[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: 7CFR4279.161]

[Page 580-582]
 
                          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. 4279.161  Filing preapplications and applications.

    Borrowers and lenders are encouraged to file preapplications and 
obtain Agency comments before completing an application. However, if 
they prefer, they may file a complete application as the first contact 
with the Agency. Neither preapplications nor applications will be 
accepted or processed unless a

[[Page 581]]

lender has agreed to finance the proposal.
    (a) Preapplications. Lenders may file preapplications by submitting 
the following to the Agency:
    (1) A letter signed by the borrower and lender containing the 
following:
    (i) Borrower's name, organization type, address, contact person, and 
federal tax identification and telephone numbers.
    (ii) Amount of the loan request, percent of guarantee requested, and 
the proposed rates and terms.
    (iii) Name of the proposed lender, address, telephone number, 
contact person, and lender's Internal Revenue Service (IRS) 
identification number.
    (iv) Brief description of the project, products, services provided, 
and availability of raw materials and supplies.
    (v) Type and number of jobs created or saved.
    (vi) Amount of borrower's equity and a description of collateral, 
with estimated values, to be offered as security for the loan.
    (vii) If a corporate borrower, the names and addresses of the 
borrower's parent, affiliates, and subsidiary firms, if any, and a 
description of the relationship.
    (2) A completed Form 4279-2, ``Certification of Non-Relocation and 
Market Capacity Information Report,'' if the proposed loan is in excess 
of $1 million and will increase direct employment by more than 50 
employees.
    (3) For existing businesses, a current balance sheet and a profit 
and loss statement not more than 90 days old and financial statements 
for the borrower and any parent, affiliates, and subsidiaries for at 
least the 3 most recent years.
    (4) For start-up businesses, a preliminary business plan must be 
provided.
    (b) Applications. Except for CLP lenders, applications will be filed 
with the Agency by submitting the following information: (CLP 
applications will be completed in accordance with 4279.43(g)(1) but CLP 
lenders must have the material listed in this paragraph in their files.)
    (1) A completed Form 4279-1, ``Application for Loan Guarantee 
(Business and Industry)''.
    (2) The information required for filing a preapplication, as listed 
above, if not previously filed or if the information has changed.
    (3) Form FmHA 1940-20, ``Request for Environmental Information,'' 
and attachments, unless the project is categorically excluded under 
Agency environmental regulations.
    (4) A personal credit report from an acceptable credit reporting 
company for a proprietor (owner), each partner, officer, director, key 
employee, and stockholder owning 20 percent or more interest in the 
applicant, except for those corporations listed on a major stock 
exchange. Credit reports are not required for elected and appointed 
officials when the applicant is a public body.
    (5) Intergovernmental consultation comments in accordance with 7 
CFR, part 3015, subpart V.
    (6) Appraisals, accompanied by a copy of the appropriate 
environmental site assessment, if available. (Agency approval in the 
form of a Conditional Commitment may be issued subject to receipt of 
adequate appraisals.)
    (7) For all businesses, a current (not more than 90 days old) 
balance sheet, a pro forma balance sheet at startup, and projected 
balance sheets, income and expense statements, and cash flow statements 
for the next 2 years. Projections should be supported by a list of 
assumptions showing the basis for the projections.
    (8) Lender's complete written analysis, including spreadsheets of 
the balance sheets and income statements for the 3 previous years (for 
existing businesses), pro forma balance sheet at startup, and 2 years 
projected yearend balance sheets and income statements, with appropriate 
ratios and comparisons with industrial standards (such as Dun & 
Bradstreet or Robert Morris Associates). All data must be shown in total 
dollars and also in common size form, obtained by expressing all balance 
sheet items as a percentage of assets and all income and expense items 
as a percentage of sales. The lender's credit analysis must address the 
borrower's management, repayment ability including a cash-flow analysis, 
history of debt repayment, necessity of

[[Page 582]]

any debt refinancing, and the credit reports of the borrower, its 
principals, and any parent, affiliate, or subsidiary.
    (9) Commercial credit reports obtained by the lender on the borrower 
and any parent, affiliate, and subsidiary firms.
    (10) Current personal and corporate financial statements of any 
guarantors.
    (11) A proposed Loan Agreement or a sample Loan Agreement with an 
attached list of the proposed Loan Agreement provisions. The Loan 
Agreement must be executed by the lender and borrower before the Agency 
issues a Loan Note Guarantee. The following requirements must be 
addressed in the Loan Agreement:
    (i) Prohibition against assuming liabilities or obligations of 
others.
    (ii) Restriction on dividend payments.
    (iii) Limitation on the purchase or sale of equipment and fixed 
assets.
    (iv) Limitation on compensation of officers and owners.
    (v) Minimum working capital or current ratio requirement.
    (vi) Maximum debt-to-net worth ratio.
    (vii) Restrictions concerning consolidations, mergers, or other 
circumstances.
    (viii) Limitations on selling the business without the concurrence 
of the lender.
    (ix) Repayment and amortization of the loan.
    (x) List of collateral and lien priority for the loan including a 
list of persons and corporations guaranteeing the loan with a schedule 
for providing the lender with personal and corporate financial 
statements. Financial statements on the corporate and personal 
guarantors must be updated at least annually.
    (xi) Type and frequency of financial statements to be required for 
the duration of the loan.
    (xii) The final Loan Agreement between the lender and borrower will 
contain any additional requirements imposed by the Agency in its 
Conditional Commitment.
    (xiii) A section for the later insertion of any necessary measures 
by the borrower to avoid or reduce adverse environmental impacts from 
this proposal's construction or operation. Such measures, if necessary, 
will be determined by the Agency through the completion of the 
environmental review process.
    (12) A business plan, which includes, at a minimum, a description of 
the business and project, management experience, products and services, 
proposed use of funds, availability of labor, raw materials and 
supplies, and the names of any corporate parent, affiliates, and 
subsidiaries with a description of the relationship. Any or all of these 
requirements may be omitted if the information is included in a 
feasibility study.
    (13) Independent feasibility study, if required.
    (14) For companies listed on a major stock exchange or subject to 
the Securities and Exchange Commission (SEC) regulations, a copy of SEC 
Form 10-K, ``Annual Report Pursuant to Section 13 or 15D of the Act of 
1934.''
    (15) For health care facilities, a certificate of need, if required 
by statute.
    (16) A certification by the lender that it has completed a 
comprehensive analysis of the proposal, the applicant is eligible, the 
loan is for authorized purposes, and there is reasonable assurance of 
repayment ability based on the borrower's history, projections and 
equity, and the collateral to be obtained.
    (17) Any additional information required by the Agency.