Indian Financing Program Overview
This overview provides details on the Indian Financing Program, including eligibility criteria, equity requirements, and the program's purpose of facilitating access to financing for Indian-owned businesses. Find out more about borrower eligibility, loan terms, and the program's impact on reservation economies.
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Presentation Transcript
4thANNUAL PARTNERS IN ACTION CONFERENCE BARABOO, WI JUNE 24, 2015 Prepared By: Alsace LaFramboise, Acting Southwest Zone Manager
Interior Assistant Secretary Indian Affairs Energy & Economic Development Division of Capital Investment NW ZONE DENVER, CO EASTERN ZONE WASHINGTON, DC SW ZONE ALBUQUERQUE, NM ALASKA ZONE ANCHORAGE, AK INDIAN LOAN GUARANTY & INDIAN LOAN GUARANTY & INSURANCE PROGRAMS INSURANCE PROGRAMS
Program Program Legal Authority Legal Authority Indian Financing Act of 1974, 25 U.S.C. 1451 et.seq. (Public Law 93-262, 88 Stat. 77), as amended
Program Regulations Program Regulations Title 25: Indians Part 103: Loan Guaranty, Insurance and Interest Subsidy 25 CFR 103.1 103.45
Purpose of Program Facilitate access to financing otherwise not available by: Guarantying loans made by conventional and non- conventional lenders to Indian-owned businesses Guaranty reduces lender risk if borrower defaults Encourages Indian owned businesses on reservations
Borrower Eligibility Enrolled member of a federally recognized Tribe Tribe Tribal Enterprise Indian-Owned Business Entity Partnership Corporation or Limited Liability Corporation* Must be majority owned (51%) by Indian Individual, Tribe or Tribal Entity *Business structure must be acceptable to Indian Affairs*
Borrowers Equity Requirement 20% percent equity in the Business Financed based on Total Project Cost Cash and/or Unencumbered Assets
Business Location Business Financed must contribute to: Economy of Reservation Tribal Service Area
Loan Terms Term based on purpose of loan Normally based on useful life of asset Permanent working capital Line of credit - revolving Construction loan Initial Inventory Purchase Equipment purchase Real estate Lines of Credit must be paid to zero on annual basis Term can not exceed 30 years Prohibited loan terms See 25 CFR 103.15
Interest Rates Must be reasonable Comparable to rates charged for loans to similar businesses May be variable based on a prime rate that is identified in lender s guaranty request
Loan Amounts Statute $500,000 - Sole Proprietorship Individuals Policy Loans to Tribal Entities & Indian Business Entities are limited by annual appropriations
Interest Subsidy Borrower is rebated for a portion of interest paid Requested by Lender at time of loan application Must be approved by Central Office If approved, 3 years only May apply for an extension no subsidy beyond 5 years
Interest Subsidy Eligibility Borrowers Projected Income is less than industry norm After Interest and Taxes After adjustments for extraordinary items
Percentage of Guaranty Up to 90% of Principal and Accrued Interest
Cost of Guaranty Lenders pay a 2% premium based on the guaranteed portion of loan Lenders may pass cost on to borrower: Premium cost may be added principal amount of loan
2015 Appropriation Congressional Appropriations will Support Guaranties totaling $100,510,479 Nationwide
Approval Authority DCI Southwest Zone Albuquerque Limited to 5% of the annual appropriation DCI Washington, DC (Central Office) Loans over 5% of annual appropriation (Loan amounts are limited by annual appropriation)
Lender Participation Requirements Traditional Bank Lenders Federally Chartered Institutions State Chartered Institutions Non-Bank Lenders Regularly engaged in making loans Capable of evaluating & servicing loans Acceptable to Indian Affairs
Benefits of Guaranty New Market Indian Country Minimizes Lender s Risk Guaranteed portion of loan: Does not count against Lender s legal lending limit Can be sold in secondary market Meets requirements of Community Reinvestment Act Liquidation is optional in event of default
Application Process Borrower Prepare a Business Plan Management Marketing Money Shop your Loan Banks Non- traditional lenders (CDFIs)
ApplicationProcess Lender Loan Guaranty Agreement BIA Form 5-4753 Submit to DCI, Southwest Zone, Albuquerque BIA Form 5-4755 Loan Guaranty Request Lender s Credit Analysis to include terms conditions Justify why guaranty is needed Applicant s Business Plan with supporting documentation
Application Process DCI - Indian Affairs Conduct independent analysis Work directly with lender to address concerns Approval/disapproval
NORTHWEST ZONE SERVICING RESPONSIBILITIES: WISCONSIN MINNESOTA MICHIGAN IOWA KANSAS NEBRASKA SOUTH DAKOTA NORTH DAKOTA MONTANA WYOMING COLORADO IDAHO OREGON WASHINGTON
Southwest Zone Servicing Responsibilities: Utah Nevada California Arizona New Mexico
EASTERN ZONE SERVICING RESPONSIBILITES: Maine New York Massachusetts Connecticut North Carolina Florida Mississippi Louisiana Oklahoma Texas Alabama
ALASKA ZONE SERVICING RESPONSIBILITIES: ENTIRE STATE OF ALASKA
Contact Information Alsace LaFramboise, Acting Zone Manager Telephone: 505-563-5466 Cell: 505-554-9526 alsace.laframboise@bia.gov
Mailing Address Capital Investment Southwest Zone Indian Energy & Economic Development Assistant Secretary - Indian Affairs 1011 Indian School Road, Suite 131 Albuquerque, NM 87104 http://www.indianaffairs.gov/WhoWeAre/AS-IA/IEED/DCI/index.htm
