(a) General. The Agency will evaluate all applications according to the provisions of this part and may require the lender to obtain additional assistance in those areas where the lender does not have the necessary expertise to originate or service the guaranteed loan. For the purposes of this paragraph (a), “those areas” mean:

(1) The type and complexity of the financing (e.g., asset-based financing, cash flow financing, and bond financing); and

(2) Loans to borrowers engaged in industries where the lender has little or no origination and/or servicing experience.

(b) Evaluation and eligibility determinations. The Agency will review each complete application to make a formal determination as to: the eligibility of the borrower, lender, project, and guaranteed loan purpose and proposed use of funds; if there is a reasonable assurance of repayment ability; if sufficient collateral and equity exists; if the proposed guaranteed loan complies with all applicable statutes and regulations; and if the environmental review is complete. The Agency will only guarantee loans that are sound and that have a reasonable assurance of repayment.

(1) If the Agency's evaluation and determination in accordance with this paragraph (b) is favorable, the Agency will proceed in accordance with paragraph (c) of this section.

(2) If the Agency's evaluation and determination in accordance with this paragraph (b) is unfavorable, the Agency will notify the lender, in writing, as applicable, identifying the reason(s) for determining ineligibility and any applicable appeal or review rights. No further processing of the application will occur.

(c) Priority score. The Agency will score each eligible application based on the point system for the respective program identified in §§ 5001.316 through 5001.319.

(1) Lenders must provide necessary information related to determining the priority score, if requested by the Agency. To the extent possible, lenders should consider the established priorities of the Agency when submitting projects for a loan guarantee. Higher scoring applications will receive first consideration for funding.

(2) The Agency may establish a minimum priority score for each guarantee program. The Agency will, if established, publish the minimum score in a document in the Federal Register. Applications that do not meet the applicable minimum score will compete with all other guaranteed loan applications for each specific program in a competition on the first business day of September of the Federal fiscal year in which the application is ready for funding.

(d) Funding selected applications. Each program identified in § 5001.1 will consider applications for funding in the order they are received by the Agency. If the Agency approves the application and guaranteed funds are available, the Agency will issue a conditional commitment to the lender in accordance with § 5001.451 of subpart E. In the event total loan requests exceed the amount of funding available the applications will be ranked for priority by each program. As applications are funded, the remaining guaranteed loan funding authority may be insufficient to fund the next highest scoring application or applications (where two or more applications receive the same priority score). The Agency will use the procedures described in paragraphs (d)(1) and (2) of this section as often as necessary to consider all applications as appropriate.

(1) If the remaining funds are insufficient to fund the next highest scoring application completely, the Agency will notify the lender and offer the lender the opportunity to accept the remaining funds. If the lender does not accept the offer, the Agency will process the next highest scoring application.

(2) If the remaining funds are insufficient to fund each application that receives the same priority score, the Agency will notify each lender and offer the lenders the opportunity to accept a prorated share of the remaining funds.

(3) Any lender offered less than the full amount requested under either paragraph (d)(1) or (2) of this section can either accept the funds available or request to compete in the next funding cycle. There is no assurance that the application(s) will be funded in a subsequent funding cycle.

(4) If a lender agrees to the lower loan guarantee amount offered by the Agency under either paragraph (d)(1) or (2) of this section, the lender must certify that the purpose(s) of the project can still be met at the lower funding level and must provide documentation that the borrower has obtained the remaining funds needed to complete the project as originally proposed.

(e) Handling of ranked applications not funded. The Agency will withdraw from consideration ranked applications that have not received funding as follows:

(1) If an unfunded application has a priority score equal to or greater than any applicable minimum score, the Agency will retain the application for consideration in subsequent funding cycles. If the unfunded application is not selected for funding after 12 months, including the first month in which the application was considered, the Agency will withdraw the application from further funding consideration.

(2) If an unfunded application has a priority score less than any applicable minimum score and remains unfunded after the competition held on the first business day of September of the fiscal year in which the application is ready for funding, the Agency will notify the applicant in writing and withdraw the application from further funding consideration.

(f) Commencement of the project. The borrower assumes all risks if the borrower purchases real property or equipment or starts construction of the project to be financed by a guaranteed loan after the complete application has been received by the Agency, but prior to the Agency's issuance of the conditional commitment and the lender and borrower's acceptance of the conditional commitment.

(g) Application withdrawal. During the period between the submission of an application and prior to issuance of the conditional commitment, the lender must notify the Agency, in writing, if the project is no longer viable or the borrower no longer is requesting financial assistance for the project. When the lender notifies the Agency, the Agency will rescind the selection and withdraw the application, as applicable.

[85 FR 42518, July 14, 2020, as amended at 89 FR 79721, Sept. 30, 2024]