§1843 Limitations and Conditions of Loan Guarantees

Summary

The Board can guarantee a loan only if it finds three things: the loan is needed so the borrower can keep providing goods or services and without it the nation or a region would face serious economic or job harm; the borrower can’t get credit elsewhere on fair terms; and the borrower’s future earnings and the pledged collateral make repayment likely and give the government reasonable protection. The lender must also say it would not make the loan without the guarantee. Guaranteed loans must be paid back in no more than 5 years and may be renewed for up to 3 more years. The Board sets the interest rate, considering the lower risk from the guarantee and rates for similar loans. The Board also charges a guarantee fee to cover its costs and risk. That fee must be at least enough so that interest plus fee equals what similar loans in the normal market would cost for the same risk and length.