PART 4274—DIRECT AND INSURED LOANMAKING Authority: 5 U.S.C. 301; 7 U.S.C. 1932 note; 7 U.S.C. 1989. Source: 63 FR 6053, Feb. 6, 1998, unless otherwise noted. Subparts A-C [Reserved] Subpart D—Intermediary Relending Program (IRP) Source: 86 FR 72156, Dec. 21, 2021, unless otherwise noted. § 4274.301 Introduction. (a) This subpart contains regulations for loans made by the Agency to eligible intermediaries. This applies to borrowers, ultimate recipients and other parties involved in making such loans. The provisions of this subpart supersede conflicting provisions of any other subpart. All complete applications received before December 21, 2021 will be processed, awarded, and serviced in accordance with the existing regulatory provisions in effect at the complete application date for the program under which the application was submitted. An intermediary borrower may use the Agency-prescribed self-election template, available at the USDA Rural Development website under “Details” in the RBCS IRP program section to have its existing loans, and any loans approved under the previous regulation but not yet closed, serviced under these provisions. (b) The purpose of the program is to alleviate poverty and increase economic activity and employment in rural communities, especially disadvantaged and remote communities in partnership with other public and private resources, and in accordance with State and regional strategy based on identified community needs. This purpose is achieved through loans made to intermediaries that establish a revolving loan fund for the purpose of providing loans to ultimate recipients to promote community development, establish new businesses, establish and support microlending programs, and create or retain employment opportunities in rural areas. (c) Intermediaries are required to identify any known relationship or association with an Agency employee. Any processing or servicing Agency activity conducted pursuant to this subpart involving authorized assistance to Agency employees, members of their families, close relatives, or business or close personal associates, is subject to the provisions of 7 CFR part 1900, subpart D. (d) Copies of all forms, regulations, and Agency procedures referenced in this subpart are available at USDA Rural Development's website under the “Resources” section, in the Rural Development National Office, or any Agency State Office. § 4274.302 Definitions. The following definitions are applicable to the terms used in this subpart. Administrator. Affiliate. (1) One controls or has the power to control the other, or a third party or parties controls or has the power to control both. Factors such as ownership, management, current and previous relationships with or ties to another concern, and contractual relationships, shall be considered in determining whether affiliation exists. It does not matter whether control is exercised, so long as the power to control exists. Concerns owned and controlled by Indian Tribes, Alaska Native Corporations (ANC), Native Hawaiian Organizations (NHO), Community Development Corporations (CDC), or wholly-owned entities of Indian Tribes, ANCs, NHOs, or CDCs, are not considered to be affiliated with other concerns owned by these entities because of their common ownership or common management. (2) There is an identity of interest between immediate family with identical or substantially identical business or economic interests (such as where the immediate family operate concerns in the same or similar industry in the same geographic area); however, an individual or entity may rebut that determination with evidence showing that the interests deemed to be one are in fact separate. Agency. Agency IRP loan. Agency IRP loan funds. Agricultural production or agriculture production. Aquaculture. Citizen. Community development. Conflict of interest. Cooperative. Hydroponics. Immediate family. Indian tribe. et seq. Intermediary. Intermediary equity contribution. IRP revolving loan fund. (1) Obtained through or related to an Agency IRP loan; and (2) Accounted for, along with related liabilities, revenues, and expenses, as an entity or enterprise separate from the intermediary's other assets and financial activities. Loan agreement. Military personnel. Principals of intermediary. Public agency. Revolved funds. Rural or rural area. (1) Any area in the urbanized area contiguous and adjacent to a city or town that has a population of more than 50,000 inhabitants that has been determined to be “rural in character” as follows: (i) The determination that an area is “rural in character” will be made by the Under Secretary of Rural Development. The process to request a determination under this provision is outlined in paragraph (1)(ii) of this definition. The determination that an area is “rural in character” under this definition will apply to areas that are within: (A) An urbanized area that has two points on its boundary that are at least 40 miles apart, which is not contiguous or adjacent to a city or town that has a population of greater than 150,000 inhabitants or the urbanized area of such a city or town; or (B) An urbanized area contiguous and adjacent to a city or town of greater than 50,000 inhabitants that is within 1/4 (ii) Units of local government may petition the Under Secretary of Rural Development for a “rural in character” designation by submitting a petition to the appropriate Rural Development State Director for recommendation to the Administrator on behalf of the Under Secretary. The petition shall document how the area meets the requirements of paragraph (1)(i)(A) or (B) of this definition and discuss why the petitioner believes the area is “rural in character,” including, but not limited to, the area's population density, demographics, and topography and how the local economy is tied to a rural economic base. Upon receiving a petition, the Under Secretary will consult with the applicable governor or leader in a similar position and request comments to be submitted within five business days, unless such comments were submitted with the petition. The Under Secretary will release to the public a notice of a petition filed by a unit of local government not later than 30 days after receipt of the petition by way of publication in a local newspaper and posting on the Rural Development State Office website and the Under Secretary will make a determination not less than 15 days, but no more than 60 days, after the release of the notice. Upon a negative determination, the Under Secretary will provide to the petitioner an opportunity to appeal a determination to the Under Secretary, and the petitioner will have 10 business days to appeal the determination and provide further information for consideration. The Under Secretary will make a determination of the appeal in not less than 15 days, but no more than 30 days. (iii) Rural Development State Directors may also initiate a request to the Under Secretary to determine if an area is “rural in character.” A written recommendation should be sent to the Administrator, on behalf of the Under Secretary, that documents how the area meets the statutory requirements of paragraph (1)(i)(B) of this definition and discusses why the State Director believes the area is “rural in character,” including, but not limited to, the area's population density, demographics, topography, and how the local economy is tied to a rural economic base. Upon receipt of such a request, the Administrator will review the request for compliance with the “rural in character” provisions and make a recommendation to the Under Secretary. Provided a favorable determination is made, the Under Secretary will consult with the applicable Governor and request comments within 10 business days, unless gubernatorial comments were submitted with the request. A public notice will be published by the State Office in accordance with paragraph (1)(ii) of this definition. There is no appeal process for requests made on the initiative of the State Director. (2) An area that is attached to the urbanized area of a city or town with more than 50,000 inhabitants by a contiguous area of urbanized census blocks that is not more than two census blocks wide. Applicants from such an area should work with their Rural Development State Office to request a determination of whether their project is located in a rural area under this provision. (3) For the Commonwealth of Puerto Rico, the island is considered rural and eligible except for the San Juan Census Designated Place (CDP) and any other CDP with greater than 50,000 inhabitants. Areas within CDPs with greater than 50,000 inhabitants, other than the San Juan CDP, may be determined to be Rural if they are not urban in character. (4) For the State