[Code of Federal Regulations]
[Title 7, Volume 15]
[Revised as of January 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR4279.113]

[Page 573-574]
 
                          TITLE 7--AGRICULTURE
 
  CHAPTER XLII--RURAL BUSINESS-COOPERATIVE SERVICE AND RURAL UTILITIES 
                   SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 4279_GUARANTEED LOANMAKING--Table of Contents
 
                  Subpart B_Business and Industry Loans
 
Sec. 4279.113  Eligible loan purposes.

    Loan purposes must be consistent with the general purpose contained 
in Sec. 4279.101 of this subpart. They include but are not limited to 
the following:
    (a) Business and industrial acquisitions when the loan will keep the 
business from closing, prevent the loss of employment opportunities, or 
provide expanded job opportunities.
    (b) Business conversion, enlargement, repair, modernization, or 
development.
    (c) Purchase and development of land, easements, rights-of-way, 
buildings, or facilities.
    (d) Purchase of equipment, leasehold improvements, machinery, 
supplies, or inventory.
    (e) Pollution control and abatement.
    (f) Transportation services incidental to industrial development.
    (g) Startup costs and working capital.
    (h) Agricultural production, when not eligible for Farm Service 
Agency (FSA) farmer program assistance and when it is part of an 
integrated business also involved in the processing of agricultural 
products.
    (1) Examples of potentially eligible production include but are not 
limited to: An apple orchard in conjunction with a food processing 
plant; poultry buildings linked to a meat processing operation; or sugar 
beet production coupled with storage and processing. Any agricultural 
production considered for B&I financing must be owned, operated, and 
maintained by the business receiving the loan for which a guarantee is 
provided. Independent agricultural production operations, even if not 
eligible for FSA farmer programs assistance, are not eligible for the 
B&I program.

[[Page 574]]

    (2) The agricultural-production portion of any loan will not exceed 
50 percent of the total loan or $1 million, whichever is less.
    (i) Purchase of membership, stocks, bonds, or debentures necessary 
to obtain a loan from Farm Credit System institutions and other lenders 
provided that the purchase is required for all of their borrowers. 
Purchase of startup cooperative stock for family-sized farms where 
commodities are produced to be processed by the cooperative.
    (j) Aquaculture, including conservation, development, and 
utilization of water for aquaculture.
    (k) Commercial fishing.
    (l) Commercial nurseries engaged in the production of ornamental 
plants and trees and other nursery products such as bulbs, flowers, 
shrubbery, flower and vegetable seeds, sod, and the growing of plants 
from seed to the transplant stage.
    (m) Forestry, which includes businesses primarily engaged in the 
operation of timber tracts, tree farms, and forest nurseries and related 
activities such as reforestation.
    (n) The growing of mushrooms or hydroponics.
    (o) Interest (including interest on interim financing) during the 
period before the first principal payment becomes due or when the 
facility becomes income producing, whichever is earlier.
    (p) Feasibility studies.
    (q) To refinance outstanding debt when it is determined that the 
project is viable and refinancing is necessary to improve cash flow and 
create new or save existing jobs. Existing lender debt may be included 
provided that, at the time of application, the loan has been current for 
at least the past 12 months (unless such status is achieved by the 
lender forgiving the borrower's debt), the lender is providing better 
rates or terms, and the refinancing is a secondary part (less than 50 
percent) of the overall loan.
    (r) Takeout of interim financing. Guaranteeing a loan after project 
completion to pay off a lender's interim loan will not be treated as 
debt refinancing provided that the lender submits a complete 
preapplication or application which proposes such interim financing 
prior to completing the interim loan. A lender that is considering an 
interim loan should be advised that the Agency assumes no responsibility 
or obligation for interim loans advanced prior to the Conditional 
Commitment being issued.
    (s) Fees and charges for professional services and routine lender 
fees.
    (t) Agency guarantee fee.
    (u) Tourist and recreation facilities, including hotels, motels, and 
bed and breakfast establishments, except as prohibited under ineligible 
purposes.
    (v) Educational or training facilities.
    (w) Community facility projects which are not listed as an 
ineligible loan purpose such as convention centers.
    (x) Constructing or equipping facilities for lease to private 
businesses engaged in commercial or industrial operations.
    (y) The financing of housing development sites provided that the 
community demonstrates a need for additional housing to prevent a loss 
of jobs in the area or to house families moving to the area as a result 
of new employment opportunities.
    (z) Community antenna television services or facilities.
    (aa) Provide loan guarantees to assist industries adjusting to 
terminated Federal agricultural programs or increased foreign 
competition.