Regulation - 7 CFR 1737

Rural Utilities Service, USDA

Pt. 1737

(2) If the funds are to be used for new
purposes, then in addition to the requirements in (a)(1) of this section,
RUS must also approve the change in
purpose.
(b) No loan or other money in the
construction fund shall be used to finance facilities outside areas to be
served by projects approved by RUS.
§§ 1735.96–1735.99

[Reserved]

Subpart J—Toll Line Acquisitions
§ 1735.100 Use of loan funds.
An acquisition of toll line facilities
financed with loan funds must be necessary and incidental, as determined by
the Administrator, to furnishing or improving telephone service in rural
areas. The borrower shall submit to
RUS the acquisition agreement, the
original cost less depreciation of the
facilities, any concurrences with the
connecting companies involved, and a
detailed inventory of the facilities to
be purchased. The borrower must submit to RUS evidence, satisfactory to
the Administrator, of the borrower’s
ownership of the toll line facilities before loan funds for improvement of
those facilities will be advanced.
[54 FR 14626, Apr. 12, 1989. Redesignated at 55
FR 39395, Sept. 27, 1990]

§ 1735.101 With nonloan funds.
When an acquisition is limited to toll
line facilities and loan funds are not involved, RUS approval of the acquisition is not required. The borrower,
however, shall submit to RUS for its
approval all concurrences with the connecting companies involved and any
other proof of ownership of the toll facilities required by RUS.
[54 FR 14626, Apr. 12, 1989. Redesignated at 55
FR 39395, Sept. 27, 1990]

PART 1737—PRE-LOAN POLICIES
AND PROCEDURES COMMON TO
INSURED
AND
GUARANTEED
TELECOMMUNICATIONS LOANS

1737.4–1737.9

Subpart B—Preapplication Stage
1737.10 Initial contact.
1737.11 Preapplication determinations.
1737.12–1737.19 [Reserved]

Subpart C—The Loan Application
1737.20 [Reserved]
1737.21 The completed loan application.
1737.22 Supplementary information.
1737.23–1737.29 [Reserved]

Subpart D—Preloan Studies—Area
Coverage Survey and Loan Design
1737.30 General.
1737.31 Area Coverage Survey (ACS).
1737.32 Loan Design (LD).
1737.33–1737.39 [Reserved]

Subpart E—Interim Financing of
Construction of Telephone Facilities
1737.40 General.
1737.41 Procedure for obtaining approval.
1737.42 Procedure for construction.
1737.43–1737.49 [Reserved]

Subpart F—Review of Application
Procedures
1737.50 Review of completed loan application.
1737.51 Approval of loan design.
1737.52–1737.59 [Reserved]

Subpart G—Project Cost Estimation
Procedures
1737.60 Telephone loan budget.
1737.61 Cost allocation for
nonrural areas.
1737.62–1737.69 [Reserved]

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rural

1737.70 Description of feasibility study.
1737.71 Interest rate to be considered for the
purpose of assessing feasibility for loans.
1737.72–1737.79 [Reserved]

Subpart I—Characteristics Letter
1737.80 Description of characteristics letter.
1737.81–1737.89 [Reserved]

Subpart J—Final Loan Approval
Procedures
1737.90 Loan approval requirements.
1737.91 Approval.
1737.92 Loan documents.
1737.93–1737.99 [Reserved]

General statement.
Definitions.
Availability of RUS forms.

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Subpart H—Feasibility Determination
Procedures

Subpart A—General
Sec.
1737.1
1737.2
1737.3

[Reserved]

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§ 1737.1

7 CFR Ch. XVII (1–1–11 Edition)

Subpart K—Release of Funds Procedure
1737.100 Prerequisites to the release and advance of funds.
1737.101 Amounts spent for preloan activities.
1737.102–1737.109 [Reserved]
AUTHORITY: 7 U.S.C. 901 et seq., 1921 et seq.;
Pub. L. 103–354, 108 Stat. 3178 (7 U.S.C. 6941 et.
seq.).
SOURCE: 54 FR 13356, Apr. 3, 1989, unless
otherwise noted. Redesignated at 55 FR 39396,
Sept. 27, 1990.

Subpart A—General
§ 1737.1

General statement.

(a) This part prescribes policies, procedures and responsibilities relating to
applications for RUS loans to finance
the improvement and extension of telephone service in rural areas. Requirements for both initial and subsequent
loans are discussed, with differences
pointed out.
(b) This part sets forth the policies,
procedures, and requirements of RUS
during the period from the receipt of a
completed loan application until the
advance of funds. This part sets forth
the factors RUS considers in determining the characteristics of a loan,
such as the amount of the loan, and
conditions to the advance of funds. Involved in this determination are:
A loan budget, feasibility study,
characteristics
letter,
loan
recommendation, and release of funds.
This CFR part supersedes all RUS Bulletins that are in conflict with it.
(c) See 7 CFR part 1735 on general
loan policies, 7 CFR part 1737 for details on submitting a loan application,
and 7 CFR part 1744 on the advance of
funds.

