(a) General. This paragraph (a) specifies the general requirements for guaranteed loan applications:
(1) Lenders must perform at least the same level of evaluation and documentation for a guaranteed loan that the lender typically performs for non-guaranteed loans of a similar type and amount.
(2) The application thresholds in this section apply to any single loan, or package of loans submitted for consideration at any one time. A lender must not split a loan into two or more parts in order to fall below the threshold in order to avoid additional documentation.
(3) The Agency may require lenders with a lender loss rate in excess of the rate for CLP lenders to assemble additional documentation specified in paragraph (d) of this section.
(b) EZ Guarantee loans. MLP lenders may submit an EZ Guarantee application for loans up to $50,000. All other lenders may submit EZ Guarantee applications for loans up to $100,000. Lenders must submit:
(1) An EZ Guarantee application form.
(2) If the loan fails to pass the underwriting criteria for EZ Guarantee approval in § 762.125(d), or the responses in the application are insufficient for the Agency to make a loan decision, the lender must provide additional information as requested by the Agency.
(c) Loans up to $125,000. Lenders must submit the following items for loans up to $125,000 (other than EZ Guarantees):
(1) The application form;
(2) Loan narrative, including a plan for servicing the loan;
(3) Balance sheet;
(4) Cash flow budget; and
(5) Credit report.
(d) Loans over $125,000. A complete application for loans over $125,000 will require items specified in paragraph (c) of this section, plus the following items:
(1) Verification of income;
(2) Verification of debts exceeding an amount determined by the Agency;
(3) Three years financial history;
(4) Three years of production history (for standard eligible lenders only);
(5) Proposed loan agreements; and,
(6) If construction or development is planned, a copy of the plans, specifications, and development schedule.
(e) Applications from PLP lenders. Notwithstanding paragraphs (c) and (d) of this section, a complete application for PLP lenders will consist of at least:
(1) An application form;
(2) A loan narrative;
(3) Any other items agreed to during the approval of the PLP lender's status and contained in the PLP lender agreement.
(f) CL Guarantees. In addition to the other requirements in this section, the following items apply when a lender is requesting a CL guarantee:
(1) Lenders must submit a copy of the conservation plan or Forest Stewardship Management Plan;
(2) Lenders must submit plans to transition to organic or sustainable agriculture when the funds requested will be used to facilitate the transition and the lender is requesting consideration for priority funding;
(3) When CL guarantee applicants meet all the following criteria, the cash flow budget requirement in this section will be waived:
(i) Be current on all payments to all creditors including the Agency (if currently an Agency borrower);
(ii) Debt to asset ratio is 40 percent or less;
(iii) Balance sheet indicates a net worth of 3 times the requested loan amount or greater; and
(iv) FICO credit score is at least 700; for entity applicants, the FICO credit score of the majority of the individual members of the entity must be at least 700.
(g) Submitting applications.
(1) All lenders must compile and maintain in their files a complete application for each guaranteed loan.
(2) The Agency will notify CLP lenders which items to submit to the Agency.
(3) PLP lenders will submit applications in accordance with their agreement with the Agency for PLP status.
(4) All lenders must certify that the required items, not submitted, are in their files.
(5) The Agency may request additional information from any lender or review the lender's loan file as needed to make eligibility and approval decisions.
(h) Incomplete applications. If the lender does not provide the information needed to complete its application by the deadline established in an Agency request for the information, the application will be considered withdrawn by the lender.
(i) Conflict of interest.
(1) When a lender submits the application for a guaranteed loan, the lender will inform the Agency in writing of any relationship which may cause an actual or potential conflict of interest.
(2) Relationships include:
(i) The lender or its officers, directors, principal stockholders (except stockholders in a Farm Credit System institution that have stock requirements to obtain a loan), or other principal owners having a financial interest (other than lending relationships in the normal course of business) in the applicant or borrower.
(ii) The applicant or borrower, a relative of the applicant or borrower, anyone residing in the household of the applicant or borrower, any officer, director, stockholder or other owner of the applicant or borrower holds any stock or other evidence of ownership in the lender.
(iii) The applicant or borrower, a relative of the applicant or borrower, or anyone residing in the household of the applicant or borrower is an Agency employee.
(iv) The officers, directors, principal stockholders (except stockholders in a Farm Credit System institution that have stock requirements to obtain a loan), or other principal owners of the lender have substantial business dealings (other than in the normal course of business) with the applicant or borrower.
(v) The lender or its officers, directors, principal stockholders, or other principal owners have substantial business dealings with an Agency employee.
(3) The lender must furnish additional information to the Agency upon request.
(4) The Agency will not approve the application until the lender develops acceptable safeguards to control any actual or potential conflicts of interest.
(j) Market placement program. Except for CL guarantees, when the Agency determines that a direct applicant or borrower may qualify for guaranteed credit, the Agency may submit the applicant or borrower's financial information to one or more guaranteed lenders. If a lender indicates interest in providing financing to the applicant or borrower through the guaranteed loan program, the Agency will assist in completing the application for a guarantee.
[64 FR 7378, Feb. 12, 1999, as amended at 68 FR 7695, Feb. 18, 2003; 72 FR 63297, Nov. 8, 2007; 75 FR 54013, Sept. 3, 2010; 77 FR 15938, Mar. 19, 2012; 81 FR 72691, Oct. 21, 2016]]