[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR32.303]

[Page 636-637]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 32_CONTRACT FINANCING--Table of Contents
 
           Subpart 32.3_Loan Guarantees for Defense Production
 
Sec.  32.303  General.

    (a) Section 301 of the Defense Production Act authorizes loan 
guarantees for contract performance or other operations related to 
national defense, subject to amounts annually authorized by Congress on 
the maximum obligation of any guaranteeing agency under any loan, 
discount, advance, or commitment in connection therewith, entered into 
under section 301. (See 50 U.S.C. App. 2091 for statutory limitations 
and exceptions concerning the authorization of loan guarantee amounts 
and the use of loan guarantees for the prevention of insolvency or 
bankruptcy.)
    (b) The guarantee shall be for less than 100 percent of the loan 
unless the agency determines that--
    (1) The circumstances are exceptional;
    (2) The operations of the contractor are vital to the national 
defense; and
    (3) No other suitable means of financing are available.
    (c) Loan guarantees are not issued to other agencies of the 
Government.
    (d) Guaranteed loans are essentially the same as conventional loans 
made by private financial institutions, except that the guaranteeing 
agency is obligated, on demand of the lender, to purchase a stated 
percentage of the loan and to share any losses in the amount of the 
guaranteed percentage. It is the responsibility of the private financial 
institution to disburse and collect funds and to administer the loan. 
Under Regulation V of the Federal Reserve Board (12 CFR 245), any 
private financing institution may submit an application to the Federal 
Reserve Bank of its district for guarantee of a loan or credit.
    (e) Federal Reserve Banks will make the loan guarantee agreements on 
behalf of the guaranteeing agencies.
    (f) Under Section 302(c) of Executive Order 10480, August 14, 1953 
(3 CFR 1949-53), as amended, all actions and operations of Federal 
Reserve Banks, as fiscal agents, are subject to the supervision of the 
Federal Reserve Board. The Federal Reserve Board is authorized to 
prescribe the following, after consultation with the heads of 
guaranteeing agencies:
    (1) Regulations governing the actions and operations of fiscal 
agents.

[[Page 637]]

    (2) Rates of interest, guarantee and commitment fees, and other 
charges that may be made for loans, discounts, advances, or commitments 
guaranteed by the guaranteeing agencies through the Federal Reserve 
Banks. These prescriptions may be in the form of specific rates or 
limits, or in other forms.
    (3) Uniform forms and procedures to be used in connection with the 
guarantees.
    (g) The guaranteeing agency is responsible for certifying 
eligibility for the guarantee and fixing the maximum dollar amount and 
maturity date of the guaranteed loan to meet the contractor's 
requirement for financing performance of the defense production contract 
on hand at the time the guarantee application is submitted.