of Hawaii, all areas within the State are considered rural and eligible except for the Honolulu CDP within the County of Honolulu and any other CDP with greater than 50,000 inhabitants. Areas within CDPs with greater than 50,000 inhabitants, other than the Honolulu CDP, may be determined to be Rural if they are not urban in character. (5) For the purpose of defining a rural area in the Republic of Palau, the Federated States of Micronesia, and the Republic of the Marshall Islands, the Agency shall determine what constitutes rural and rural area based on available population data. State. Technical assistance. Ultimate recipient. Underrepresented group. Value-added agricultural product. (1) Has undergone a change in physical state; (2) Is a source of farm or ranch-based renewable energy; or (3) Is aggregated and marketed as a locally produced agricultural food product. Work plan. [86 FR 72156, Dec. 21, 2021, as amended at 87 FR 38644, June 29, 2022] § 4274.303 Review or appeal rights. An intermediary may have appeal or review rights for adverse Agency decisions made under this part. Agency decisions that are adverse to the individual participant are appealable, while matters of general applicability are not subject to appeal; however, such decisions are reviewable for appealability by the National Appeals Division (NAD). All appeals will be conducted by NAD and will be handled in accordance with 7 CFR part 11. § 4274.304 Exception authority. The Administrator may, on a case-by-case basis, grant an exception to any requirement or provision of this subpart provided that such an exception is in the best financial interests of the Federal government. Exercise of this authority cannot be in conflict with applicable law. § 4274.305 Other regulatory requirements. (a) Intergovernmental consultation. (b) Environmental requirements. (1) All IRP loans between the Agency and the intermediary are considered categorical exclusions absent the existence of extraordinary circumstances in accordance with 7 CFR part 1970. All intermediaries must execute an Exhibit H, “Multi-tier Action Environmental Compliance Agreement,” to RD Instruction 1970-A as part of their IRP application submitted to the Agency. The intermediary must sign a certification that they have National Environmental Policy Act (NEPA) staff capable of undertaking an environmental review that meets Agency standards. For intermediaries that don't have capable staff, the Agency will deliver sufficient training to intermediaries on the environmental process and how to determine whether an ultimate recipient project is a categorical exclusion or requires an environmental assessment and review. (2) For each proposed loan from an intermediary to an ultimate recipient using Agency IRP loan funds, an environmental review will be completed in accordance with 7 CFR 1970.55. For projects that do not qualify for a categorical exclusion, or which may be subject to an extraordinary circumstance under 7 CFR 1970.52, the intermediary will refer the project to the Agency for review under 7 CFR part 1970, subpart C. The intermediary retains responsibility for providing sufficient information for the Agency to make an environmental determination, though Agency staff may also opt to complete the environmental review with information provided by either the intermediary or ultimate recipient. (3) The Agency will prepare an environmental impact statement for any application for a loan from Agency IRP loan funds determined to have a significant adverse effect on the quality of the human environment. (c) Equal opportunity and nondiscrimination requirements. (1) The civil rights compliance requirements contained in 7 CFR part 1901, subpart E, apply to intermediaries and ultimate recipients. (2) The Agency will ensure that equal opportunity and nondiscrimination requirements are met in accordance with the Equal Credit Opportunity Act, Title VI of the Civil Rights Act of 1964, “Nondiscrimination in Federally Assisted Programs,” 42 U.S.C. 2000d-4, § 504 of the Rehabilitation Act for Federally Conducted Programs and Activities, the Age Discrimination Act of 1975, and the Americans With Disabilities Act of 1990 (as amended). (d) Seismic safety of new building construction. (1) All new buildings financed from the IRP revolving loan fund, whether directly or through participations, must be designed and constructed in accordance with the seismic provisions of the most current version of the International Building Code (IBC) or two versions prior; currently that is 2021 IBC, 2018 IBC or 2015 IBC, or an above-code seismic standard that meets or exceeds the equivalent level of safety to that contained in the latest edition of the National Earthquake Hazard Reduction Programs (NEHRP) Recommended Provisions for the Development of Seismic Regulations for New Building (NEHRP Provisions.) (2) The date, signature, and seal of a registered architect or engineer and the identification and date of the model building code on the plans and specifications constitutes evidence of compliance with the seismic requirements of the appropriate code. § 4274.306-§ 4274.309 [Reserved] § 4274.310 Eligibility requirements—intermediaries. To be eligible to receive an Agency IRP loan, an intermediary must comply with the requirements specified in paragraphs (a) through (i) of this section. (a) Type of entity. (1) A private nonprofit corporation; (2) A public agency; (3) An Indian Tribe; or (4) A cooperative. (b) Legal authority. (c) Proven record. (1) Except as provided in paragraph (c)(2) of this section, such record must include recent experience in loan making and servicing with loans that are similar in nature to those proposed by the intermediary and a delinquency and loss rate acceptable to the Agency. Any request for an exception must be specifically addressed in the loan application and be supported with concluding statements that relate to the items specified in paragraphs (c)(2)(i) and (ii) of this section. (2) The Agency may approve an exception to the requirement for loan making and servicing experience provided the intermediary: (i) Itself has a proven record of successfully assisting (other than through lending) rural business and industry or rural community development projects through technical assistance or business development projects to the type and size of planned ultimate recipient borrowers; and (ii) Will, before the loan is closed, employ individuals with loan making and servicing experience and qualifications and expertise for the operation and administration of an IRP revolving loan fund as described in § 4274.340(a)(1)(ii). These shall not include contracted staff and staff from affiliates of the intermediary. (d) Staff. (e) Capitalization/equity. (f) Citizens. (g) Delinquent debt. (h) Conditions. (1) There is adequate assurance of repayment of the loan based on the fiscal and managerial capabilities of the intermediary itself; and (2) The amount of the loan, together with other funds available, is adequate to ensure the continuation or establishment of an effective IRP revolving loan fund or achieve the purposes for which the loan is made. (i) Other financing unavailable. (j) Restrictions. § 4274.311 Eligibility requirements—ultimate recipients. To be eligible for a loan from an intermediary under this subpart, an ultimate recipient must meet or comply with the requirements specified in paragraphs (a) through (g) of this section. (a) Type of entity. (b) Legal authority. (c) Citizens. (d) Location. (e) Other financing unavailable. (f) Legal or financial influence. (2) The ultimate recipient must, along with its principals (including their immediate families), hold no legal or financial interest or influence in or with the intermediary as per § 4274.321(b)(4) as this is considered a conflict of interest, as defined. (g) Delinquent debt. (h) Fund usage. § 4274.312-§ 4274.319 [Reserved] § 4274.320 Loan purposes. (a) Agency IRP loans. (b) IRP revolving loan fund loans. (1) The Secretary may relend funds to eligible intermediaries for projects that: (i) Promote community development; (ii) Establish new businesses; (iii) Establish and support microlending programs; and (iv) Create or retain employment opportunities. (2) Such loan purposes may include, but are not limited to, those purposes identified in paragraphs (b)(2)(i) through (xx) of this section. (i) Business and industrial acquisitions when the loan will keep the business from closing, prevent the loss of employment opportunities, or provide expanded job opportunities. (ii) Business construction, conversion, enlargement, repair, modernization, or development. (iii) Purchase and development of land, easements, rights-of-way, buildings, facilities, leases, or materials. (iv) Purchase of