USDA Rural Energy for America Program Guide

5. COMBINATION OF PROJECT GRANTS AND GUARANTEED LOANS


You can receive both a direct project grant and a loan guarantee at the same time for your project. As with REAP direct project grants, there are two types of combined applications:

  • "Small combination" applications for projects whose total costs are $200,000 or less
  • "Large combination" applications for projects whose total costs are more than $200,000

5.1. SMALL COMBINATION APPLICATIONS

These applications entail two parts:

A simplified application for REAP direct project grant funding.

A short application for the REAP loan guarantee (discussed below).

5.2. SMALL COMBINATION LOAN GUARANTEE APPLICATIONS

Form RD 4279-1A - Application for Loan Guarantee (for loans up to $600,000)

Lender’s credit analysis of the proposed loan. This includes spreadsheets comparing the applicant’s past and projected financial statements, financial ratio analysis, and a comparison of the borrowing business with industry averages.

Lender’s proposed loan agreement with the borrower. The agreement should address:

  • Negative Covenants: Limitations on purchase or sale of equipment and fixed assets, limitations on compensation of officers and owners, restriction on dividend payments. restrictions concerning consolidations, mergers, or other circumstances, prohibition against assuming liabilities or obligations of others, limitations on selling the business without the concurrence of the lender.
  • Financial Standards Covenants: Minimum working capital or current ratio requirement, maximum debt-to-net worth ratio.

Reporting Requirements. The borrower and lender must provide financial statements at least annually. And as with other REAP funding, the borrower must provide USDA and the lender with "reasonable access" to information on the energy project and its performance.

5.3 LARGE COMBINATION APPLICATIONS

These applications entail two parts:

A full application for REAP project grant funding.

An application for the REAP loan guarantee (discussed below).

5.4. LARGE COMBINATION LOAN GUARANTEE APPLICATION

Form RD 4279-1 - Application for Loan Guarantee (for loans above $600,000). Both the lender and the borrower must fill this form.

  • The borrower must provide detailed information on key interests such as owners. Project information should include current sources of financing, equipment, design and engineering plans, suppliers, and consultants. Financial statements must comply with 7 CFR 4280.128 (PDF). You will need a DUNS number unless you are an individual.
  • The lender must provide information on other financial interest in the borrower; fees to be charged to the borrower; loan servicing plan (e.g., audits); other loans guaranteed by USDA; collateral for the loan; other financing for the energy project; terms and rates for the loan to be guaranteed; credit reports on the borrower, its principals, and any parent, affiliate or subsidiary firms; proposed term Loan Agreement between lender and borrower; appraisal reports whenever available; and an analysis including spreadsheets of the balance sheets and income statements for 3 years historical, proforma balance sheet at start up, 2 years projected yearend balance sheets and income statements with appropriate ratios and comparison with industrial standards (such as D&B, RMA).

Form RD 4279-1A - Application for Loan Guarantee (for loans up to $600,000).

Lender’s credit analysis of the proposed loan. This includes spreadsheets comparing the applicant’s past and projected financial statements, financial ratio analysis, and a comparison of the borrowing business with industry averages.

Lender’s proposed loan agreement with the borrower. The agreement should address:

  • Negative Covenants: Limitations on purchase or sale of equipment and fixed assets, limitations on compensation of officers and owners, restriction on dividend payments. restrictions concerning consolidations, mergers, or other circumstances, prohibition against assuming liabilities or obligations of others, limitations on selling the business without the concurrence of the lender.
  • Financial Standards Covenants: Minimum working capital or current ratio requirement, maximum debt-to-net worth ratio.

Current appraisal of the property to be taken as security (e.g., real estate, equipment). Real estate appraisals should be complete summary reports and must comply with the Uniform Standards of Professional Appraisal Practices. Equipment appraisals should report both a fair market value and an orderly liquidation value. USDA has some discretion to approve a REAP guarantee subject to an adequate appraisal.

Current financial statements. This applies to all owners of the borrowing business who will provide personal/commercial guaranties. This applies usually to owners with 20% or more interest in the borrowing business. Such statements should not be more than 90 days old.

Credit reports. A commercial credit report on the applicant business, plus credit reports on all proposed personal and corporate guarantors (including all owners with a 20%-or-more interest in the business).

FEMA Form 81-93: Standard Flood Hazard Determination (for loans secured by real estate).

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