Legislative Authority Section 310B of the Consolidated Farm and Rural Development Act of 1972, as amended. As is the case with SBA loan guarantees, the business must first find a bank or lending institution willing to extend a loan subject to a guarantee. The bank then makes a joint application with the borrower to the USDA state or district office of Rural Development. The state office generally has loan approval authority. Applications for loan guarantees over the states' loan approval authority are submitted to the national office.
Applications are available throughout the year and are accepted on an ongoing basis.
Loan guarantees are to be approved within 60 days subject to the availability of funds. Pre-application reviews and advice are also available through state offices. Feasibility studies may be required. The interest rate is negotiated between the lender and borrower and may be fixed or variable. The lender addresses the business adequacy of equity, cash flow, collateral, history, management, and the current status of the industry in a written credit analysis.