B) Seventy five basis points (0.75 

percent) for guarantees on loans that 

were originally greater than 65 percent 

but less than or equal to 75 percent of 

eligible project costs. 

(C) Fifty basis points (0.50 percent) for 

guarantees on loans that were originally 

for 65 percent or less of eligible project 

costs. 

(iii) The annual renewal fee will be 

paid to the Agency for as long as the 

guaranteed loan is outstanding and is 

payable during the construction period. 

(3) Lender fees. The lender may 

charge the borrower reasonable fees as 

approved by the Agency. 

(i) Conditions precedent to issuance 

of Loan Note Guarantee. All applicable 

regulatory, statutory, and other 

requirements must be met to issue the 

Loan Note Guarantee. The Secretary has 

the discretion to cancel a Conditional 

Commitment at any time. Further, the 

Loan Note Guarantee will not be issued 

until the lender certifies to the following 

conditions: 

(1) 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. 

(2) 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, and 

conforms with applicable Federal, state, 

and local codes. 

(3) Required hazard, flood, liability, 

worker compensation, and personal life 

insurance, when required, are in effect. 

(4) Truth-in-lending requirements 

have been met. 

(5) All equal credit opportunity 

requirements have been met. 

(6) 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. 

(7) 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. 

(8) When required, the entire amount 

of funds for working capital has been 

disbursed except in cases where the 

Agency has approved disbursement over 

an extended period of time. 

(9) All other requirements of the 

Conditional Commitment have been 

met. 

(10) 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. 

(11) The loan proceeds will be 

disbursed for purposes and in amounts 

consistent with the Conditional 

Commitment and Form RD 4279–1. A 

copy of the detailed loan settlement of 

the lender must be attached to support 

this certification. 

(12) There has been neither any 

material adverse change in the 

borrower’s financial condition nor any 

other material adverse change in the 

borrower, for any reason, during the 

period of time from the Agency’s 

issuance of the Conditional 

Commitment to issuance of the Loan 

Note Guarantee regardless of the cause 

or causes of the change and whether or 

not the change or causes of the change 

were within the lender’s or borrower’s 

control. The lender must address any 

assumptions or reservations in the 

requirement and must address all 

adverse changes of the borrower, and 

any parent, affiliate, or subsidiary of the 

borrower. 

(13) 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. 

(14) The loan agreement includes all 

mitigation measures identified in the 

Agency’s environmental impact analysis 

for this proposal (measures with which 

the borrower must comply) for the 

purpose of avoiding or reducing adverse 

environmental impacts of the proposal’s 

construction or operation. 

(j) Issuance of the guarantee. 

(1) When loan closing plans are 

established, the lender must notify the 

Agency in writing. At the same time, or 

immediately after loan closing, the 

lender must provide the following to the 

Agency: 

(i) Lender’s certifications as required 

by Conditions Precedent to Issuance of 

Loan Note Guarantee in this Notice; 

(ii) An executed Form RD 4279–4, as 

modified; and 

(iii) An executed Form RD 1980–19, 

‘‘Guaranteed Loan Closing Report,’’ and 

appropriate guarantee fee. 

(2) When the Agency is satisfied that 

all conditions for the guarantee have 

been met, the Loan Note Guarantee, 

Form RD 4279–5, as modified, and the 

following documents, as appropriate, 

will be issued: 

(i) Assignment Guarantee Agreement. 

If the lender assigns the guaranteed 

portion of the loan to a holder, the 

lender, holder, and the Agency must 

execute the Assignment Guarantee 

Agreement, Form RD 4279–6, as 

modified; 

(ii) Certificate of Incumbency. If 

requested by the lender, the Agency will 

provide the lender with a copy of Form 

RD 4279–7, as modified, ‘‘Certificate of 

Incumbency and Signature,’’ with the 


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signature and title of the Agency official 

responsible for signing the Loan Note 

Guarantee, Lender’s Agreement, and 

Assignment Guarantee Agreement; and 

(iii) Legal documents. Copies of legal 

loan documents. 

