USDA enacts a rule to streamline 4 loan guarantee programs
The USDA passed a final ruling on July 13th aimed at increasing 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 to come into force on October 1 and is subject to a 60-day comment period, which opens after the rule has been published in the federal register.
“Under President Trump’s leadership, the USDA is committed to cutting red tape and improving customer service so we can be a better partner for America’s rural leaders in wealth-building,” said Agriculture Secretary Sonny Perdue. “These improvements will make it easier for private lenders to leverage USDA programs to invest in rural businesses and support rural economic development efforts on the ground.”
The regulatory reforms contained in the rule are collectively referred to as the OneRD Guarantee Credit Initiative. According to the USDA, the initiative will eliminate duplicate processes and introduce a single platform for four major loan programs including REAP, the water and waste disposal loan guarantee program, the community facility guaranteed loan program, and the corporate and industrial guaranteed loan program.
REAP provides loan guarantees and grants to agricultural producers and rural small businesses for renewable energy systems or for improving energy efficiency. Solid biomass, biogas and biofuel projects are among the renewable energy systems eligible for the program. The USDA’s Water and Waste Disposal Guarantee program provides funding to improve access to clean, reliable water and waste disposal systems for households and businesses in rural areas, while the guaranteed community facility loan program supports the development of essential community facilities in rural areas, including health care facilities , Town halls, courthouses, community centers, daycare centers, fairs, fire departments, police stations, museums, libraries, community gardens, and others. Finally, the Enterprise and Industry Loan Guarantee Scheme provides eligible rural enterprises loan guarantees that can support business transformation, expansion, repair, modernization or development; the acquisition and development of land, easements, rights of way, buildings or facilities; the purchase of equipment, leasehold improvements, machinery, supplies or inventory; Rescheduling when refinancing improves cash flow and creates jobs; Business and industrial acquisitions if the loan keeps business going and creates or saves jobs; and other permitted uses. As announced in May, the USDA is providing loan guarantees of up to $ 1 billion on top of the CARES Act program for business and industry to help rural businesses meet their working capital needs during the COVID-19 pandemic.
As part of the OneRD Guarantee Loan Initiative, the USDA has announced that it will standardize the requirements for credit reviews, loan processing, loan disbursements and loss claims. The agency said these measures will make the application process easier and faster for lenders.
In particular, the USDA plans to introduce a common credit guarantee application and standardized forms for lenders that can be used in all four programs. The agency also said it plans to issue promissory notes to lenders within 48 hours of submitting documentation demonstrating compliance with the terms of the conditional commitment. The USDA will also provide guarantee percentages and fee requirements to lenders through a single annual notice at the beginning of each fiscal year and allow lenders to obtain loan guarantee approval prior to any construction project. The agency will also provide automatic approval to reputable lenders that are overseen or created by state or federal regulators to participate in all four programs, while unregulated lenders can apply for approval to participate through a single certification process that is valid 5 years.
The USDA is supposed to carry out virtual listening sessions to seek feedback on the final settlement of the OneRD Guaranteed Loan Initiative on July 22nd, August 5th and August 19th.
A pre-release version of the final rule is available on the USDA website. The rule is to be published in the July 14 edition of the Federal Register. Written comments can be submitted online at www.Regulations.gov.