[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1703.29]

[Page 40]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1703--RURAL DEVELOPMENT--Table of Contents
 
      Subpart B--Rural Economic Development Loan and Grant Program
 
Sec. 1703.29  Terms of zero-interest loan repayment.

    (a) The Administrator will determine the terms and repayment 
schedule of the zero-interest loan to the borrower based on the nature 
of the project and approved purposes. Ordinarily, the total term of the 
zero-interest loan, including any principal deferment period, will not 
exceed 10 years. The repayment terms the borrower sets on a pass-
through-loan must equal the terms of the loan provided to the borrower 
unless a written request from the borrower to provide a longer deferment 
period, shorter total term of the loan, or other benefits is approved by 
the Administrator.
    (b) The Administrator has the discretion to defer the repayment of 
principal up to two years, based on an analysis of the feasibility of 
the project. Ordinarily, if the Administrator considers the project to 
be a business expansion or going concern, the first repayment of 
principal will not begin until one year after the date of the RUS note. 
Ordinarily, if the Administrator considers the project to be a start-up 
project, the first repayment of principal will not begin until 2 years 
after the date of the RUS note. Loans must be repaid under terms set 
forth in RUS's legal documents.
    (c) Unless the Administrator has specifically approved otherwise, 
the borrower will be required to repay the RUS zero-interest loan in 
full at such time as a pass-through-loan has been fully repaid to the 
borrower. If the borrower uses the proceeds of the RUS zero-interest 
loan to provide pass-through-loans to more than one entity, this 
requirement will only apply to that portion of the zero-interest loan 
associated with the loan that has been fully repaid to the borrower.
    (d) If the Administrator determines that, as a result of state law, 
court rulings, or regulatory commission decisions, it is necessary to 
ensure that the borrower will repay the RUS zero-interest loan, the 
borrower may be required to provide an irrevocable letter of credit, or 
another form of guarantee satisfactory to the Administrator. The letter 
of credit or other guarantee is to be made payable to RUS. The letter of 
credit or other guarantee may not be secured by any assets under a RUS 
and/or Rural Telephone Bank mortgage and must be in form and substance 
satisfactory to the Administrator. RUS must receive the letter of credit 
or other guarantee prior to the advance of any zero-interest loan funds.