Modifications to the Facility Guarantee Program
The U.S. Department of Agriculture today announced modifications to certain Facility Guarantee Program (FGP) terms for transactions with repayment terms (tenor) of less than two years. These changes will reduce the burden on participants wishing to utilize the program for short-term transactions – particularly transactions that involve sales of equipment. These revised terms reflect the fact that short-term transactions supported by FGP typically necessitate a shorter, less complicated application review process.
Effective immediately, the following revised terms apply to all FGP transactions with tenor of less than two years:
- Initial Application Fee: $100
Per the Code of Federal Regulations (CFR) at 7 CFR 1493.300(b), an initial application fee, as specified on the USDA Web site, must be received by the Commodity Credit Corporation (CCC) before USDA will consider the seller's initial application for a payment guarantee. Previously the initial application fee was set to a minimum of $800 for all transactions, regardless of tenor. The initial application fee is reduced to $100 for transactions with tenor less than two years.
- Initial Payment Percentage: 0 percent
Per 7 CFR 1493.210, the initial payment is the minimum amount that the buyer is required to pay the seller prior to USDA’s approval of the payment guarantee, expressed as a percentage (specified on the USDA Web site). Previously the initial payment percentage was 15 percent of the net contract value for all transactions, regardless of tenor. The requirement for an initial payment has been eliminated for transactions with tenor less than two years.
- Maximum Guarantee Coverage (principal): 98 percent
Previously the maximum principal guarantee coverage available was 100 percent of the net contract value (after deduction of the 15 percent initial payment) for all transactions, regardless of tenor. The maximum principal guarantee coverage is now 98 percent of the net contract value for transactions with tenor less than two years (as the initial payment requirement for these transactions was eliminated).
Program terms remain unchanged for all transactions with tenor of two years or longer. For more information, please see the FAS Website at https://www.fas.usda.gov/programs/facility-guarantee-program or contact the Operations and Analysis Branch at email@example.com.