equipment, leasehold improvements, machinery, or supplies. (v) Pollution control and abatement. (vi) Transportation services. (vii) Start-up operating costs and working capital. (viii) Interest (including interest on interim financing) during the period before the facility becomes income producing, but not to exceed three years. (ix) Feasibility studies. (x) Debt refinancing. (A) The intermediary is responsible for making prudent lending decisions based on sound underwriting principles when considering the restructuring of an ultimate recipient's debt. (B) Refinancing debts may be allowed only when it is determined by the intermediary that the project is viable, and refinancing is necessary to create new or save existing jobs or create or continue a needed service. (xi) Reasonable fees and charges to the ultimate recipient are allowed only as specifically listed in this paragraph. Authorized fees include loan documentation and fees for recording a collateral lien, environmental data collection fees, management consultant fees, and other fees for services rendered by professionals in relation to the loan project. Professionals are generally persons licensed by States or accreditation associations, such as engineers, architects, lawyers, accountants, and appraisers. Additional charges to the ultimate recipient, whether by a fee or interest rate increase, for an intermediary's costs related to loan participations are not allowed. In addition, the intermediary shall not be charged fees related to the purchase or sale of a loan participation. The maximum amount of any fee will be what is reasonable and customary in the community or region where the project is located; provided, however, that all costs must be actual costs and shall not be marked-up beyond actual cost. Any such fees or charges are to be fully documented and justified. (xii) Hotels, motels, tourist homes, bed and breakfast establishments, nonowner-occupied real estate, convention centers, and other tourist and recreational facilities except as prohibited by § 4274.321. These types of facilities are allowed when the pro rata value, supported by an analysis of the supporting real estate appraisal, of the owner's living quarters is deleted from the appraised value. (xiii) Educational institutions. (xiv) Revolving lines of credit provided the portion of the intermediary's total IRP revolving loan fund that is committed to, or in use for revolving lines of credit, will not exceed 25 percent at any time. (A) All ultimate recipients receiving revolving lines of credit must reduce the outstanding balance of the revolving line of credit to zero at least once each year. (B) The intermediary must approve all revolving lines of credit for a specific maximum amount and for a specific maximum time period, not to exceed two years. (C) The intermediary must provide a detailed description, which will be incorporated into the intermediary's work plan and be subject to Agency approval, of how the revolving lines of credit will be operated and managed. The description must include evidence that the intermediary has an adequate system for: ( 1 ( 2 (D) If, at any time, the Agency determines that an intermediary's operation of revolving lines of credit is causing excessive risk of loss for the intermediary or the government, the Agency may terminate the intermediary's authority to use the IRP revolving loan fund for revolving lines of credit. Such termination will be by written notice and will prevent the intermediary from approving any new lines of credit or extending any existing revolving lines of credit beyond the effective date of termination contained in the notice. (xv) Aquaculture and hydroponics, as defined in this subpart. (xvi) Commercial fishing. (xvii) Commercial nurseries engaged in the production of ornamental plants and trees and other nursery products such as bulbs, flowers, shrubbery, flower and vegetable seeds, sod, and the growing of plants from seed to the transplant stage. (xviii) Forestry, which includes businesses primarily engaged in the commercial operation of timber tracts, tree farms, and forest nurseries and related activities such as reforestation. (xix) Value-added production. (xx) Housing, only when related to community development projects and, limited to working capital, equipment, pre-business development costs, and other such business purposes. Agency IRP loan funds may be used to assist a housing project planner, a housing project builder, a construction sub-contractor (indirect soft costs such as architectural, engineering and legal fees), or for any other business-related aspect of a housing project that is separate from the sale and/or purchase transaction involved in transferring ownership of a single or multi-family dwelling. While the proceeds from a sale might be used by an ultimate recipient to repay an Agency IRP loan, an Agency IRP loan cannot be used to finance a residential housing purchase. Agency IRP loans may not be used to assist in the purchase of residential housing (single, multiple dwelling, etc.) as financial assistance moves outside of community development when the financial assistance (a mortgage loan) is requested for a purchase. (c) Participations. (2) Loan participant buyers are able to compensate for low loan demand or invest in large loans without servicing burdens and origination costs. Lenders selling loan participations can accommodate a larger credit while mitigating some of the risk by reducing their credit exposure. (3)(i) Participation agreements between the lead lender and buying participants are executed with each transaction and must address, among other items: (A) The obligation of the lead lender to furnish timely credit information and to provide notification of material changes in the borrower's status; (B) Requirements that the lead lender consult with participants and obtain their consent prior to modifying any loan, guaranty, or security agreements and before taking any action on defaulted loans; and (C) The specific rights and remedies available to the lead and participating lenders upon default of the borrower. (ii) A Master (open ended) participation agreement between the intermediary and any lender is not allowed. All loans made through use of participation agreements must be to eligible ultimate recipients and for eligible purposes. The ultimate recipients, lead lender and all participating lenders must agree to be bound by the applicable requirements of this regulation. (4) Participation in loans where 50 percent or more of the loan funds are used to refinance a lead lender's existing loans to the borrower are ineligible. The Agency does not consider take out or terming out a construction loan as refinancing. (5) No more than 50 percent of an intermediary's loan funds may be used to purchase loans from any individual lender or affiliation of lenders, to prevent an exclusive relationship with a lender or lender holding company. Likewise, no more than 50 percent of the total intermediary loans to ultimate recipients may be sold or participated to an individual lender or affiliation of lenders. An exception to these limits may be requested by the intermediary and is subject to review by the Agency of the intermediary's lending portfolio, credit quality and overall use of loan participations. § 4274.321 Ineligible loan purposes. (a) Agency IRP loans. (b) IRP revolving loan fund loans. (1) Assistance in excess of what is needed to accomplish the purpose of the ultimate recipient's project. (2) Distribution, payment, or loans to the owner, partners, shareholders, or beneficiaries of the ultimate recipient or members of their families when such persons will retain any portion of their equity, or control, in the ultimate recipient. This is not intended to prevent the sale of a business among immediate family members as long as the selling immediate family member does not retain an ownership interest and the price paid is deemed to be reasonable. This type of transaction is not an arm's length transaction and reasonableness of the price paid will be based upon an appraisal acceptable to the Agency. (3) Charitable institutions and fraternal organizations that would not have revenue from sales, fees, or stable revenue source to support their operation and repay the loan. (4) Assistance to Federal government employees, active-duty military personnel, employees of the intermediary, or any organization for which such persons are directors or officers or have 20 percent or more ownership. (5) A loan to an ultimate recipient that has an application pending with or a loan outstanding from another intermediary involving an IRP revolving loan fund if the total Agency IRP loans would exceed the limits established in § 4274.331(c). (6) Agricultural