[Code of Federal Regulations] [Title 7, Volume 7, Parts 700 to 899] [Revised as of January 1, 2001] From the U.S. Government Printing Office via GPO Access [CITE: 7CFR762.120] [Page 416-418] TITLE 7--AGRICULTURE CHAPTER VII--FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE PART 762--GUARANTEED FARM LOANS--Table of Contents Sec. 762.120 Loan applicant eligibility. Loan applicants must meet all of the following requirements to be eligible for a guaranteed OL or a guaranteed FO: (a) Agency loss. The loan applicant, and anyone who will execute the promissory note, have not caused the Agency a loss by receiving debt forgiveness on more than three occasions on or prior to April 4, 1996, or on any occasion after April 4, 1996, on all or a portion of any direct or guaranteed loan made under the authority of the CONACT by debt write-down, write-off, compromise under the provisions of section 331 of the CONACT, adjustment, reduction, charge-off, or discharge in bankruptcy or through any payment of a guaranteed loss claim under the same circumstances. Notwithstanding the preceding sentence, applicants who receive a write-down under section 353 of the CONACT, or are current on payments under a confirmed bankruptcy reorganization plan, may receive direct and guaranteed OL loans to pay annual farm and ranch operating expenses, which include family subsistence, if the applicant meets all other requirements for the loan. (b) Delinquent Federal debt. The loan applicant, and anyone who will execute the promissory note, is not delinquent [[Page 417]] on any Federal debt, other than a debt under the Internal Revenue Code of 1986. (Any debt under the Internal Revenue Code of 1986 may be considered by the lender in determining cash flow and creditworthiness.) (c) Outstanding judgments. The loan applicant, and anyone who will execute the promissory note, have no outstanding unpaid judgment obtained by the United States in any court. Such judgments do not include those filed as a result of action in the United States Tax Courts. (d) Citizenship. (1) The loan applicant is a citizen of the United States or an alien lawfully admitted to the United States for permanent residence under the Immigration and Nationalization Act. Indefinite parolees are not eligible. For an entity applicant, all members of an entity must meet this citizenship test. (2) Aliens must provide the appropriate Immigration and Naturalization Service forms to document their permanent residency. (e) Legal capacity. The loan applicant and all borrowers on the loan must possess the legal capacity to incur the obligations of the loan. (f) False or misleading information. The loan applicant, in past dealings with the Agency, must not have provided the Agency with false or misleading documents or statements. (g) Credit history. (1) The individual or entity loan applicant and all entity members must have acceptable credit history demonstrated by debt repayment. (2) A history of failures to repay past debts as they came due when the ability to repay was within their control will demonstrate unacceptable credit history. (3) Unacceptable credit history will not include: (i) Isolated instances of late payments which do not represent a pattern and were clearly beyond their control; or, (ii) Lack of credit history. (h) Test for credit. (1) The loan applicant is unable to obtain sufficient credit elsewhere without a guarantee to finance actual needs at reasonable rates and terms. (2) The potential for sale of any significant nonessential assets will be considered when evaluating the availability of other credit. (3) Ownership interests in property and income received by an individual or entity loan applicant, and any entity members as individuals will be considered when evaluating the availability of other credit to the loan applicant. (i) For OLs: (1) The individual or entity loan applicant must be an operator of not larger than a family farm after the loan is closed. (2) In the case of an entity borrower: (i) The entity must be authorized to operate, and own if the entity is also an owner, a farm in the State or States in which the farm is located; and (ii) If the entity members holding a majority interest are related by marriage or blood, at least one member of the entity must operate the family farm; or, (iii) If the entity members holding a majority interest are not related by marriage or blood, the entity members holding a majority interest must also operate the family farm. (j) For FOs: (1) The individual must be the operator and owner of not larger than a family farm after the loan is closed. (2) In the case of an entity borrower: (i) The entity must be authorized to own and operate a farm in the state or states in which the farm is located; and (ii) If the entity members holding a majority interest are related by marriage or blood, at least one member of the entity also must operate the family farm and at least one member of the entity or the entity must own the family farm; or, (iii) If the entity members holding a majority interest are not related by marriage or blood, the entity members holding a majority interest must operate the family farm and the entity members holding a majority interest or the entity must own the family farm. (k) For entity loan applicants. Entity loan applicants must meet the following additional eligibility criteria: (1) Each entity member's ownership interest may not exceed the family farm definition limits; [[Page 418]] (2) The collective ownership interest of all entity members may exceed the family farm definition limits only if the following conditions are met: (i) All of the entity members are related by blood or marriage; (ii) All of the members are or will be operators of the entity; and, (iii) The majority interest holders of the entity must meet the requirements of paragraphs (d), (f), (g), and (i) through (j) of this section; (3) The entity must be controlled by farmers or ranchers engaged primarily and directly in farming or ranching in the United States after the loan is made; and (4) The entity members are not themselves entities. (l) Neither the applicant nor any entity member has been convicted of planting, cultivating, growing, producing, harvesting, or storing a controlled substance under Federal or state law within the last five crop years. ``Controlled substance'' is defined at 21 CFR 1308. Applicants must certify on the application that it and its members, if an entity, have not been convicted of such a crime within the relevant period. If the lender uses the lender's Agency approved forms, the certification may be an attachment to the form.