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§ 1737.2

Definitions.

As used in this part:
Access line means a transmission path
between user terminal equipment and a
switching center that is used for local
exchange service. For multiparty service, the number of access lines equals
the number of lines/paths terminating
on the mainframe of the switching center.
Acquisition means the purchase of another telephone system, lines, or facilities whether by acquiring telephone

plant in service or majority stock interest of one or more organizations.
Administrator means the Administrator of RUS.
Area Coverage means the provision of
adequate telephone service to the
widest practical number of rural users
during the life of the loan.
Advance of funds means the transferring of funds by RUS to the borrower’s
construction fund.
Borrower means any organization
which has an outstanding loan made or
guaranteed by RUS, on which is seeking such financing.
Characteristics letter means the letter
informing the borrower of the characteristics of the proposed loan before
the loan is recommended.
Feasibility study means the pro forma
financial analysis performed by RUS to
determine the economic feasibility of a
loan.
Forecast period means the time period
beginning on the date (base date) of the
borrower’s balance sheet used in preparing the feasibility study and ending
on a date equal to the base date plus
the number of years estimated in the
feasibility study for the completion of
the project. Feasibility projections are
usually for 5 years, see § 1737.70(a). For
example, the forecast period for a loan
based on a December 31, 1990 balance
sheet and having a 5-year estimated
project completion time is the period
from December 31, 1990 to December 31,
1995.
Guaranteed loan means a loan guaranteed by RUS under section 306 of the
RE Act bearing interest at a rate
agreed to by the borrower and the lender.
Hardship loan means a loan made by
RUS under section 305(d)(1) of the RE
Act bearing interest at a rate of 5 percent per year.
Initial loan means the first loan made
to a borrower.
Interim construction means the purchase of equipment or the conduct of
construction under an RUS-approved
plan of interim financing.
Interim financing means funding for a
project which RUS has acknowledged
will be included in a loan, should said
loan be approved, but for which RUS
loan funds have not yet been made
available.

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Rural Utilities Service, USDA

§ 1737.10

Loan means any loan made or guaranteed by RUS.
Project means the improvements and
telephone facilities financed by a particular RUS loan.
RE Act means the Rural Electrification Act of 1936, as amended (7 U.S.C.
901 et seq.).
RUS cost-of-money loan means a loan
made under section 305(d)(2) of the RE
Act bearing an interest rate as determined under 7 CFR 1735.31(c). RUS
cost-of-money loans are made concurrently with RTB loans.
Release of funds means determination
by RUS that a borrower has complied
with all of the conditions prerequisite
to the advances as set forth in the loan
contract to the extent deemed necessary by RUS for approval of the use
of loan funds and any required equity
or other nonloan funds.
Reserves means loan or nonloan funds
that have not been encumbered. Funds
are encumbered when they have been
set aside for by RUS for a particular
loan purpose.
RTB loan means a loan made by the
Rural Telephone Bank (RTB) under
section 408 of the RE Act bearing an interest rate as determined under 7 CFR
1610.10. RTB loans are made concurrently with RUS cost-of-money loans.
Rural area means any area of the
United States, its territories and possessions (including any area within the
Federated States of Micronesia, the
Republic of the Marshall Islands, and
the Republic of Palau) not included
within the boundaries of any incorporated or unincorporated city, village
or borough having a population exceeding 5,000 inhabitants. The population
figure is obtained from the most recent
data available, such as from the Bureau of the Census and Rand McNally
and Company. For purposes of the
‘‘rural area’’ definition, the character of
an area is determined as of a time the
initial loan for the system is made.
Special project means facilities involving investment in excess of $100,000 for
any single subscriber.
Subscriber means the same as access
line.
Subsequent Loan means any loan to a
borrower which has already received a
loan.

Telephone service means any communication service for the transmission or
reception of voice, data, sounds, signals, pictures, writing, or signs of all
kinds by wire, fiber, radio, light, or
other visual or electromagnetic means
and includes all telephone lines, facilities and systems to render such service. It does not mean:
(1) Message telegram service;
(2) Community antenna television
system services or facilities other than
those intended exclusively for educational purposes; or
(3) Radio broadcasting services or facilities within the meaning of section
3(o) of the Communications Act of 1934,
as amended.
Times Interest Earned Ratio (TIER)
means the ratio of a borrower’s net income (after taxes) plus interest expense, all divided by interest expense.
For the purpose of this calculation, all
amounts will be annual figures and interest expense will include only interest on debt with a maturity greater
than one year.
[54 FR 13356, Apr. 3, 1989. Redesignated at 55
FR 39396, Sept. 27, 1990, as amended at 56 FR
26598, June 10, 1991; 58 FR 66256, Dec. 20, 1993]