production. For the purposes of this program, Agricultural production does not include those activities specifically listed as eligible uses of IRP revolving loan fund loans in § 4274.320(b)(15) through (19). (7) The transfer of ownership unless the loan will keep the business from closing, prevent the loss of employment opportunities in the area, or provide expanded job opportunities. (8) Community antenna television services or facilities. (9) Any illegal activity. (10) Any project that is in violation of either a Federal, State, or local environmental protection law or regulation or an enforceable land use restriction unless the assistance given will result in curing or removing the violation. (11) Loans to lending and investment institutions and insurance companies. (12) Golf courses, racetracks, or gambling facilities. (13) An entity is ineligible if it derives more than 15 percent of its annual gross revenue (including any lease income from space or machines) from gambling activity, excluding State-authorized lottery proceeds or Tribal-authorized gambling proceeds, as approved by the Agency, conducted for the purpose of raising funds for the approved project. § 4274.322-§ 4274.329 [Reserved] § 4274.330 Agency IRP loan conditions and terms. (a) Revolving fund. (b) Loan closing. (c) Term. (d) Interest rate. (e) Security. (1) Security for such loans may include, but is not limited to: (i) Any realty, personalty, or intangible asset capable of being mortgaged, pledged, or otherwise encumbered by the intermediary in favor of the Agency; and (ii) Any realty, personalty, or intangible asset capable of being mortgaged, pledged, or otherwise encumbered by an ultimate recipient in favor of the Agency. (2) Initial security will consist of a pledge by the intermediary of all assets now in or hereafter placed in the IRP revolving loan fund, including cash and investments, notes receivable from ultimate recipients, and the intermediary's security interest in collateral pledged by ultimate recipients. Except for good cause shown, the Agency will not obtain assignments of specific assets at the time a loan is made to an intermediary or ultimate recipient. The intermediary must covenant that, in the event the intermediary's financial condition deteriorates or the intermediary takes action detrimental to prudent fund operation or fails to take action required of a prudent lender, the intermediary will provide additional security, execute any additional documents, and undertake any reasonable acts the Agency may request to protect the Federal Government interest or to perfect a security interest in any asset, including physical delivery of assets and specific assignments to the Agency. All debt instruments and collateral documents used by an intermediary in connection with loans to ultimate recipients, including all documents representing an interest in a participation loan made pursuant to § 4273.320 of this chapter, must be assignable. (3) In addition to normal security documents, a first lien interest in the intermediary's IRP revolving loan fund account(s) will be accomplished by a control agreement satisfactory to the Agency. Agency signatures for withdrawals are not required. The depository bank must waive its offset and recoupment rights against the depository account to the Agency and subordinate any liens it may have against the IRP depository bank account. The use of Form RD 402-1, “Deposit Agreement,” or a similar form developed by the Agency's Office of the General Counsel is acceptable. (f) Loan limits. (2) The Agency IRP loan to an intermediary will not exceed the maximum award amount established by the Agency in an annual Notice. (3) Intermediaries that have received one or more Agency IRP loans may apply for and be considered for additional Agency IRP loans provided that the outstanding loans of the intermediary's IRP revolving loan fund are generally sound, the intermediary is in compliance with all applicable regulations and its loan agreements with the Agency, and either: (i) The intermediary has insufficient IRP revolving loan funds available for lending to meet current and expected ultimate recipient loan demand. Funds available for lending consist of Agency IRP loan funds not yet disbursed by the Agency, revolved funds, and cash on-hand in the IRP revolving loan fund. Necessary cash reserves including, but not limited to, debt service reserves, may be deducted from the IRP revolving loan fund cash on-hand in determining funds available for lending. The intermediary must provide documentation acceptable to the Agency of the current and expected ultimate recipient loan demand; or (ii) The Agency IRP loan will serve a geographic area not included in an area currently served by an existing IRP intermediary and it is not possible or feasible to expand the existing IRP loan's service area to include the new geographic area; and (4) Total outstanding IRP indebtedness of an intermediary to the Agency will not exceed $15 million at any time. § 4274.331 IRP revolving loan fund loan conditions and terms. (a) Conditions and terms. (1) Interest rate. (2) Repayment. (b) Security. (c) Loan limits. (1) $400,000; and (2) Fifty percent of the originally-approved Agency IRP loan amount to an intermediary (including the unpaid balance of any existing ultimate recipient loans). § 4274.332 Post award requirements. (a) Applicability. (b) Maintenance of IRP revolving loan fund. (1) The intermediary can use the portion of the IRP revolving loan fund that consists of Agency IRP loan funds only for making loans in accordance with § 4274.320. The intermediary may use the portion of the IRP revolving loan fund that consists of revolved funds for debt service reserve and reasonable administrative costs, in accordance with this section, or for making additional ultimate recipient loans. (2) The intermediary must submit for Agency approval an annual budget of proposed IRP revolving loan fund income and expenses including expected administrative costs. The annual budget must itemize income, including interest received from ultimate recipients, interest earnings on deposits, fees, and other income excluding principal recaptured from ultimate recipients, and expenses including interest repaid to the Agency, administrative expenses, liquidation expenses, loan write-offs, and other fees and costs excluding principal repaid to the Agency. The intermediary cannot use proceeds received from the collection of principal repayment by an ultimate recipient for administrative expenses. The amount removed by the intermediary from the IRP revolving loan fund for administrative costs in any year must be reasonable, must not exceed the actual cost of operating the IRP revolving loan fund, including loan servicing, and providing technical assistance, and must not exceed the amount approved by the Agency in the intermediary's annual budget. The administrative expenses that the intermediary charges to the IRP fund may never exceed the actual income earned on an annual basis. An intermediary can contract personnel for hire per § 4274.340(a)(1)(ii); but the intermediary may not routinely contract loan underwriting, management, or day-to-day operations. Essential activities of the IRP revolving loan funds must be conducted in-house. (3) The intermediary must establish a debt service reserve fund. The purpose of the debt service reserve fund is to ensure that adequate cash is available for the annual IRP loan installment(s) in the event that the IRP revolving loan fund has insufficient cash to make these payments. The minimum amount of cash in the debt service reserve fund must be at least equal to the intermediary's cumulative, annual debt service requirements for all Agency IRP loans outstanding. This account should be established by the date of loan closing, but the minimum required cash balance does not have to be reached until the third anniversary of an Agency IRP loan closing. The minimum required balance must be maintained for the life of the Agency IRP loan thereafter. The debt service reserve funds can only be withdrawn when there is insufficient cash in the IRP revolving loan fund's other account(s) to make the annual Agency IRP loan installments, and such withdrawals require the prior written concurrence of the Agency. Any withdrawal that causes the cash balance to drop below the minimum amount required must be repaid to the debt service reserve fund as soon as possible, but in no event can such repayment be longer than six months from the date of withdrawal. The funding of this debt service reserve fund may not come from Agency IRP loan funds and must come from an unencumbered source. (4) The intermediary must make any cash in the IRP revolving loan fund that is not needed