Current through Register Vol. 48, No. 12, March 22, 2024
a) General
Description of Program. The Young Farmer Guarantee Program (YFG) is designed to
enhance credit availability to younger farmers who are purchasing capital
assets. Loan funds may be used for new purchases of capital assets such as
land, buildings, machinery, equipment, breeding livestock, soil and water
conservation projects, etc. In some cases, loan proceeds may be used to
refinance existing debt as needed to improve lien positions or improve
financial structure. The provisions of this Section are applicable only to the
YFG.
b) Definitions
Words defined in the Illinois Finance Authority Act and in
Section
1100.50 have the same
meaning when used in this Subpart unless a more specific definition is
prescribed in this Section. This Section establishes additional definitions for
use in this Subpart only.
"Applicant" means a farmer whose application for a Young
Farmer Guarantee has been submitted to the Authority by a lender.
"Asset" includes, but is not limited to, the following:crops
or feed on hand; livestock held for sale; breeding stock; cash; marketable
bonds and securities; securities not readily marketable; accounts receivable;
notes receivable; cash invested in growing crops; net cash value of life
insurance; machinery and equipment; cars and trucks; farm and other real estate
including life estates and personal residence; value of beneficial interest in
trusts;governmentpayments or grants; capitalized leases; retirement accounts
and all other assets. [20 ILCS
3501/801-10(aa) ]
"Debt to Asset Ratio" means total outstanding liabilities,
including any debt to be financed or refinanced under this Section, divided by
total outstanding assets. [20 ILCS
3501/830-45(a) ]
"Fund" means the Illinois Farmer and Agribusiness Loan
Guarantee Fund (see
20
ILCS 3501/830-35(c) ), which is the
State's fund to cover losses resulting from defaults on young farmer guarantee
loans.
"Gross Annual Income" means income as defined in Section 61
of the Internal Revenue Code (
26 USC 61
).
"Liability" includes, but is not limited to, the following:
accounts payable; notes or other indebtedness owed to any source; taxes; rent;
amounts owed on real estate contracts or real estate mortgages;
judgments;accruedinterest payable; indebtedness under capitalized leases; and
all anyother liabilities. [20 ILCS
3501/801-10(bb) ]
"YFG Loan" means an installment note for which the State of
Illinois shall be liable for 85% of the total principal and interest as
determined by the Authority.
"Young Farmer" means a resident of Illinois who is at
least18years of age, who is a principal operator of a farm or land, who derives
or will derive at least 50% of gross annual income from farming, who has a net
worth of not less than $10,000and whose debt to asset ratio is not less than
40%. [20 ILCS
3501/830-45(a) ]
c) Eligible Farmers. To qualify for
participation in the YFG, each farmer must:
1) be at least18years of age and maintain his
principal residence in the State [20 ILCS
3501/830-45(a) ];
2) be the principal operator of a farm who
derives or will derive at least 50% of annual gross income from farming
[20 ILCS
3501/830-45(a) ];
3) have a debt to asset ratio ofnot less
than40% and not greater than 70% after purchase of the capital item and have a
net worth of not less than $10,000 [20 ILCS
3501/830-45(a) ];
4) demonstrate the ability to adequately
service the proposed debt. If this ability is not adequately demonstrated, he
can have a guarantor sign the note with him and/or pledge additional collateral
for the loan;
5) provide sufficient
collateral to secure the YFG loan and agree to keep it adequately
collateralized in the future. All real estate and depreciable property which is
to be used as collateral on a YFG loan must be evaluated by IFA staff or
appraised by a qualified appraiser. All real estate appraisals must meet
federal regulatory requirements and meet the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation. Auctioneers and machinery and
equipment dealers are qualified to appraise depreciable property. The applicant
is liable for all appraisal fees connected with the YFG Loan;
6) certify that all of his debts will be
current at the time the YFG loan is closed. (See
20 ILCS
3501/830-45.)
