Pub. 13 2016 Issue 3

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S Issue 3 • 2016 19 Streamlined Guaranteed Loan Making with USDA Rural Development T h e USDA Ru r a l D e v e l o pme n t ’ s Bu s i n e s s a nd I ndu s t r y Gua r ant e ed Loan Prog r am (B&I ) c an he lp you t he l ender make loans in rura l communit ies of less than 50,000 people. Please note the B&I regulation, 7 CFR Parts 4279 and 4287, re- lating to loan making and servicing have been updated and clar- ified. The updates and clarifications become effective August 2, 2016. Below is a summary of changes to the regulation: • Streamlined the application forms by obsoleting application Form 4279 -1A (loans under $600,000) and modifying application Form 4279-1. • Business plan may be omitted when loan proceeds are for debt refinancing and fees. • Balloon payments now allowed for a workout/ restructure guaranteed loan. • Relaxed the requirement of 3 years historical financial statements for parent, subsidiary and affiliated companies to require current financial statements only. • Financing for mixed use properties, involving both commercial business and residential space is allowed provided that 51% or more of the projected revenue will be generated from business use. • Financing for the purchase of cooperative stocks by individual farmers or ranchers in a farmer or rancher cooperative for the purpose of processing an agricultural commodity is allowed. • Financing for conversions of businesses to either cooperatives or Employee Stock ownership Plans within 5 years from the date of initial transfer of stock is allowed. • A provision involving New Market Tax Credits allows the community development entity’s (CDE) or the sub-CDE’s subordinated loan to the guaranteed loan be considered equity when calculating the tangible balance sheet equity. • Businesses that derive more than 10% of annual gross revenue from tax deductible charitable donations based on historical financial statements are considered charitable organization and is an ineligible entity. • Annual financial statements prepared by an accountant in accordance with GAAP are required, except for personal financial statements and on cooperative stock purchase loans are not required to be prepared in accordance with GAAP. Lenders can continue to accept tax returns and use them to prepare spreads and financial statements. The spreads and financial statements are to be submitted in the guaranteed loan application. • Appraisals are required for real estate and chattel collateral when the value of the collateral exceeds $250,000. For values under this threshold, lenders must follow their regulator’s policies relating to appraisals and evaluations. • The Agency may charge a reduced guarantee fee for loans of $5 million or less when the borrower’s business supports value added agriculture, promotes access to healthy foods or is a high impact business development investment (long term population decline, in poverty last 30 years, experiencing trauma as a result of a natural disaster, located in tribal trust lands, high unemployment rate, etc.). There are other changes not reflected in the list above. The Ru - ral Development State Office holds monthly Business and Industry Guaranteed Loan Seminars on the third Thursday of every month. The next one is scheduled for August 18, 2016 at 6200 Jefferson St. NE, first floor, from 10:00 am to 11:00 am. This seminar will incorporate the updates to the regulation. If you plan to attend, please call Megan at 505-761-4953 or email her at megan.reader@ nm.usda.gov. n The Business and Cooperative Programs Director for the State is Richard Carrig. He may be reached at 505-761-4956, richard.car- rig@nm.usda.gov . Other contacts to call to discuss your potential loan using the B&I guaranteed loan program are: Albuquerque Carlos Contreras 505-761-4958 carlos.contreras@nm.usda.gov Patricia Navarrette patricia.navarrette@nm.usda . gov 505-761-4961 Aztec Evert Oldham evert.oldham@nm.usda.gov 505-334-3090 ext. 111 Las Cruces Kathy Barrett kathy.barrett@nm.usda.gov 575-522-8775 ext. 122 Roswell Ray Melton ray.melton@nm.usda.gov (575) 622-8745 ext. 4