USDA issues rule to streamline 4 loan guarantee programs

July 13, 2020

BY Erin Krueger

The USDA on July 13 issued a final rule that aims to increase private investment in rural communities by making it easier for lenders to access four guaranteed loan programs, including the Rural Energy for America Program. The rule is scheduled to take effect Oct. 1 and is subject to a 60-day comment period, which will open following publication of the rule in the Federal Register.

“Under the leadership of President Trump, USDA is committed to cutting red tape and enhancing customer service so we can be a better partner to America’s rural leaders in building prosperity,” said Agriculture Secretary Sonny Perdue. “These enhancements will make it easier for private lenders to use USDA programs to invest in rural businesses and grassroots rural economic development efforts.”

The regulatory reforms included in the rule are collectively referred to as the OneRD Guarantee Loan Initiative. According to the USDA, the initiative will eliminate duplicative processes and launch a single platform for four key loan programs, including REAP, the Water and Waste Disposal Loan Guarantees Program, the Community Facilities Guaranteed Loan Program, and the Business and Industry Guaranteed Loan Program.

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REAP provides loan guarantees and grant funding to agricultural producers and rural small businesses for renewable energy systems or to make energy efficiency improvements. Solid biomass, biogas, and biofuel projects are among the renewable energy systems that are eligible for the program. The USDA’s Water and Waste Disposal Guarantees Program provides financing to improve access to clean, reliable water and waste disposal systems for households and businesses in rural areas, while the Community Facilities Guaranteed Loan Program supports the development of essential community facilities in rural areas, including healthcare facilities, town halls, courthouses, community centers, child care centers, fairgrounds, fire departments, police stations, museums, libraries, community gardens, and others. Finally, the Business and Industry Loan Guarantee program provides eligible rural businesses with loan guarantees that can support business conversion, enlargement, repair, modernization or development; the purchase and development of land, easements, rights-of-way, buildings or facilities; the purchase of equipment, leasehold improvements, machinery, supplies or inventory; debt refinancing when refinancing improves cash flow and creates jobs; business and industrial acquisitions when the loan will maintain business operations and create or save jobs; and other eligible uses. As announced in May, USDA is making up to $1 billion in loan guarantees available through the Business and Industry CARES Act Program to help rural businesses meet their working capital needs during the COVID-19 pandemic.

As part of the OneRD Guarantee Loan Initiative, the USDA said it is standardizing requirements for credit reviews, loan processing, loan servings and loss claims. The agency said these measures will make the application process simpler and faster for lenders.

Specifically, the USDA plans to launch a common loan note guarantee application and consistent forms for lenders to use across the four programs. The agency also said it plans to issue loan note guarantees to lenders within 48 hours after they provide documentation to prove the requirements of the conditional commitment have been met. The USDA will also provide guarantee percentage and fee requirements to lenders through a single annual notice at the beginning of each fiscal year and allow lenders to obtain approval for a loan guarantee prior to the beginning of construction projects. The agency will also provide automatic approval to lenders in good standing who are supervised or created by state or federal regulatory agencies to participate in all four programs, while non-regulated lenders may seek approval to participate through a single certification process that will be valid for five years.

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The USDA is scheduled to conduct virtual listening sessions to seek feedback on the OneRD Guarantee Loan Initiative final rule on July 22, Aug. 5 and Aug. 19.

A pre-publication version of the final rule is available on the USDA website. The rule is scheduled to be published in July 14 edition of the Federal Register. Written comments can be filed online at www.Regulations.gov.

 

 

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