(a) Eligibility.--An operator who desires to receive an Agriculture-Linked Investment Loan shall submit a loan application to a lending institution. The application shall contain information demonstrating all of the following:
(1) The applicant is an eligible borrower.
(2) The best management practice for which the applicant is seeking a loan under this chapter has been approved by the commission or the commission's delegated agent for implementation.
(3) Reasonable estimated costs for implementation of the approved best management practices sought to be funded have been provided by a project designer and concurred in by the commission or its delegated agent.
(b) Implementation of program.--The procedures applicable to the Agriculture-Linked Investment Program are as follows:
(1) A lending institution wishing to participate in this program shall enter into an investment agreement with the Commonwealth.
(2) A lending institution shall accept and review applications for loans from eligible borrowers.
(3) A lending institution shall apply all usual lending standards, practices and forms to determine the creditworthiness of each eligible borrower.
(4) Upon the lending institution's approval of an eligible borrower's loan application, the lending institution shall submit to the State Treasurer a request for the transfer of Agriculture-Linked Investment Loan money in an amount equivalent to the amount of the loan approved, along with the application and any supporting documents filed in accordance with subsection (a).
(5) The State Treasurer shall review the submitted request for the transfer of money and any supporting documentation for completeness prior to the transfer of Agriculture-Linked Investment Loan money to the lending institution.
(6) Upon determination of the completeness of the request for money and supporting documentation, the State Treasurer shall transfer to the lending institution money equivalent to the amount of the loan approved as follows:
(i) if the lending institution is a State depository, the State Treasurer shall deposit the money in a collateralized certificate of deposit in the name of the Commonwealth which, except as provided in this chapter, conforms to the legal requirements for deposits in State depositories; or
(ii) if the lending institution is an agricultural credit association affiliated with the Farm Credit Bank, the State Treasurer shall invest the money in bonds, notes, debentures or other obligations or securities issued by the Farm Credit Bank.
(7) The interest rate payable by lending institutions with respect to Agriculture-Linked Investment Loan money shall be the interest rate on deposits in State depositories as established by the Board of Finance and Revenue from time to time, as otherwise provided by law, reduced by any subsidy that the commission may agree to pay under this chapter.
(8) Principal balances of Agriculture-Linked Investment Loan money with each lending institution shall be adjusted periodically as follows:
(i) If the lending institution is a State depository, the principal amount of the certificate of deposit shall be adjusted not less than semiannually to reflect the reduction of the principal outstanding on the loan. The interest earned plus an amount equal to the principal repaid by the borrower shall be remitted not less than semiannually by the lending institution to the State Treasurer.
(ii) If the lending institution is an agricultural credit association in conjunction with the Farm Credit Bank, the face value of the bonds, notes, debentures or other obligations or securities outstanding shall, at the option of the State Treasurer, be periodically reduced by payment or redemption to match as nearly as possible the amount of principal outstanding on program loans, and the interest earned shall be payable to the State Treasurer as due in accordance with the terms of the bonds, notes, debentures or other obligations or securities.
(c) Terms of loan for borrowers.--The terms of the loans for borrowers shall be:
(1) Loans shall not exceed $250,000.
(2) Loans shall be amortized over a term not to exceed 12 years.
(3) The interest rate shall be established at or prior to the approval of the eligible borrower's loan application.
(4) The interest rate charged by a lending institution to an eligible borrower shall reflect a percentage rate reduction below the prevailing market loan interest rate otherwise applicable to the borrower that is equal to the percentage rate reduction, if any, below the rate set by the Board of Finance and Revenue at which the certificates of deposit associated with the loan are placed or at which the investment in bonds, notes, debentures or other obligations or securities of the Farm Credit Bank associated with the loan are made.
(5) The interest rate charged by a lending institution to an eligible borrower may be either a fixed rate for the entire term of the loan or a variable rate which shall be adjusted semiannually to reflect changes in the interest rate established by the Board of Finance and Revenue for deposits in State depositories as otherwise provided by law.
(6) Except as modified by the requirements of this chapter, a lending institution may apply its usual policies and practices with respect to the administration, collection and enforcement of loans issued under this chapter.
(d) Interest subsidy.--
(1) The commission, at the commission's discretion, may enter into an agreement with the State Treasurer to subsidize the interest rate charged to eligible borrowers under this program with money provided to the commission under section 4(6) of the Conservation District Law or section 512 (relating to Nutrient Management Fund).
(2) Under the agreement, the commission may designate from time to time a block of loans of a certain aggregate dollar amount which the commission wishes to subsidize and shall deposit in advance into a restricted escrow account in the State Treasury an amount estimated by the State Treasurer to be sufficient to make the yield over a 12-year term on the Agriculture-Linked Investment Loan money to be transferred to lending institutions in connection with each designated block of subsidized loans equivalent to the yield the money otherwise would have earned at interest rates established from time to time by the Board of Finance and Revenue for deposits in State depositories as otherwise provided by law. Withdrawals from the restricted escrow
account shall be made by the State Treasurer at the times when interest becomes due and payable from lending institutions on Agriculture-Linked Investment Loan money associated with subsidized loans.
(3) Among its terms, the agreement shall contain provisions:
(i) To require the deposit of additional money into the restricted escrow account when the parties agree that the account balance has become insufficient to fully fund the subsidy.
(ii) To permit the withdrawal of money from the escrow account when the parties agree that the account balance exceeds the amount needed to fully fund the subsidy.
(4) The amount to be deposited into the restricted escrow account as to each block of loans designated by the commission shall be determined by calculating that the loans will be amortized over 12 years at a fixed rate of interest which is a number of percentage points below the prevailing market interest rate for such loans, to be designated by the commission.