d) Limitations
1) YFG loans shall not exceed$500,000per
young farmer. A young farmer may use this program more than once provided the
aggregated principal amount of YFG loans to that young farmer does not
exceed$500,000. [20 ILCS
3501/830-45(a) ]
2) Each YFG loan shall be set up on a payment
schedule not to exceed30years, but shall be no longer than 15 years in
duration. [20 ILCS
3501/830-45(a) ] The payment schedule
for the loan will be tailored to the applicant's collateral and cash flow. Real
estate loans may be amortized up to 25 years with a 15 year balloon. Loans with
depreciable property as collateral will be amortized over a shorter
period.
3) The YFG loan can be
fully or partially paid at any time while the loan is outstanding as long as
the loan is held in the lender's portfolio and not sold into a secondary
market. YFG loans may not be assumed.
e) Application Procedures and Review
1) Lenders shall apply for theYFG loans on
forms provided by the Authority.The application shall at a minimum contain the
young farmer's name, address, present credit and financial information,
including cash flow statements, financial statements, balance sheets, and any
other information pertinent to the application, and the collateral to be used
to secure the State guarantee. [20 ILCS
3501/830-45(a) ] Applications shall
be processed by the Authority on a first-come, first-served basis, based upon
the receipt of all completed documents by the Authority.
2) Lenders shall certify that the application
and any other documents submitted are true and correct. [20 ILCS
3501/830-45]
3) Each applicant
shall pay a $300 application fee which will be submitted to the Authority at
the time of the application. At the time the loan is closed, the applicant will
be required to pay a closing fee of 1% of the YFG loan amount less the $300
application fee. Of this 1% closing fee, the Authority shall receive 3/4% and
the lender shall receive 1/4% to cover administrative expenses in completing
the application packet and closing documents. The 1% closing fee may be
included in the State Guarantee loan amount. The lender shall charge no fees or
points in addition to those outlined herein. The applicant shall be responsible
for paying any fee or charge involved in recording mortgages, releases,
financing statements, insurance for secondary market issues, and any other
similarfeeor charge that theAuthoritymay require. [20 ILCS
3501/830-45(a) ]
4) When a State Guarantee application is
submitted to the Authority, the Authority shall review the application to
determine whether it is complete and whether it meets the criteria established
by the Act and this Section. When the Authority has completed the review of the
Guarantee application, the application shall be presented, along with a
statement of recommended action, to the Board for review at its next regularly
scheduled meeting. The review shall include whether the applicant and lender
are in compliance with the requirements of the program. The review shall also
include an evaluation of collateral, percentage of loan, debt to asset ratio,
cash flow, etc.
5) The Board shall
approve the application and provide the Guarantee, pursuant to the Act and this
Section; or, deny the application and serve upon the lender and applicant a
written statement of the grounds for the denial.
6) If the application is denied, the
applicant and the lender may request reconsideration stating reasons why the
Board should withdraw its denial of the application and approve the State
Guarantee. The request should be accompanied by supporting documents and/or
information not previously considered by the Board. The Board shall review the
request at its next scheduled meeting, and shall either approve or deny the
application. A denial of a request for reconsideration shall be
final.
7) Upon approval of an
application and receipt of the documentation necessary to prepare loan closing
documents, a YFG Loan Closing Documents package, which contains all the
appropriate forms and documents to execute, shall be prepared by the Authority
and sent to the lender. Upon completion of all such forms and documents by the
applicant, lender and Authority and after satisfaction of all loan closing
requirements, the YFG loan guarantee will be considered in force.
