Unless otherwise provided, applicants must meet all of the following requirements to be eligible for a guaranteed OL, FO, or CL.
(a) Agency loss.
(1) Except as provided in paragraph (a)(2) of this section, the applicant, and anyone who will execute the promissory note, has not caused the Agency a loss by receiving debt forgiveness on all or a portion of any direct or guaranteed loan made under the authority of the Act by debt write-down or write-off; compromise, adjustment, reduction, or charge-off under the provisions of section 331 of the Act; discharge in bankruptcy; or through payment of a guaranteed loss claim on:
(i) More than three occasions on or prior to April 4, 1996; or
(ii) Any occasion after April 4, 1996.
(2) The applicant may receive a guaranteed OL to pay annual farm operating and family living expenses, provided the applicant meets all other requirements for the loan, if the applicant and anyone who will execute the promissory note:
(i) Received a write-down under section 353 of the Act;
(ii) Is current on payments under a confirmed reorganization plan under chapter 11, 12, or 13 of title 11 of the United States Code; or
(iii) Received debt forgiveness on not more than one occasion after April 4, 1996, resulting directly and primarily from a Presidentially-designated emergency for a county or contiguous county in which the applicant operates. Only applicants who were current on all existing direct and guaranteed FSA loans prior to the beginning date of the incidence period for a Presidentially-designated emergency and received debt forgiveness on that debt within three years after the designation of such emergency meet this exception.
(b) Delinquent Federal debt. The applicant, and anyone who will execute the promissory note, is not delinquent on any Federal debt, other than a debt under the Internal Revenue Code of 1986. (Any debt under the Internal Revenue Code of 1986 may be considered by the lender in determining cash flow and creditworthiness.)
(c) Outstanding judgments. The applicant, and anyone who will execute the promissory note, have no outstanding unpaid judgment obtained by the United States in any court. Such judgments do not include those filed as a result of action in the United States Tax Courts.
(d) Citizenship.
(1) The applicant must be a citizen of the United States, a United States non-citizen national, or a qualified alien under applicable Federal immigration laws. For an entity applicant, the majority interest of the entity must be held by members who are United States citizens, United States non-citizen nationals, or qualified aliens under applicable Federal immigration laws.
(2) United States non-citizen nationals and qualified aliens must provide the appropriate documentation as to their immigration status as required by the United States Department of Homeland Security, Bureau of Citizenship and Immigration Services.
(e) Legal capacity. The applicant and all borrowers on the loan must possess the legal capacity to incur the obligations of the loan.
(f) False or misleading information. The applicant, in past dealings with the Agency, must not have provided the Agency with false or misleading documents or statements.
(g) Credit history.
(1) The individual or entity applicant and all entity members must have acceptable credit history demonstrated by debt repayment.
(2) A history of failures to repay past debts as they came due when the ability to repay was within their control will demonstrate unacceptable credit history.
(3) Unacceptable credit history will not include:
(i) Isolated instances of late payments which do not represent a pattern and were clearly beyond their control; or,
(ii) Lack of credit history.
(h) Test for credit. Except for CL guarantees,
(1) The applicant is unable to obtain sufficient credit elsewhere without a guarantee to finance actual needs at reasonable rates and terms.
(2) The potential for sale of any significant nonessential assets will be considered when evaluating the availability of other credit.
(3) Ownership interests in property and income received by an individual or entity applicant, and any entity members as individuals will be considered when evaluating the availability of other credit to the applicant.
(i) For OLs:
(1) The individual or entity applicant must be an operator of not larger than a family farm after the loan is closed.
(2) In the case of an entity borrower:
(i) The entity must be authorized to operate, and own if the entity is also an owner, a farm in the State or States in which the farm is located; and
(ii) If the entity members holding a majority interest are related by marriage or blood, at least one member of the entity must operate the family farm; or,
(iii) If the entity members holding a majority interest are not related by marriage or blood, the entity members holding at least 50 percent interest must also operate the family farm.
(j) For FOs:
(1) The individual must be the operator of not larger than a family farm and the owner of a farm after the loan is closed. Ownership of the family farm operation or the farm real estate may be held either directly in the individual's name or indirectly through interest in a legal entity.
(2) In the case of an entity borrower:
(i) An ownership entity must be authorized to own a farm in the state or states in which the farm is located. An operating entity must be authorized to operate a farm in the state or states in which the farm is located; and
(ii) If the entity members holding a majority interest are related by marriage or blood, at least one member of the entity must operate the family farm and at least one member of the entity or the entity must own the farm; or
(iii) If the entity members holding a majority interest are not related by marriage or blood, the entity members holding at least 50 percent interest must operate the family farm and the entity members holding at least 50 percent or the entity must own the farm.
(3) If the entity is an operator-only entity, the individuals that own the farm (real estate) must own at least 50 percent of the family farm (operating entity).
(4) All ownership may be held either directly in the individual's name or indirectly through interest in a legal entity.
(k) For entity applicants. Except for CL, entity applicants must meet the following additional eligibility criteria:
(1) Each entity member's ownership interest may not exceed the family farm definition limits;
(2) The collective ownership interest of all entity members may exceed the family farm definition limits only if the following conditions are met:
(i) All of the entity members are related by blood or marriage;
(ii) All of the members are or will be operators of the entity; and,
(iii) The majority interest holders of the entity must meet the requirements of paragraphs (d), (f), (g), and (i) through (j) of this section;
(3) The entity must be controlled by farmers engaged primarily and directly in farming in the United States after the loan is made; and
(4) If the applicant has one or more embedded entities, at least 75 percent of the individual ownership interests of each embedded entity must be owned by members actively involved in managing or operating the family farm.
(l) For CL entity applicants. Entity applicants for CL guarantees must meet the following eligibility criteria:
(1) The majority interest holders of the entity must meet the requirements of paragraph (d), (f), and (g) of this section;
(2) The entity must be controlled by farmers engaged primarily and directly in farming in the United States after the loan is made;
(3) If the applicant has one or more embedded entities, at least 75 percent of the individual ownership interests of each embedded entity must be owned by members actively involved in managing or operating the family farm; and
(4) The entity must be authorized to operate a farm in the State or States in which the farm is located.
(m) For CL individual applicants. Individual applicants for CL guarantees must be farmers in the United States.
(n) Controlled substances. The applicant, and anyone who will sign the promissory note, must not be ineligible as a result of a conviction for controlled substances according to 7 CFR part 718 of this chapter. If the lender uses the lender's Agency approved forms, the certification may be an attachment to the form.
(o) Disqualification. The applicant, and all entity members in the case of an entity, must not be ineligible due to disqualification resulting from a Federal Crop Insurance violation, according to 7 CFR part 718.
[64 FR 7378, Feb. 12, 1999, as amended at 68 FR 62223, Nov. 3, 2003; 69 FR 5262, Feb. 4, 2004; 72 FR 63297, Nov. 8, 2007; 75 FR 54013, Sept. 3, 2010; 78 FR 65529, Nov. 1, 2013; 79 FR 60743, Oct. 8, 2014; 86 FR 43391, Aug. 9, 2021; 87 FR 13123, Mar. 9, 2022]