for debt service or approved administrative costs available for additional loans to ultimate recipients. If the Agency determines that the intermediary has substantial amounts of Agency IRP loan funds available for lending that is not being regularly loaned out to ultimate recipients, the Agency may require, at its discretion, that those funds be returned to the Agency in accordance with paragraph (b)(8) of this section. (5) The intermediary must deposit all reserves and other cash of the IRP revolving loan fund not immediately needed for loans to ultimate recipients or other authorized uses in accounts in banks or other financial institutions. Such accounts must be fully covered by Federal deposit insurance or fully collateralized with other securities in accordance with normal banking practices and all applicable State laws. The account must be interest-bearing if feasible and any interest earned thereon remains a part of the IRP revolving loan fund. The intermediary cannot use funds for any certificates of deposit over a 30-day duration or for investments in securities. All instruments associated with the revolving loan fund must be liquid and not impose fees associated with the withdrawal or movement of cash. (6) If an intermediary receives more than one IRP loan, the intermediary does not need to establish and maintain a separate IRP revolving loan fund for each loan. Instead, the intermediary may combine them and maintain only one IRP revolving loan fund, unless the Agency requires separate IRP revolving loan funds because there are significant differences in the loan purposes, work plans, loan agreements, or requirements for the loans. The Agency may allow loans with different requirements to be combined into one IRP revolving loan fund if the intermediary agrees in writing to operate the combined revolving funds in accordance with the most stringent requirements of the Agency. The combining of multiple loans in one IRP revolving loan fund does not preclude the intermediary from being able to individually track the activity of each Agency IRP loan. The Agency must be able to readily determine the ultimate recipient loans made from each Agency IRP loan. (7) The intermediary may deposit their full equity contribution for the entire Agency IRP loan before the initial advance of Agency IRP loan funds or it may deposit its matching percent at each interval that loan advances are made by the Agency. (8) IRP revolving loan fund funds are intended to be active mechanisms to enhance business development in rural communities. If Agency IRP loan funds have been unused for a period of six months or more, those funds in excess of $250,000 will be returned to the Agency unless the Agency concurs with an intermediary's request for an exception. Any exception would be based on evidence satisfactory to the Agency that every effort is being made by the intermediary to utilize the IRP revolving loan fund funding for loans to ultimate recipients in conformance with program objectives. (9) The full measure of collateral must be made up of cash available in the IRP revolving loan fund, the debt service reserve, and the total outstanding balance of ultimate recipient loans. At all times, the sum of the IRP revolving loan fund, debt service reserve, and principal amount outstanding on performing ultimate recipient loans must equal 100 percent of what is owed to the Agency by the intermediary plus any equity contribution amount. Therefore, if any part of the collateral fluctuates to the extent that the minimum retention requirement falls below the 100 percent plus the equity contribution threshold, the intermediary must inject cash into the IRP revolving loan fund and or debt service reserve fund to ensure that the total collateral is maintained at the minimum required level. (10) The intermediary must also file a Uniform Commercial Code (UCC) financing statement at closing in order to perfect the Agency's security interest in the ultimate recipient's promissory notes. The intermediary is responsible for covering the costs of filing as well as ensuring the necessary filings are renewed and recorded with the Secretary of State, or the equivalent tribal official as appropriate. (c) Agency oversight. (d) Return of equity. (1) The intermediary is current in all payments to the Agency and in compliance with all elements of their loan agreement and Agency reporting requirements; (2) The ratio of intermediary equity to the Agency loan after the return of equity remains consistent with the initial equity injection percentage by the intermediary; and (3) Any return of an intermediary's equity from the revolving loan fund must be approved by the Agency in writing and is limited to an amount that the Agency determines will not cause additional credit risk to the revolving loan fund or the Agency and is in compliance with paragraph (b)(9) of this section. § 4274.333 Loan agreements between the Agency and the intermediary. The intermediary and the Agency must execute a loan agreement or a supplement to a previous loan agreement at loan closing for each Agency IRP loan. The Agency will prepare the loan agreement and the intermediary must review it prior to loan closing. The intermediary is responsible for compliance with the terms and conditions of the loan agreement. (a) The loan agreement will, at a minimum, set out: (1) The amount of the loan; (2) The interest rate; (3) The term and repayment schedule; (4) The provisions for late charges. The intermediary must pay a late charge of four percent of the payment due if payment is not received within 15 calendar days following the due date. The Agency will consider the late charge as unpaid if it is not received within 30 calendar days of the missed due date for which it was imposed. The Agency will add any unpaid late charge to the loan's principal balance, and it will be due as an extra payment at the end of the term. Acceptance of a late charge by the Agency does not constitute a waiver of default. (i) A per diem amount will be shown on the late notice sent to the intermediary. The Agency will continue sending notices to the intermediary on the late payments or any further payments until the account is in a current status. (ii) Interest will be computed on a 365-day basis unless legal documents state otherwise. (5) The disbursement procedure. The Agency will disburse the Agency IRP loan funds to the intermediary on an as-needed basis after the loan agreement and promissory note are executed, and after any other conditions precedent to disbursement of funds are fully satisfied. Fund disbursement requests must be submitted with an intermediary's request for Agency concurrence in accordance with the provisions of § 4274.352(a). Only the amount of Agency IRP loan funds necessary to fund the given ultimate recipient loan request(s) can be requested by the intermediary and disbursed by the Agency. The intermediary's equity contribution may not be used for administrative costs. When lending, the intermediary's equity contribution must be loaned out prior to or on a pro rata basis with Agency IRP loan funds. For purposes of computing interest, the date of each draw down of an Agency IRP loan constitutes the date the funds are advanced under the loan agreement. (6) The provisions regarding default. On the occurrence of any event of default (monetary or nonmonetary), the Agency may declare all or any portion of the debt and interest to be immediately due and payable and may proceed to enforce its rights under the loan agreement or any other instruments securing or relating to the loan and in accordance with the applicable laws and regulations. Any of the following may be regarded as an “event of default” at the sole discretion of the Agency: (i) Failure of the intermediary to carry out the specific activities in its loan application as approved by the Agency or failure to comply with the loan terms and conditions of the loan agreement, any applicable Federal or State laws, or with such USDA or Agency regulations as may be applicable; or (ii) Failure of the intermediary to pay within 15 calendar days of its due date any installment of principal or interest on its promissory note to the Agency; or (iii) The occurrence of: (A) The intermediary becoming insolvent, or ceasing, being unable, or admitting in writing its inability to pay its debts as they mature, or making a general assignment for the benefit of, or entering into any composition or arrangement with creditors; or (B) Proceedings for the appointment of a receiver, trustee, or liquidator of the intermediary, in whole or of a substantial part of its assets, being authorized or instituted by or against it; or (iv) Submission or making of any report, statement, warranty, or