f) Provision or Renewal of State
Guarantees. The Authority shall provide or renew a State Guarantee to any
lender if, in addition to meeting the other criteria described in the Act and
this Section, the lender:
1) charges a fixed
or adjustable interest rate that the Authority determines to be below the
market rate of interest generally available to the borrower. If both the lender
and applicant agree, the interest rate on the YFG loan can be converted to a
fixed interest rate at any time during the term of the loan [20 ILCS
3501/830-45];
2) pays a fee equal
to 25 basis points on the loan to the Authority on annual basis [20 ILCS
3501/830-45(a) ];
3) agrees to complete and certify that, to
the best of the lender's knowledge, all information is true and correct on the
application, balance sheets, security analysis, cash flow projection and any
other documents that the Authority may request [20 ILCS
3501/830-45(a) ];
4) identifies collateral acceptable to the
Authority in accordance with subsection (h) that is at least equal to the State
Guarantee loan request [20 ILCS
3501/830-45(a) ];
5) assumes all responsibility and costs for
pursuing legal action on collecting any loan that is delinquent or in default
subject to consulting the Authority [20 ILCS
3501/830-45(b)(iii) ];
6) is at risk for the first 15% of the
outstanding principal of the note for which the State Guarantee is provided
[20 ILCS
3501/830-45(b)(iv) ];
7) assumes responsibility for the timely
collection and disposition of collateral on a YFG loan that is in default;
provided, however, that the lender shall not collect or dispose of collateral
on the YFG loan without the express written prior approval of the Authority.
Approval shall be granted if the collateral is disposed of in a commercial
manner, which nets an amount closely approximating the value of the
collateral;
8) agrees that the
Authority has final approval on the sale of all collateral for the YFG loan.
After the sale of collateral, the State shall be reimbursed its 85% guaranteed
portion of the principal balance at default. If funds from the sale of
collateral remain after this payment, the lender shall be reimbursed its 15% of
the principal balance at default. If excess funds remain after paying the
principal to the State and lender, then the State and lender shall be repaid
interest on a prorated basis; 85% of such excess funds shall be allocated to
the State's portion and 15% shall be allocated to the lender's
portion.
g) The YFG loan
shall besubject to an annual review and renewalby the lender andthe Authority
[20 ILCS
3501/830-45(a) ] for adequacy of
collateral and performance by the applicant. The applicant is required to
provide the lender with a current financial statement annually.
1) If it is determined that there is not
sufficient collateral to adequately secure the YFG loan, additional collateral
may be required. If the applicant is unwilling or unable to pledge additional
collateral, the YFG loan may be called due and payable.
2) If a YFG loan is going to be called for
any reason, written notice which specifies the reasons for said action must be
served to all parties (IFA, lender, and borrower) not less than 90 days prior
to call of the loan.
3) Failure of
the applicant to make any payment on or before its due date shall render the
loan delinquent. Notice of this delinquency shall immediately be sent to all
parties. If the loan remains delinquent for a period of 90 days, the total
outstanding principal and interest shall become due and payable immediately on
the entire YFG loan. The YFG loan cannot be reinstated after the 90-day
delinquency period.
h)
In the event of default that is not cured within 90 days or in the event a loan
is called for any reason, the Authority shall make payment of the guaranteed
portion of the YFG loan to the holder of the guarantee. This payment shall be
equal to the sum of:
1) 85% of the principal
balance as of the date of default or date of call less any proceeds received
from sales of collateral;
2) 85% of
the interest balance as of the date of default or call; and
3) 85% of the interest accrued from the date
of default or call until the date payment is made up to a maximum of 120
days.
i) The Illinois
Farmer and Agribusiness Loan Guarantee Fund shall be used to secure State
Guarantee on YFG loans. [20 ILCS
3501/830-45 (c)]
1)
The Authority shall guarantee up to $50,000,000 in loans through the State
Livestock Guarantee Program (SLP), YFG and State Guarantee Program for
Agri-Industries (SGPAI). The Illinois Farmer and Agribusiness Loan Guarantee
Fund shall be funded with $15,000,000 to cover any losses under these
programs.
2) The Authority shall
direct payments from this fund to guarantee holders as described in subsection
(h).
3) Monies returned to the
State on the disposition of collateral as described in subsection (f) shall be
deposited to this fund.