§ 1737.3 Availability of RUS forms.
Single copies of RUS forms and publications cited in this part are available
from Administrative Services Division,
Rural Utilities Service, United States
Department of Agriculture, Washington, DC 20250. These RUS forms and
publications may be reproduced. The
terms ‘‘RUS form’’, ‘‘RUS standard
form’’, and ‘‘RUS specification’’ have the
same meanings as the terms ‘‘REA
form’’ ‘‘REA standard form’’, and ‘‘REA
specification’’, respectively, unless otherwise indicated.
[54 FR 13356, Apr. 3, 1989. Redesignated at 55
FR 39396, Sept. 27, 1990, as amended at 59 FR
66441, Dec. 27, 1994]

§§ 1737.4–1737.9

[Reserved]

Subpart B—Preapplication Stage
§ 1737.10 Initial contact.
Initial loan applicants seeking assistance should write the Rural Utilities
Service, United States Department of
Agriculture, Washington, DC 20250. A
field representative will be assigned by

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§ 1737.11

7 CFR Ch. XVII (1–1–11 Edition)

RUS to visit the applicant and discuss
its financial needs and eligibility. Existing borrowers initiate the contact
directly with their assigned field representative. Borrowers consult with
RUS field representatives and headquarters staff, as necessary.

tion to finance improvements to a portion of a borrower’s system.
(i) Telecommunications modernization
plan. A borrower applying for hardship
or concurrent RUS cost-of-money and
RTB loans should refer to 7 CFR part
1751, subpart B.

§ 1737.11 Preapplication
determinations.
Before submitting an application to
RUS, the borrower should consider the
following:
(a) Area to be served. The proposed
service area should neither include subscribers already receiving adequate
service from another telephone system
nor leave out unserved pockets of potential subscribers who have indicated
an interest in service and are located
between the proposed system and
neighboring systems. See 7 CFR 1735.11
on Area Coverage and 7 CFR 1735.12 on
Nonduplication. In establishing service
area boundaries, borrowers should consider the location of adjoining systems,
natural boundaries such as rivers and
mountains, and economic and cultural
features such as trading and community centers.
(b) Number of subscribers. The borrower must estimate the number of
subscribers that will request service
from the proposed system.
(c) Acquisitions. A borrower considering an acquisition should refer to 7
CFR 1735.20 and RUS Bulletins 320–4,
321–2, 325–1, and 326–1.
(d) Mergers and consolidations. A borrower considering a merger or consolidation should refer to 7 CFR 1735.19.
(e) Refinancing. Restrictions on the
use of loan funds for refinancing are
contained in 7 CFR 1735.21.
(f) Service for nonrural subscribers. In
some situations, RUS loan funds may
be used to finance facilities to serve
nonrural subscribers. See 7 CFR 1735.13.
(g) Loan amount. The initial loan request is based on the borrower’s best
estimate of financing needs. RUS requires detailed studies by the borrower
to complete the application and the
initial estimate is subject to revision.
(h) Loans for a portion of a system. If
it is impractical to finance facilities to
provide adequate service throughout
the borrower’s entire telephone service
area, RUS will consider a loan applica-

[54 FR 14626, Apr. 12, 1989. Redesignated at 55
FR 39395, Sept. 27, 1990, as amended at 58 FR
66256, Dec. 20, 1993]

§§ 1737.12–1737.19

[Reserved]

Subpart C—The Loan Application
§ 1737.20

[Reserved]

§ 1737.21
tion.

The completed loan applica-

(a) The completed loan application
consists of four parts:
(1) A completed RUS Form 490.
(2) A market survey called the Area
Coverage Survey (ACS).
(3) The plan and associated costs for
the proposed construction, called the
Loan Design (LD).
(4) Various supplementary information specified in 7 CFR 1737.22.
(b) The RUS field representative assists the borrower in assembling this
information. Certain information is required from initial loan applicants but
usually not from borrowers seeking
subsequent loans. Borrowers are to
submit all information in paragraph (a)
of this section to their RUS field representatives, who will review and then
forward the packages to RUS headquarters.
(c) RUS will make a determination of
completeness of the application package and will notify the borrower of this
determination within 10 working days
of receipt of the information at RUS
headquarters. If the application package is not complete, RUS will notify
the borrower of what information is
needed in order to complete the application package. If the information required to complete the application
package is not received by RUS within
90 working days from the date the borrower was notified of the information
needed, RUS may return the application package to the borrower. Returned
applications are without prejudice and

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Rural Utilities Service, USDA