representation by the intermediary or agent on its behalf to the Agency in connection with the financial assistance awarded hereunder which is false, incomplete, or incorrect in any material respect; or (v) Failure of the intermediary to remedy any material adverse change in its financial or other condition (such as the representational character of its board of directors, loan making or policymaking body) arising since the date of the Agency's award of assistance hereunder, which condition was an inducement to the Agency's original award. (7) Insurance requirements. (i) Hazard insurance with a standard mortgage clause naming the intermediary as beneficiary will be required by the intermediary on every ultimate recipient's project funded from the IRP revolving loan fund in an amount that is at least the lesser of the depreciated replacement value of the property being insured or the amount of the loan. Hazard insurance includes fire, windstorm, lightning, hail, business interruption, explosion, riot, civil commotion, aircraft, vehicle, marine, smoke, builder's risk, public liability, property damage, flood or mudslide, or any other hazard insurance that may be required to protect the security. The intermediary's interest in the insurance will be assigned to the Agency, upon the Agency's request, in the event of default by the intermediary. (ii) Workmen's compensation insurance on ultimate recipients is required in accordance with State law. (iii) The intermediary is responsible for determining if an ultimate recipient funded from the IRP revolving loan fund is located in a special flood or mudslide hazard area. If the ultimate recipient is in a flood or mudslide area, then flood or mudslide insurance must be provided in accordance with 7 CFR part 1806, subpart B. (iv) Intermediaries must provide fidelity bond coverage, or employee dishonesty insurance, for all persons who have access to intermediary funds. Coverage may be provided either for all individual positions or persons, or through “blanket” coverage providing protection for all appropriate employees and officials. (A) The minimum amount of fidelity bond/employee dishonesty coverage required by the Agency will equal the total, cumulative annual debt service requirements for all Agency IRP loans. Intermediaries with fidelity bond/employee dishonesty coverage requirements through other Agency programs ( e.g., (B) Evidence of this coverage must be provided at, or prior to, loan closing and must be maintained for the life of the IRP loan. During the term of the loan, the intermediary must provide evidence to the Agency, upon request, that adequate fidelity bond/employee dishonesty coverage is in place. (v) The Agency may also require the intermediary to carry other appropriate insurance, such as coverage for public liability, leasehold, and property damage. (b) The intermediary must agree in the loan documents to: (1) Not make any changes in the intermediary's articles of incorporation, charter, or by-laws that would impact the intermediary's eligibility for the IRP program or would adversely affect their ability to operate the IRP program in accordance with the provisions of this instruction and any other applicable laws, regulations, and executive orders without the prior written concurrence of the Agency. This pertains to the Agency's original IRP loan funds and revolved funds. (2) Not make a loan commitment to an ultimate recipient to be funded from Agency IRP loan funds without first receiving the Agency's written concurrence; (3) Maintain a separate ledger and segregated accounting for the IRP revolving loan fund; (4) Provide to the Agency: (i) An annual audit as described in 2 CFR part 200, subpart F, or any successor regulation; (A) The financial audit report period may be different than the IRP reporting periods. Intermediaries must promptly provide the auditor with the records and documentation necessary for the completion of the audit following the end of the audit period. The audit report must be submitted to the Agency within the earlier of 30 calendar days after receipt of the auditor's report, or nine months after the end of the audit period as described in 2 CFR 200.512. Audits must cover all the intermediary's activities. Audits will be performed by an independent certified public accountant. An acceptable audit will be performed in accordance with Generally Accepted Government Auditing Standards (GAAP) and include such tests of the accounting records as the auditor considers necessary in order to express an opinion on the financial condition of the intermediary. Compilations or reviews do not satisfy the audit requirement. (B) It is not intended that audits required by this subpart be separate and apart from audits performed in accordance with State and local laws or for other purposes. To the extent feasible, the audit work should be done in connection with these audits. Intermediaries covered by 2 CFR part 200, subpart F, as codified in 2 CFR 400.1, should submit audits conducted in accordance with that regulation. (ii) Quarterly or semiannual reports (due 30 days after the end of the period); (A) Reports will be required quarterly during the first year after loan closing and, if all loan funds are not utilized during the first year, quarterly reports will be continued until at least 90 percent of the Agency IRP loan funds have been loaned out to ultimate recipients. Thereafter, reports will be required semiannually. Also, the Agency may require quarterly reports if the intermediary becomes delinquent in repayment of its loan or otherwise fails to fully comply with the provisions of its work plan or loan agreement, or the Agency determines that the intermediary's IRP revolving loan fund is not adequately protected by the current sound worth and paying capacity of the ultimate recipients. (B) These reports must contain information only on the IRP revolving loan fund. Information required to be included in these reports as well as detailed reporting instructions will be provided by the Agency through a revolving loan fund user manual (available on the USDA Rural Development Intermediary Relending Program website) or similar documentation, which may be amended from time to time; (iii) Annual proposed budget for the following year that meets the requirements of § 4274.332(b)(2); and (iv) Other reports as the Agency may require from time to time; (5) Before the initial lending of Agency IRP loan funds to an ultimate recipient, to obtain written Agency approval of all forms to be used for relending purposes, including application forms, loan agreements, promissory notes, and security instruments. If the intermediary plans to sell participations in its loans made to ultimate recipients, the loan participation agreement and any planned interest rate spread or associated fees must be submitted to the Agency for review and concurrence; (6) To obtain written approval of the Agency before making any significant changes in forms, security policy, or the work plan. The servicing officer may approve changes in forms, security policy, IRP revolving loan fund plan, or work plans at any time upon a written request from the intermediary and determination by the Agency that the change will not jeopardize repayment of the loan or violate any requirement of this subpart or other Agency regulations. The intermediary must comply with the work plan approved by the Agency so long as any portion of the intermediary's IRP loan is outstanding. (7) To secure the indebtedness by pledging the IRP revolving loan fund, including all of its loans derived from the proceeds of the Agency loan award, and pledging its real and personal property and other rights and interests as the Agency may require; (8) In the event the intermediary's financial condition deteriorates or the intermediary takes action detrimental to prudent fund operation or fails to take action required of a prudent lender, to provide additional security, execute any additional documents, and undertake any reasonable acts the Agency may request, to protect the agency's interest or to perfect a security interest in any assets, including physical delivery of assets and specific assignments; and (9) Funds not disbursed to the intermediary by the end of the 36th month of the IRP loan from the Agency will be deobligated and not available for disbursement to the intermediary. (10) For revolved funds, the intermediary is responsible for continuing compliance with the terms and conditions of the loan agreement until the Agency loan is fully satisfied and repaid. [86 FR 72156, Dec. 21, 2021, as amended at 87 FR 18967, Apr. 1, 2022] § 4274.334--§ 4274.339 [Reserved] § 4274.340 Application content and submittal. Intermediaries seeking to participate in the IRP