(k) 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, in writing, 

additional time 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. 

(l) Replacement of document. If the 

Loan Note Guarantee or Assignment 

Guarantee Agreement has been lost, 

stolen, destroyed, mutilated, or defaced, 

the Agency may issue a replacement to 

the lender or holder upon receipt from 

the lender of a notarized certificate of 

loss and an indemnity bond acceptable 

to the Agency. If the holder is the 

United States, a Federal Reserve Bank, 

a Federal Government corporation, a 

State or Territory, or the District of 

Columbia, an indemnity bond is not 

required. 

(m) Alterations of loan instruments. 

Under no circumstances shall the lender 

alter or approve any alterations of any 

loan instrument without the prior 

written approval of the Agency. 

(n) Reorganizations 

(1) 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 prior to the 

issuance of the Conditional 

Commitment. Once the Conditional 

Commitment is issued, no substitution 

of borrower(s) or change in the form of 

legal entity will be approved, unless 

Agency approval, in writing, is 

obtained. 

(2) Transfer of lenders. The Agency 

may approve the substitution of a new 

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. 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 RD 4279–1. 

(3) Substitution of lender. After the 

issuance of a Loan Note Guarantee, the 

lender shall not sell or transfer the 

entire loan without the prior written 

approval of the Agency. The Agency 

will not pay any loss or share in any 

costs (i.e., appraisal fees, environmental 

studies, or other costs associated with 

servicing or liquidating the loan) with a 

new lender unless a relationship is 

established through a substitution of 

lender in accordance with paragraph (b) 

of this section. This includes cases 

where the lender has failed and been 

taken over by a regulatory agency such 

as the Federal Deposit Insurance 

Corporation (FDIC) and the loan is 

subsequently sold to another lender. 

(i) The Agency may approve the 

substitution of a new lender if: 

(A) The proposed substitute lender: 

(1) Is an eligible lender in accordance 

with this Notice; 

(2) Is able to service the loan in 

accordance with the original loan 

documents; and 

(3) Acquires/Agrees, in writing, to 

acquire title to the unguaranteed portion 

of the loan held by the original lender 

and assumes all original loan 

requirements, including liabilities and 

servicing responsibilities. 

(B) The substitution of the lender is 

requested, in writing, by the borrower, 

the proposed substitute lender, and the 

original lender if still in existence. 

(ii) Where the lender has failed and 

been taken over by FDIC and the 

guaranteed loan is liquidated by FDIC 

rather than being sold to another lender, 

the Agency will pay losses and share in 

costs as if FDIC were an approved 

substitute lender. 

(o) Sale or Assignment of Guaranteed 

Loan. The lender may sell all or part of 

the guaranteed portion of the loan on 

the secondary market or retain the entire 

loan. The guaranteed portion of the loan 

shall be fully transferable to any 

accredited investor. However, the lender 

shall not sell or participate any amount 

of the guaranteed or unguaranteed 

portion of the loan to the borrower or 

members of the borrower’s immediate 

families, officers, directors, 

stockholders, other owners, or a parent, 

subsidiary or affiliate. If the lender 

desires to market all or part of the 

guaranteed portion of the loan at or 

subsequent to loan closing, such loan 

must not be in default. Loans made with 

the proceeds of any obligation the 

interest on which is excludable from 

income under 26 U.S.C. 103 (interest on 

State and local banks) or any successor 

section will not be guaranteed. The 

Secretary may not guarantee a loan 

funded with the net proceeds of a bond 

described in section 142(a) of the 

Internal Revenue Code of 1986. 

(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 

unpaid guaranteed portion of the loan 

sold under the Assignment Guarantee 

Agreement. Upon notification and 

completion of the assignment through 

the use of Form RD 4279–6, 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. 