§ 1737.22

borrowers may resubmit the completed
application.
(Approved by the Office of Management and
Budget under control number 0572–0079)

jdjones on DSKHWCL6B1PROD with CFR

[54 FR 13356, Apr. 3, 1989. Redesignated at 55
FR 39396, Sept. 27, 1990, as amended at 56 FR
26598, June 10, 1991]

§ 1737.22 Supplementary information.
RUS requires additional information
in support of the loan application form.
The information listed in paragraphs
(a), (b), and (c) of this section must be
submitted as part of the loan application as specified in 7 CFR 1737.21.
(a) The following must be submitted
by all initial loan applicants. Borrowers seeking subsequent loans must
submit any changes in these items
since they were last submitted.
(1) Name of attorney and manager,
and certified copies of board resolutions selecting them.
(2) Certified copy of articles of incorporation showing evidence of filing
with the Secretary of State and in
county records.
(3) Certified copies of bylaws and
board minutes showing their adoption.
(4) Certified sample stock certificates.
(5) Amounts of common and preferred
stock issued and outstanding.
(6) Names, addresses, business affiliations, and stockholdings of the manager, officers, directors, and other principal stockholders (those owning at
least 20 percent of borrower’s voting
stock).
(7) Certified copies of real estate
deeds showing all recording information.
(8) Service agreements, such as for
management or system maintenance.
(9) Certified copies of existing leases,
except those for vehicles, furniture and
office equipment, and computer equipment.
(10) Certified copies of existing franchises.
(11) Information on any franchises required as a result of the proposed loan
project.
(12) Federal Communications Commission (FCC) authorizations.
(13) Certified copy of a certificate of
convenience and necessity (or its
equivalent),
or
information
demonstrating the nonduplication of rea-

sonably adequate facilities, for all
areas in the loan project.
(14) For toll, operator office, traffic,
and EAS agreements, the names of all
parties to the agreement, the type of
agreement, and the effective and termination dates of the agreement and
annexes, and the exchanges involved.
(15) Copies of rate schedules. (A copy
of the tariff must be available for review by the RUS field representative.)
(16) Executed copy of RUS Form 291,
‘‘Certification of Nonsegregated Facilities’’.
(17) A sketch or map showing the existing and proposed service areas.
(18) Executed assurance that the borrower will comply with the Uniform
Relocation Assistance and Real Property Acquisitions Policies Act of 1970,
as amended (see 49 CFR 24.4).
(19) A certification (which is included
on RUS Form 490, ‘‘Application for
Telephone Loan or Guarantee’’) that
the borrower has been informed of the
collection options listed below that the
Federal government may use to collect
delinquent debt. RUS and other government agencies are authorized to
take any or all of the following actions
in the event that a borrower’s loan
payments become delinquent or the
borrower defaults (OMB Circular A–129
defines ‘‘delinquency’’ for direct or
guaranteed loans as debt more than 31
days past due on a scheduled payment):
(i) Report the borrower’s delinquent
account to a credit bureau.
(ii) Assess additional interest and
penalty charges for the period of time
that payment is not made.
(iii) Assess charges to cover additional administrative costs incurred by
the Government to service the borrower’s account.
(iv) Offset amounts owed to the borrower under other Federal programs.
(v) Refer the borrower’s debt to the
Internal Revenue Service for offset
against any amount owed to the borrower as an income tax refund.
(vi) Refer the borrower’s account to a
private collection agency to collect the
amount due.
(vii) Refer the borrower’s account to
the Department of Justice for litigation in the courts.

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§§ 1737.23–1737.29

7 CFR Ch. XVII (1–1–11 Edition)

(20) A certification, signed by the
president of the borrower, that the borrower is participating in the State’s
telecommunications
modernization
plan (for additional information concerning the plan, see 7 CFR part 1751,
subpart B). This certification is not required if the borrower is seeking a
guaranteed loan.
All of the actions in paragraph (a)(19)
of this section can and will be used to
recover any debts owed when it is determined to be in the interest of the
Government to do so. The notification
and the required form of certification
in paragraph (a)(19) of this section are
included on RUS Form 490, Application
for Telephone Loan or Guarantee.
(b) The following must be submitted
by all initial loan applicants and borrowers seeking subsequent loans:
(1) Certified financial statements for
the last 3 years.
(2) Toll settlement statements and
related data.
(3) Present exchange rates and any
pending changes.
(4) Borrower’s Environmental Report
(BER)—See 7 CFR part 1794.
(5) A ‘‘Certification Regarding Lobbying’’ for loans, or a ‘‘Statement for
Loan Guarantees and Loan Insurance’’
for loan guarantees, and when required,
an executed Standard Form LLL, ‘‘Disclosure of Lobbying Activities,’’ (see
section 319, Public Law 101–121 (31
U.S.C. 1352)).
(6) Executed copy of Form AD–1047,
‘‘Certification Regarding Debarment,
Suspension, and Other Responsibility
Matters—Primary
Covered
Transactions’’ (see appendix A to 7 CFR part
3017).
(7) Borrower’s determination of loan
maturity, including information noted
in § 1735.43(a) of this chapter as required.
(8) Approved depreciation rates for
items under regulatory authority jurisdiction.
(9) A statement that the borrower is
or is not delinquent on any Federal
debt, such as income tax obligations or
a loan or loan guarantee from another
Federal agency. If delinquent, the reasons for the delinquency must be explained and RUS will take such explanation into consideration in deciding
whether to approve the loan. RUS

