Limitations and conditions of loan guarantees

Source Credit

(a) Necessary findings
A guarantee of a loan may be made under this chapter only if—
(1) the Board finds that (A) the loan is needed to enable the borrower to continue to furnish goods or services and failure to meet this need would adversely and seriously affect the economy of or employment in the Nation or any region thereof, (B) credit is not otherwise available to the borrower under reasonable terms or conditions, and (C) the prospective earning power of the borrower, together with the character and value of the security pledged, furnish reasonable assurance that it will be able to repay the loan within the time fixed, and afford reasonable protection to the United States; and
(2) the lender certifies that it would not make the loan without such guarantee.
(b) Term of loans; renewal
Loans guaranteed under this chapter shall be payable in not more than five years, but may be renewable for not more than an additional three years.
(c) Interest rates, determination; guarantee fee
(1) Loans guaranteed under this chapter shall bear interest payable to the lending institutions at rates determined by the Board taking into account the reduction in risk afforded by the loan guarantee and rates charged by lending institutions on otherwise comparable loans.
(2) The Board shall prescribe and collect a guarantee fee in connection with each loan guaranteed under this chapter. Such fee shall reflect the Government's administrative expense in making the guarantee and the risk assumed by the Government and shall not be less than an amount which, when added to the amount of interest payable to the lender of such loan, produces a total charge appropriate for loan agreements of comparable risk and maturity if supplied by the normal capital markets.

History

(Pub. L. 92–70, §4, Aug. 9, 1971, 85 Stat. 178.)