program must submit an application in accordance with paragraph (a) of this section. Intermediaries applying for a subsequent Agency IRP loan may instead submit a streamlined application in accordance with paragraph (b) of this section. All intermediaries must submit their applications as provided in paragraph (c) of this section. (a) Intermediary application content. (1) A work plan/narrative that demonstrates the feasibility of the intermediary's program to meet the objectives of this program. The work plan must include, at a minimum: (i) A copy of the intermediary's policy and/or procedural manuals to assure the Agency that its mission and goals align with that of the Agency ( i.e., (ii) Document the intermediary staff's ability in administering an IRP revolving loan fund. This includes but is not limited to providing a complete listing of all personnel responsible for administering this program along with a statement of their qualifications and experience. Their qualifications should detail their experience in loan making, loan monitoring, and loan servicing including liquidations. The personnel may be either members or employees of the intermediary's organization or on an as-needed basis and as allowed by this regulation, contracted personnel. (A) Contract personnel may be used to train, develop, or supervise the intermediary's members or employees or to provide interim expertise while the intermediary develops relevant in-house experience. The intermediary may contract for general services, such as clerical, administrative, and accounting services, and loan packaging. (B) The intermediary cannot use contract personnel for the primary functions of its lending program, such as credit analysis and loan underwriting. The intermediary is expected to make an independent lending decision for each ultimate recipient loan request. ( 1 ( 2 (C) If the Agency determines the intermediary's personnel lack the necessary expertise to administer the program, the loan request will not be approved; (iii) Demonstrate a need for loan funds. At a minimum, the intermediary must either positively identify a sufficient number of proposed and known ultimate recipients it has on hand to justify the level of Agency funding of its loan request, or include well developed targeting criteria for ultimate recipients consistent with the intermediary's mission and strategy for the IRP, along with supporting statistical or narrative evidence that such prospective recipients exist in sufficient numbers to justify Agency funding of the loan request; (iv) Provide a set of goals, strategies, and anticipated outcomes for the intermediary's program. Outcomes should be expressed in quantitative or observable terms ( e.g., see (v) Provide specific information as to whether and how the intermediary will ensure that technical assistance is made available to ultimate recipients and potential ultimate recipients. Describe the qualifications of the technical assistance providers, the nature of technical assistance that will be available, and expected and committed sources of funding for technical assistance. If other than the intermediary itself, describe the organizations providing such assistance and the arrangements between such organizations and the intermediary. (2) Demonstrate the sustainability of the IRP revolving loan fund by providing a pro forma balance sheet at start-up and projected balance sheets for at least three additional years including the accumulated debt service reserve; financial statements for the last three years, or from inception of the operations of the intermediary if less than three years; and projected cash flow and earnings statements for at least three years supported by a list of assumptions showing the basis for the projections. The projected earnings statement and balance sheet must include one set of projections that shows the IRP revolving loan fund only and a separate set of projections that shows the intermediary organization's total operations. Also, if principal repayment on the IRP loan will not be scheduled during the first three years, the projections for the IRP revolving loan fund must extend to include at least one year with a full annual installment on the IRP loan. (3) Provide documentation of any funds pledged and intermediary equity contribution that will be contributed into the IRP revolving loan fund to serve as security for the IRP loan and to pay for part of the cost of the ultimate recipient projects. Pledged funds and intermediary equity contribution must be in the form of cash and cannot be in-kind contributions; they also cannot be used as intermediary operating funds. (4) A written agreement of the intermediary to abide with the Agency audit requirements. (5) Complete organizational documents including: Articles of Incorporation (initial loan only), Bylaws, Certificate of Good Standing, a list of board members with contact and lending experience information, and evidence of authority to conduct the proposed lending activities (this could be satisfied with a statement from the intermediary's counsel). (6) Document the intermediary's ability to commit financial resources under the control of the intermediary to the establishment of an IRP program. This should include a statement of the sources of non-Agency funds for administration of the intermediary's operations and financial assistance for projects. (7) Demonstrate to Agency satisfaction that the intermediary has secured commitments of significant financial support from public agencies and private organizations. (8) Provide evidence to Agency satisfaction that the intermediary has a proven record of obtaining private or philanthropic funds for the operation of similar programs to the IRP. (9) Latest audit report, if available. (10) The IRP revolving loan fund plan is a separate stand-alone document from the application and may be revised in the future. The IRP revolving loan fund plan governs the use of the RLF and must be developed by the intermediary and approved by the Agency. The plan must include a detailed explanation of the intermediary's fund administration policies and procedures in addition to planned fund use after the original IRP loan funds in the RLF have revolved. Fund administration policies and procedures must also include information regarding the review and approval of loans from the fund, including participation loans. The revolving loan fund plan must be of sufficient and detailed information to provide the Agency with a complete understanding of what the intermediary will accomplish by lending the funds to the ultimate recipient and the complete mechanics of how the funds will get from the intermediary to the ultimate recipient, including participation loans. The IRP revolving loan fund plan must contain: (i) The specific service area of the IRP fund including names of counties and or cities within the service area; (ii) Borrower eligibility criteria, loan purposes, loan priorities, fees, rates, terms, loan limits and collateral requirements; (iii) Details on the intermediary's application review and approval process; (iv) Details on the method of disposition of funds to the ultimate recipient, monitoring of the ultimate recipient's accomplishments, the reporting requirements by the ultimate recipient's management; and (v) A copy of the intermediary's ultimate recipient loan application package and sample loan documents ( i.e., (11) Credit Elsewhere Certification ( see (12) Prior to applying for program funding, a resolution by the intermediary's board of directors is required. At a minimum, the executive director of the intermediary must make the organization's board of directors aware of the possibility that the organization may be entering into a significant debt. (b) Streamlined applications. (1) Submission of the information required under the Intermediary Guide (available at the USDA Rural Development Intermediary Relending Program website) and paragraphs (a)(1) through (4) of this section except that the information required by paragraph (a)(2) of this section may be limited to projections for the proposed new IRP revolving loan fund. (2) A statement that the new loan would be operated in accordance with the work plan on file for the previous IRP loan(s) may be submitted in lieu of a new work plan. Any substantial change to an existing work plan would require the submission of a new work plan. (3) Intermediaries that have received one or more Agency IRP loans may apply for and be considered for additional Agency IRP loans provided that the outstanding loans of the intermediary's IRP revolving loan fund are generally sound, the intermediary is in compliance with all applicable regulations and its loan agreements with the Agency, and the revolving