Form 490, ‘‘Application for Telephone
Loan or Guarantee,’’ contains a section
for providing the required statement
and any appropriate explanation.
(10) Any other supporting data required by the Administrator.
(c) The following must be submitted
for all borrowers requesting funds for
refinancing:
(1) Copies of all bonds, notes, mortgages, and contracts covering outstanding indebtedness proposed to be
refinanced.
(2) For each note or bond, the name
of the creditor, original amount of debt
and amount as of last year-end, purpose of debt, dates incurred and due,
interest rates, and repayment terms.
(3) Justification for refinancing and
evidence that the use of loan funds is
necessary and incidental to furnishing
or improving rural telephone service.
See 7 CFR 1735.21.
(d) Borrowers requesting loan funds
for acquisitions should refer to RUS
bulletins 320–4, 321–2, 325–1, and 326–1
for requirements.
(Approved by the Office of Management and
Budget under control number 0572–0079)
[54 FR 13356, Apr. 3, 1989. Redesignated at 55
FR 39396, Sept. 27, 1990, as amended at 56 FR
26599, June 10, 1991, 58 FR 66256, Dec 20, 1993]

§§ 1737.23–1737.29

[Reserved]

Subpart D—Preloan Studies—Area
Coverage Survey and Loan
Design
§ 1737.30

General.

In support of a loan application, the
borrower shall prepare and submit to
RUS: (a) A market forecast to determine service requirements (the Area
Coverage Survey) and (b) engineering
studies to determine the system design
that provides service most efficiently
(the Loan Design). The RUS field representative confers with the borrower
and its engineer to schedule the completion and submission of these studies.
(Approved by the Office of Management and
Budget under control number 0572–0079)

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§ 1737.31

§ 1737.32

Area Coverage Survey (ACS).

(a) The Area Coverage Survey (ACS)
is a market forecast of service requirements of subscribers in a proposed
service area.
(b) The objective of the ACS is to determine the location, number and telephone service requirements of subscribers in a service area. RUS will use
the ACS to appraise the proposed plan
for area coverage and to determine the
largest practical number of rural subscribers which can be served on an economically feasible basis. Preparation
of the ACS requires:
(1) A field survey of the service area
to locate and identify on maps all business and residential establishments,
whether currently served or not. The
location and identification of future establishments are also recorded on the
maps.
(2) A forecast of the number of telephone subscribers, in the entire service
area, by exchange, grade and class of
service, projected for the end of the 5year study period.
(c) The results of the survey and forecast shall be:
(1) Shown on maps (maps for those
service areas previously financed by
RUS do not have to be included in the
ACS provided that the borrower’s
records contain sufficient information
as to subscriber development to enable
cost estimates for the proposed facilities to be prepared);
(2) Tabulated on RUS Form 569 ‘‘Area
Coverage Survey Report,’’ or its equivalent; and
(3) supported by a narrative (see
§ 1737.32(f)(1)(ii)) containing information on the bases for the service requirement forecasts in each exchange.
(d) Guidelines on preparing an ACS
are provided in RUS Telecommunications Engineering and Construction
Manual section 205.
(e) The RUS field representative reviews and approves the borrower’s
ACS. The borrower should make sure
this is done before proceeding with the
Loan Design in order to prevent unnecessary expense should the ACS not be
approved. The borrower’s engineer

must use the RUS-approved ACS in
preparing the Loan Design.
(Approved by the Office of Management and
Budget under control number 0572–0079)

§ 1737.32 Loan Design (LD).
(a) A loan application requires supporting data collectively called a ‘‘Loan
Design.’’ The LD contains a forecast of
service requirements and a narrative
with supporting exhibits. Most of the
items included in the LD are similar
for all loan applications. However, as
noted below, there are certain additional requirements for initial loans
and for any exchange areas not previously financed by RUS, and other additional requirements for subsequent
loans for areas previously financed by
RUS. The LD must conform to the borrower’s state telecommunications modernization plan unless the borrower is
seeking a guaranteed loan (for additional information concerning the
plan, see 7 CFR part 1751, subpart B).
(b) Because of the importance and
complexity of the engineering studies
necessary for the LD, it should be prepared by a competent experienced telecommunications engineer. While the
LD is subject to RUS approval, the borrower’s selection of an engineer to perform preloan work is not. Note: The
borrower’s selection of an engineer to
perform postloan work is subject to
RUS approval. This should be considered when selecting a preloan engineer,
if the same individual or company is to
perform both services. See 7 CFR
1753.17.
(c) An LD for initial loans or for any
exchange areas not previously financed
by RUS requires an Outside Plant Design that provides:
(1) The most economical and practical design for a telephone system
that meets immediate service demands; and
(2) The basis for orderly expansion of
the system to serve the widest practical number of rural establishments.
(d) The LD for a subsequent loan
(which only includes areas previously
financed by RUS) does not require a detailed Outside Plant Design. The detailed Outside Plant Design for these
subsequent loans may be completed for
RUS review and approval after loan approval, but before staking is started

