Who May Borrow?
Intermediaries may be private non-profit corporations, public agencies, Indian groups, or cooperatives. Intermediaries must:
Have legal authority to carry out the proposed loan purposes and to incur and repay the debt.
Have a record of successfully assisting rural business and industry, normally including experience in making and servicing commercial loans.
Provide adequate assurance of repayment.
Ultimate recipients may be private or public organizations or individuals.
At least 51 percent of the owners or members of both intermediaries and ultimate recipients must be United States citizens or admitted for permanent residency. Both intermediaries and ultimate recipients must be unable to obtain the proposed loan elsewhere at reasonable rates and terms.
How May Funds Be Used?
All of the IRP loan funds received by an intermediary must be reloaned to ultimate recipients. Interest income and fees may be used for administrative costs, technical assistance to borrowers, or debt retirement. All collections from the operation of the IRP revolving loan fund that are not used for the above authorized expenses must be made available for relending to eligible ultimate recipients.
Loans from intermediaries to ultimate recipients must be for the establishment of new businesses, the expansion of existing businesses, creation of employment opportunities, saving of existing jobs, or community development projects.
What are the Loan Terms?
Loans to intermediaries are scheduled for repayment over a period of up to 30 years. The term of loans from intermediaries to ultimate recipients is set by the intermediary.
What is the Interest Rate?
The interest rate on loans to intermediaries is 1 percent per annum. The interest rate charged to ultimate recipients is negotiated by the intermediary and the ultimate recipient.
Is Collateral Required?
Yes. All loans to intermediaries must be adequately secured. Security normally consists of a lien on the IRP revolving fund. Intermediaries are also required to obtain RBS approval for their security policies for loans.
If Ultimate Recipients Fail to Repay Loans from the Intermediary, what happens to the Intermediary's Loan from RBS?
When the intermediary accepts the IRP loan, it is incurring a debt. Collections from loans to ultimate recipients should be sufficient to repay the RBS loan on schedule. However, even if collections from ultimate recipients are not sufficient, the intermediary is fully responsible for repaying RBS.