(2) Multi-note system. Under this 

option the lender may provide 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, 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 guaranteed note to 

be attached to the note. An Assignment 

Guarantee Agreement will not be used 

when the multi-note option is utilized. 

(3) After loan closing. If a loan is 

closed using the multinote option and at 

a later date additional notes are desired, 

the lender may cause a series of new 

notes, so that the total number of notes 

issued does not exceed the total number 

provided for in paragraph (b) of this 

section, to be issued as replacement for 

previously issued guaranteed notes, 

provided: 

(i) Written approval of the Agency is 

obtained; 

(ii) The borrower agrees and executes 

the new notes; 

(iii) The interest rate terms remain the 

same as those in effect when the loan 

was closed; 

(iv) The maturity date of the loan is 

not changed; 

(v) The Agency will not bear or 

guarantee any expenses that may be 

incurred in reference to such reissuance 

of notes; 

(vi) There is adequate collateral 

securing the notes; 

(vii) No intervening liens have arisen 

or have been perfected and the secured 

lien priority is better or remains the 

same; and 

(viii) All holders agree. 

(p) Termination of lender servicing 

fee. The lender’s servicing fee will stop 


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25098 Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 

when the Agency purchases the 

guaranteed portion of the loan from the 

secondary market. No such servicing fee 

may be charged to the Agency and all 

loan payments and collateral proceeds 

received will be applied first to the 

guaranteed loan and, when applied to 

the guaranteed loan, will be applied on 

a pro rata basis. 

(q) Participation. The lender may sell 

participations in the loan under its 

normal operating procedures; however, 

the lender must retain title to the notes 

if any of them are unguaranteed and 

retain the lender’s interest in the 

collateral. 

(r) Minimum retention. Lenders may 

syndicate a portion of its risk position 

to other eligible lenders provided that at 

no time during the life of the guarantee 

may the original lender hold less than 

50 percent of their original 

unguaranteed position in the loan. 

(s) Termination of guarantee. A 

guarantee issued under this Notice will 

terminate automatically upon: 

(1) Full payment of the guaranteed 

loan; 

(2) Full payment of any loss 

obligation or negotiated loss settlement 

except for future recovery provisions 

and payments made as a result of the 

Debt Collection Improvement Act of 

1996. After final payment of claims to 

lenders and/or holders, the Agency will 

retain all funds received as the result of 

the Debt Collection Improvement Act of 

1996; or 

(3) Written request from the lender to 

the Agency that the guarantee will 

terminate 30 days after the date of the 

request, provided that the lender holds 

all of the guaranteed portion, and the 

original Loan Note Guarantee is 

returned to the Agency to be canceled. 

Nondiscrimination Statement 

‘‘The U.S. Department of Agriculture 

(USDA) prohibits discrimination in all 

its programs and activities on the basis 

of race, color, national origin, age, 

disability, and where applicable, sex, 

marital status, familial status, parental 

status, religion, sexual orientation, 

genetic information, political beliefs, 

reprisal, or because all or part of an 

individual’s income is derived from any 

public assistance program. (Not all 

prohibited bases apply to all programs.) 

Persons with disabilities who require 

alternative means for communication of 

program information (Braille, large 

print, audiotape, etc.) should contact 

USDA’s TARGET Center at (202) 720– 

2600 (voice and TDD). 

To file a complaint of discrimination, 

write USDA, Director, Office of 

Adjudication and Compliance, 1400 

Independence Avenue SW., 

Washington, DC 20250–9410, or call 

(800) 795–3272 (voice), or (202) 720– 

6382 (TDD). USDA is an equal 

opportunity provider, employer, and 

lender.’’ 

Dated: April 27, 2010. 

Judith A. Canales, 

Administrator, Rural Development, Business 

and Cooperative Programs. 

[FR Doc. 2010–10249 Filed 5–5–10; 8:45 am] 

BILLING CODE 3410–XY–P 


jlentini on DSKJ8SOYB1PROD with NOTICES2