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§ 1737.32

7 CFR Ch. XVII (1–1–11 Edition)

and plans and specifications are prepared. By scheduling preparation of the
outside plant design closer to preparation for construction, the need for redesign resulting from changing conditions and its attendant costs are reduced.
(e) Guidelines on preparing an LD are
provided in RUS Telecommunications
Engineering and Construction Manual
section 205.
(f) The LD shall include a narrative,
several exhibits, and a certification, as
explained below:
(1) Narrative. This section discusses
the following topics, as appropriate.
(i) General. The purposes and amount
of the proposed construction and both
immediate and long range plans must
be covered. The source and amount of
any nonloan funds to be used for this
construction must be discussed.
(ii) Subscriber data. The basis for the
subscriber forecast, including any unusual factors expected to influence
growth, must be discussed. Reasons for
growth projections which vary from
historic trends must be explained.
(iii) Proposed construction. All proposed construction must be described
fully. Reference to the BER must be
made here.
(iv) Service area. For subsequent loans
only, proposed construction which is
not within the boundaries of prior loan
projects must be discussed. New areas
to be served (even if from existing exchanges) must be shown on maps submitted with the proposal.
(v) Toll and EAS. Proposed new toll or
extended area service (EAS) facilities,
including any changes from the existing trunking arrangements, must be
described fully. Minutes of meetings
and correspondence with connecting
companies, and connecting company
concurrences, if any, must be included.
(vi) Radio telephone service. Proposed
radio telephone service must be discussed. Results of studies demonstrating demand and/or need most be
included as an exhibit.
(vii) Special projects. Facilities involving investment in excess of $100,000 for
any single subscriber must be discussed
fully. Contractual arrangements with
the subscriber, including a termination
agreement providing for (A) the full recovery by the borrower of its capital

costs of the facilities no later than the
maturity date of the note representing
the loan, (B) the immediate repayment
of all remaining capital costs, if terminated, and (C) repayment to RUS of the
outstanding amount of the special note
shall be submitted. Usually a separate
short-term note is prepared for loans to
finance Special Projects.
(viii) Investment in nonrural areas.(A)
For initial loans, or loans for areas not
previously financed by RUS, the borrower must fully discuss proposed improvements or expansions in an exchange serving a community over 5,000
population. The name of the community, the number of existing and projected new subscribers by grades of
service within the community, detailed
cost estimates of the facilities involved, and information sufficient to
establish the necessity for the use of
loan funds must be provided.
(B) For subsequent loans, the borrower must fully discuss as specified in
paragraph (f)(1)(viii)(A) of this section
proposed improvements or expansions
in an exchange serving a community
over 5,000 population which had a population of more than 5,000 at the time
the facilities to serve the community
were first financed by RUS. The population determination is based on the
corporate limits or boundaries of unincorporated areas in existence at the
time the facilities to serve the community were first financed by RUS.
(C) For subsequent loans, the borrower shall state whether the population of a community, which is currently more than 5,000, was considered
rural at the time RUS first financed
the facilities to serve the community.
Detailed cost estimates are not required if the population was considered
rural at the time RUS first financed facilities to serve the community, see 7
CFR 1735.13(d).
(ix) Prior loan project. For subsequent
loans only, the reason for and amount
of additional loan funds needed to complete construction in progress which
was part of a prior loan project in central office areas not included in the
current LD must be discussed fully.
(x) Route miles. Route miles of outside
plant in central office areas not shown
on RUS Form 495 must be provided.