loan fund's liabilities do not significantly exceed their assets. The intermediary must have a reasonable plan to disburse any unused IRP loan funds within six months of loan closing in addition to showing the need for additional IRP funds in accordance with paragraph (a)(1)(iii) of this section. (c) Application submittal. § 4274.341 Processing applications for loans. (a) Processing applications. (b) Scoring. (1) Intermediary equity contribution for initial Agency IRP loan applications only (maximum 35 points). (i) At least 5 percent, but less than 10 percent of the requested loan amount—10 points. (ii) At least 10 percent, but less than 20 percent of the requested loan amount—15 points. (iii) At least 20 percent, but less than 30 percent of the requested loan amount—20 points. (iv) At least 30 percent, but less than 40 percent of the requested loan amount—25 points. (v) At least 40 percent, but less than 50 percent of the requested loan amount—30 points. (vi) More than 50 percent of the requested loan amount—35 points. (2) Intermediary equity contribution for subsequent Agency IRP loan applications only (maximum 35 points). (i) At least 5 percent, but less than 10 percent of the requested loan amount—10 points. (ii) At least 10 percent, but less than 20 percent of the requested loan amount—15 points. (iii) At least 20 percent, but less than 30 percent of the requested loan amount—20 points. (iv) At least 30 percent, but less than 40 percent of the requested loan amount—25 points. (v) At least 40 percent, but less than 50 percent of the requested loan amount—30 points. (vi) More than 50 percent of the requested loan amount—35 points. (3) Community Representation (10 points). (4) Leveraging (maximum 25 points). (i) At least 10 percent, but less than 25 percent of the total project costs—5 points will be awarded; (ii) At least 25 percent, but less than 50 percent of the total project costs—10 points will be awarded; or (iii) Fifty percent or more of the total project costs—25 points will be awarded. (5) Median household income (maximum 15 points). (i) At least 50 percent, but not more than 75 percent, 5 points will be awarded; (ii) At least 25 percent, but less than 50 percent, 10 points will be awarded; or (iii) Below 25 percent, 15 points will be awarded. (6) Unemployment (maximum 15 points). (i) Equal to, or less than 25 percent above the national unemployment rate, 5 points will be awarded; (ii) At least 25 percent above, but less than 50 percent above the national unemployment rate, 10 points will be awarded; or (iii) Fifty percent or more above the national unemployment rate, 15 points will be awarded. (7) Trauma (maximum 15 points). (8) Experience (maximum 30 points). (i) At least 1 but less than 3 years, 5 points will be awarded; (ii) At least 3 but less than 5 years, 10 points will be awarded; (iii) At least 5 but less than 10 years, 20 points will be awarded; or (iv) Ten or more years, 30 points will be awarded. (9) Size of loan request (maximum 20 points). (i) $500,000 or less, 20 points will be awarded; or (ii) Over $500,000, and up to $750,000, 10 points will be awarded (10) Administrator (maximum 10 points). (i) The project meets the President/Secretary Initiative(s) ( e.g., (ii) The applicant's service area will include areas not currently served by existing IRP Intermediaries. Statewide and nationwide Intermediaries will not be considered for Administrator points with regard to whether an area is currently covered by an existing IRP fund. § 4274.342-§ 4274.344 [Reserved] § 4274.345 Letter of conditions. The Agency will provide the successful intermediary with a letter of conditions listing all requirements for the loan. Immediately after reviewing the conditions and requirements in the letter of conditions, the intermediary must complete, sign, and return the requisite forms provided by the Agency indicating the intermediary's intent to meet the conditions and the request of obligation of funds. If the intermediary identifies certain conditions that cannot be met, the intermediary may propose alternate conditions to the Agency. The Agency must approve in writing of any proposed changes made to the initially issued or proposed letter of conditions prior to acceptance and finalization § 4274.346 Agency IRP loan closing. (a) At the time the Agency IRP loan is closed, the intermediary must certify to each condition identified in paragraphs (a)(1) through (5) of this section. (1) No major changes have been made in the work plan except those approved in the interim by the Agency. (2) All requirements of the letter of conditions have been met. (3) There has been no material adverse change in the intermediary's financial condition, nor any other material adverse change in the intermediary, for any reason, during the period of time from the Agency's loan approval to loan closing regardless of the cause or causes of the change and whether or not the change or causes of the change were within the intermediary's control. Any material adverse change must be explained by the intermediary. The Agency, at its sole discretion, will consider any such change and determine if it is significant enough to prevent the loan closing or disbursement of IRP loan funds to the intermediary. (4) There are no claims or liens of laborers, materialmen, contractors, subcontractors, suppliers of machinery and equipment, or other parties pending against the security of the intermediary, and that no suits are pending or threatened that would adversely affect the security of the intermediary when the security instruments are filed. (5) Certification that the intermediary has received Agency staff training on how to distinguish a required environmental review from a categorical exclusion in accordance with § 4274.305(b). (b) The Agency will consider all requested changes submitted in writing to the Agency but will only approve changes that do not materially affect the IRP project, its capacity, employment, original projections, or credit factors. § 4274.347-§ 4274.350 [Reserved] § 4274.351 Loan approval and obligating funds. (a) The loan will be considered approved on the date that the obligation of funds document ( Form RD 1940-1, Request for Obligation of Funds (b) An obligation of funds established for an intermediary may be transferred by the Agency to a different (substituted) intermediary provided: (1) The substituted intermediary is eligible to receive the assistance approved for the original intermediary; (2) The substituted intermediary bears a close and genuine relationship to the original intermediary; and (3) The need for and scope of the project and the purposes for which Agency IRP loan funds will be used remain substantially unchanged. § 4274.352 Loan documentation for ultimate recipients. (a) Agency IRP loans. (1) Certification by the intermediary that: (i) The ultimate recipient is eligible for the loan; (ii) The loan is for an eligible purpose; (iii) Agency IRP loan funds are not more than 75 percent of the total project costs; (iv) The loan complies with all applicable statutes and regulations; (v) The ultimate recipient is unable to finance the proposed project through commercial credit or other Federal, State, or local programs at reasonable rates and terms; and (vi) The intermediary and its principal officers (including immediate family) hold no legal or financial interest or influence in the ultimate recipient, and the ultimate recipient and its principal officers (including immediate family) hold no legal or financial interest or influence in the intermediary. The interest and influence of a cooperative member when the intermediary is a cooperative is an allowable exception to this paragraph. (2) A completed and executed request for environmental information on a form provided by the Agency for projects that meet the criteria for a NEPA review categorical exclusion, NEPA environmental assessment or NEPA environmental impact statement in accordance with § 4274.305(b)(2). (3) All comments obtained in accordance with § 4274.305(a) regarding intergovernmental consultation (if required). (4) Copies of sufficient material from the ultimate recipient's application and the intermediary's related files to allow the Agency to determine the: (i) Name, address, Unique Entity Identifier, Federal ID number, and North American Classification System (NAICS) Code of the ultimate recipient; (ii) Loan purpose; (iii) Interest rate and term; (iv) Location, nature, and scope of the project being financed; (v) Uses and sources of funds; and (vi) Nature and lien priority of the collateral. (5) Such other information as the Agency may request. (b) Revolved IRP loan funds. [86 FR 72156, Dec. 21, 2021, as amended at 89 FR 34958, May 1, 2024] § 4274.353-§ 4274.359 [Reserved]