PURPOSE:

This program was established by the Indian Financing Act of 1974 to stimulate and increase American Indian and Native Alaska entrepreneurship and employment through establishment, acquisition or expansion of Indian or Native Alaskan owned economic enterprises.

ELIGIBILITY REQUIRMENTS:

• Any lender regularly engaged in making loans, with an acceptable capacity for evaluating and servicing loans, which is satisfactory to BIA may obtain a guaranty.
• The borrower must be projected to have at least 20 percent equity in the business being financed immediately after the loan is funded.
• The business must be located on or near a federally recognized reservation or recognized service area and must contribute to the economy of the reservation or service area.
• A borrower must be a federally recognized American Indian tribe or Alaska Native group; an enrolled member of such tribe or group; or, a business organization with no less than 51 percent ownership by American Indians or Alaska Natives.
• The borrower may not be delinquent on any federal obligation.

LOAN PURPOSE:

Loans may be made to finance Indian-owned businesses organized for profit.

Loan amounts:

• $500,000 is the maximum loan that can be guaranteed for individuals.
• BIA can guarantee loans of greater amounts for tribes, tribal enterprises, or a business entity involving two or more persons subject to BIA's resources and policy limits.

Percentage of Guaranty:

• The percentage of a loan that is guaranteed is the minimum necessary to obtain financing, but may not exceed 90 percent of the unpaid principal and interest on a loan.

Premium Charges:

• The lender must pay a one-time premium of 2 percent of the guaranteed portion of a loan.
• The lender may charge the premium to the borrower as a one time fee or add the premium to the loan.

Loan Terms:

• The maturity of the loan is determined by the lender based upon the use of the loan proceeds and the repayment capacity of the borrower. The loan term may not exceed 30 years.
• Interest rates are determined by the lender, subject to reasonable limitations established by BIA policy.
• In some cases, BIA can provide an interest subsidy. An interest subsidy is a rebate to the borrower of the difference between the lender's interest rate and the rate set for BIA by the U.S. Treasury, for up to five years.
• Lenders must obtain security, if available, up to an amount adequate to protect the loan without consideration of the guaranty.

Application Process:

• A lender should apply to BIA for a loan guaranty only when it would not otherwise approve a borrower's loan application. The lender should submit its application to the BIA office where the business is to be located.

Lender Guaranty Request:

To apply for a loan guaranty, a lender must submit a loan guaranty request on BIA Form 5-4755 with:

1. A written explanation from the lender why the lender requires a BIA guaranty percentage for the loan, and the minimum loan guaranty for the loan and the minimum loan guaranty percentage it will accept.
2. A copy of the borrower's complete loan application.
3. A description of the borrower's equity in the business being financed.
4. A copy of the lender's independent credit analysis of the borrower's business, ability to service the debt and loan collateral.
5. A credit report from a credit bureau, dated within 90 days of the application package, providing a credit history of the borrower and each co-maker or guarantor of the loan.
6. A copy of the lender's commitment letter to the borrower, reflecting the proposed loan amount, purpose, interest rate, schedule of payments, security and lender's terms and conditions.
7. The lender's estimate of any loan related fees and cost the lender will charge.
8. If any significant portion of the loan will be used to finance construction, renovation or demolition work, the lender must provide:
   

   Insurance and bonding requirements for the work. Proposed draw requirements and proposed work inspection procedures.

CONTACT:

Office of Economic Development
1951 Constitution Avenue NW, Room 320 SIB
Washington, DC 20240
202-513-7680
Fax: 202-208-6512
www.doi.gov

Great Plains Regional Office
Federal Building
115 4th Avenue SE
Aberdeen, SD 57401-4382
605-348-3680 or
605-226-7381
Fax: 605-348-3795

Midwest Regional Office
Bishop Henry Whipple Federal Building
One Federal Drive, Room 550
Fort Snelling, MN 55111-4007
612-713-4400, ext. 1181
Fax: 612-713-4453

Rocky Mountain Regional Office
316 North 26th Street
Billings, MT 59101
406-247-7963
Fax: 406-247-7978