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§ 1737.32

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(xi) Future plans. Where the loan application is to finance part of a systemwide upgrading plan, plans for those remaining exchanges not included in the
current loan proposal must be discussed.
(2) Exhibits. (i) An RUS Form 569,
‘‘Area Coverage Survey Report,’’ or its
equivalent shall be included for the
total system and for each exchange in
which system improvements or additions are proposed.
(ii) An RUS Form 495, ‘‘Construction
Cost Estimates,’’ or its equivalent shall
be prepared for each exchange in which
system improvements or additions are
proposed. An explanation of the method used in developing these cost estimates must be included.
(iii) RUS Form 494, ‘‘Loan Design
Summary,’’ or its equivalent shall be
prepared for each loan. This must show
all expected 5-year construction costs,
loan and nonloan.
(iv) A schematic trunking diagram
shall be included showing the number
and type, length, ownership and makeup of existing and proposed toll and
EAS trunks, plus transmission and
traffic data for each trunk group.
(v) Detailed outside plant design
maps must be submitted for all central
office areas of initial loan applicants
and for areas not previously served by
existing borrowers or financed by RUS.
These design maps must be in sufficient detail to substantiate the construction cost estimates.
(vi) For subsequent loans only, if a
change in system boundaries is proposed, a map must be furnished showing present and proposed boundaries,
and existing establishments and subscribers in the new areas.
(vii) Any other special exhibits needed to support particular items in the
loan proposal must be included.
(3) Certification. The following certification shall be signed by a principal of
the engineering firm and the borrower:
We, the undersigned, certify that the data
in this Loan Design are correct to the best of
our knowledge and belief and reasonably reflect the cost to serve the subscribers as proposed on the Forms 569, ‘‘Area Coverage Survey Report,’’ which are integral parts hereof,
and that this Loan Design adheres to RUS

engineering and construction standards and
practices.

(g) The RUS field representative
shall review and make a recommendation on each LD.
(1) After completion of the LD, the
borrower arranges a meeting with its
engineer and RUS’s field representative
to review:
(i) Design and cost estimates.
(ii) Reserves available from prior
loans, if any, or internally generated
funds which may be applied against the
requirements of the current application.
(2) One copy of RUS Form 567,
‘‘Checklist for Review of Loan Design,’’
completed and signed by the borrower’s
engineer must be attached to the LD
submitted to the RUS field representative.
(3) The RUS field representative recommends acceptance of the LD as the
basis for RUS financing.
(4) Three copies of the final LD with
the RUS field representative’s recommendation are then sent to the relevant Area Office in RUS. A fourth
copy is retained by the RUS field representative.
(5) A transmittal letter from the borrower must accompany the LDs, requesting that the application previously submitted be amended so as to
be consistent with the approved LD.
(6) Final approval of the LD is given
by the relevant Area Office in RUS. To
be approved, the LD must be cost effective, include appropriate technology,
and provide area coverage.
(7) Upon receipt of the LD and any
other
required
information,
RUS
makes a preliminary analysis of the
loan proposal. Before final consideration of the loan, RUS reviews the results of its preliminary analysis with
the borrower.
(Approved by the Office of Management and
Budget under control number 0572–0079)
[54 FR 13356, Apr. 3, 1989; 54 FR 16194, Apr. 21,
1989. Redesignated at 55 FR 39396, Sept. 27,
1990, as amended at 58 FR 66256, Dec. 20, 1993]

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§§ 1737.33–1737.39
§§ 1737.33–1737.39

7 CFR Ch. XVII (1–1–11 Edition)

[Reserved]

Subpart E—Interim Financing of
Construction of Telephone Facilities
§ 1737.40

General.

(a) Under special circumstances a
borrower may request that RUS approve interim financing for interim
construction. This subpart describes
the circumstances in which RUS will
consider approving interim financing
of construction, the information to be
submitted to RUS to support the borrower’s request, RUS’s requirements
relating to interim construction, and
related matters.
(b) For a borrower to preserve the option of obtaining loan funds for reimbursement of interim financing, it
must obtain prior RUS approval of its
interim financing plan and follow the
procedures in 7 CFR 1737.41 and 7 CFR
1737.42.
(c) RUS will approve interim financing only for projects which must be
performed immediately.
(d) RUS approval of interim financing is not a commitment that RUS will
make loan funds available.
(e) Equal employment opportunity
requirements apply to interim construction. See RUS Bulletin 320–15.

jdjones on DSKHWCL6B1PROD with CFR

§ 1737.41 Procedure for obtaining approval.
(a) The borrower shall submit to the
RUS Area Office a written request for
approval of interim financing. This request shall include:
(1) A description of the construction
proposed under interim financing.
(2) An explanation of the urgency of
proceeding with the proposed construction.
(3) An estimate of the cost.
(4) The source of funds to be used for
interim financing.
(b) RUS will not approve interim financing until it has reviewed and found
acceptable:
(1) All of the information required
under § 1737.21; or
(2) The following documents:
(i) The loan application (RUS Form
490) clearly marked ‘‘in support of interim financing request.’’

