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

• Any lender regularly engaged in making loans, with a capacity for evaluating and servicing loans, may obtain a guaranty.
• Financial institutions regulated by the United States, a State, or the District of Columbia and Indian organizations making loans from their own funds to other Indian organizations may be insured.
• The business must be located on or near a Federal Indian reservation or service area and must contribute to the economy of the reservation or service area.
• The borrower must be projected to have at least 20 percent equity in the business being financed.
• 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 debt.

LOAN INSURANCE:

How does loan insurance differ from a loan guaranty?

Insured lenders can make loans up to $100,000 without prior BIA approval. They are limited to claims for 15 percent of their insured loan portfolio or 90 percent of the outstanding balance on a particular loan, whichever is less. They must liquidate collateral before making their loss claim.

Guaranteed Lenders must get BIA approval before making each loan. Every loan can be guaranteed up to 90 percent of the outstanding balance. They can make their claim without liquidating collateral.

What are the loan limits?

For loans in an original principal amount of up to $100,000 per borrower, the lender can make each loan in accordance with the lender's loan insurance agreement, without specific prior approval from BIA. For loans in original principal amount of over $100,000, the lender must seek BIA's specific prior approval in each case. The lender must submit a loan insurance application package even for a loan of less than $100,000 if:

• The total outstanding balance of all insured loans the lender is extending to the borrower under the program exceeds $100,000;
• The lender makes a request for interest subsidy.

How does a lender become an insured lender?

Financial institutions must be regulated by the United States, a State, or the District of Columbia. Indian organizations must make loans from their own funds to other tribes or organizations. The lender executes a loan insurance agreement with a BIA Regional Director.

How does the borrower apply for an insured loan?

The borrower applies for an insured loan as for any other loan. The lender may use any application form it chooses. However, a minimum of information about the borrower and the business will be required before the lender can process the application. Regional credit officers can describe this required information.

How does a lender make an insured loan?

The lender must have executed a loan insurance agreement with BIA. After making the loan, lender informs BIA that it has made the loan, describes the loan, and pays the premium.

What is the cost of insurance to a lender?

BIA charges the lender a premium for insurance coverage. The premium is one percent of the insured portion of the original insured loan. The premium cost may be included as part of the loan.

Office of Economic Development
1849 C Street NW, MS 2412-MIB
Washington, DC 20240
202-208-5324
Fax: -202-208-7419

Great Plains Regional Office
Federal Building
115 4th Avenue SE
Aberdeen, SD 57401-4382
605-348-3680
Fax: 605-226-7393

Midwest Regional Office
Bishop Henry Whipple
Federal Building
One Federal Drive, Rm 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