§1843 Limitations and Conditions of Loan Guarantees

Summary

The government can guarantee a loan only if the Board finds three things: the loan is needed so the borrower can keep providing goods or services and not doing so would hurt the national or regional economy or jobs, the borrower cannot get credit on reasonable terms elsewhere, and the borrower’s future earnings plus the value and quality of the pledged collateral make repayment likely and protect the United States. The lender must also certify it would not make the loan without the guarantee. Guaranteed loans must be paid back in no more than 5 years, with an optional renewal for up to 3 more years. The Board sets the interest rate for the lender based on the lower risk from the guarantee and comparable market rates. The Board also charges a guarantee fee to cover administrative costs and government risk. That fee must be at least large enough so that interest plus the fee equals what normal markets would charge for a similar loan.