(ii) The Loan Design (LD), or the portion thereof that covers the proposed
construction if the completed LD is not
available. See 7 CFR 1737.32.
(iii) Evidence that the borrower has
satisfied the requirements of 7 CFR
part 1794 applying to the proposed interim construction.
(iv) A statement that the borrower is
or is not delinquent on any Federal
debt, such as income tax obligations or
a loan guarantee from another Federal
agency. If delinquent, the reasons for
the delinquency must be explained and
RUS will take such explanation into
consideration in deciding whether to
approve the interim financing, see 7
CFR 1737.22(b)(9).
(v) A ‘‘Certification Regarding Lobbying’’ for loans, or a ‘‘Statement for
Loan Guarantees and Loan Insurance’’
for loan guarantees, and when required,
an executed Standard Form LLL, ‘‘Disclosure of Lobbying Activities,’’ (see
section 319, Pub. L. 101–121 (31 U.S.C.
1352)).
(vi) Executed copy of Form AD–1047,
‘‘Certification Regarding Debarment,
Suspension, and Other Responsibility
Matters—Primary
Covered
Transactions’’ (see appendix A to 7 CFR part
3017).
(vii) Any other supporting data required by the Administrator.
(c) RUS will not approve a borrower’s
request for approval of interim financing if, in RUS’s judgment:
(1) The proposed interim financing
does not comply with the requirements
of this subpart.
(2) The proposed interim construction will not qualify for RUS financing.
(3) The proposed interim financing
presents unacceptable loan security
risks to RUS, or otherwise is not in the
best interests of RUS.
(Approved by the Office of Management and
Budget under control number 0572–0079)
[54 FR 13356, Apr. 3, 1989. Redesignated at 55
FR 39396, Sept. 27, 1990, as amended at 56 FR
26599, June 10, 1991; 59 FR 54381, Oct. 31, 1994]

§ 1737.42 Procedure for construction.
(a) If RUS approves the interim financing, interim construction shall be
conducted in accordance with 7 CFR
part 1753, 7 CFR part 1788, RUS Bulletin 320–15, and RUS Bulletins 381–1,
381–2, 381–4, 381–7, 381–8, 381–9, 381–10,

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Rural Utilities Service, USDA

§ 1737.50

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381–11, 381–13, 382–1, 382–2, 382–3, 383–1,
383–4, 384–1, 384–2, 384–3, 385–1, 385–2, 385–
3, 385–4, 385–5, 385–6, 387–1, 387–2, 387–3,
387–4, and 387–5) except for the following:
(1) All sellers and contractors invited
to bid must be informed that funds
from sources other than RUS will be
used to pay for construction.
(2) Contracts involving the interim
construction must contain a provision,
in form and substance satisfactory to
RUS, stating that RUS is not committed to lend or advance funds to finance the project.
(3) Contracts will not be approved by
RUS until the borrower demonstrates
to RUS’s satisfaction that funds from
sources other than RUS will be available when needed to pay invoices submitted in accordance with contract
payment terms.
(4) The borrower shall not begin interim construction until all necessary
licenses, permits, and other governmental approvals have been obtained.
(b) After RUS loan funds are released, the borrower can obtain reimbursement for interim financing by
submitting a Financial Requirement
Statement. See 7 CFR part 1744, subpart C (or RUS Bulletin 327–1).
(1) The first advance of loan funds to
a borrower that has received interim financing approval generally will be limited to funds to repay any interim financing indebtedness and such additional amounts as RUS deems necessary. RUS will make no further advances of loan funds until the borrower
has submitted evidence, in form and
substance satisfactory to the Administrator, that (i) any indebtedness created by the interim financing and any
liens associated therewith have been
fully discharged of record and (ii) the
borrower has satisfied all other conditions on the advance of additional loan
funds.
(2) If the source of funds for interim
financing is the borrower’s internally
generated funds, the borrower may request reimbursement of those funds
along with advances for other purposes
on the first Financial Requirement
Statement.
[54 FR 13356, Apr. 3, 1989; 54 FR 16194, Apr. 21,
1989. Redesignated at 55 FR 39396, Sept. 27,
1990]

§§ 1737.43–1737.49

[Reserved]

Subpart F—Review of Application
Procedures
§ 1737.50 Review of completed loan application.
(a) The completed loan application
consists of:
(1) A completed RUS Form 490, ‘‘Application for Telephone Loan or Loan
Guarantee;’’
(2) A completed certification Form
AD–1047, ‘‘Certification Regarding Debarment, Suspension, and Other Responsibility Matters—Primary Covered
Transactions,’’ (see appendix A to 7
CFR part 3017);
(3) A market survey called the Area
Coverage Survey (ACS);
(4) The plan and associated costs for
the proposed construction, called the
Loan Design (LD);
(5) Evidence that the borrower is participating in a telecommunications
modernization plan in the state where
the proposed construction will occur,
unless the borrower is seeking a guaranteed loan; and
(6) Various supplementary information.
See 7 CFR part 1737 for additional information.
(b) RUS shall review the completed
loan application, particularly noting
subscriber data, grades of service, extended area service (EAS), connecting
company commitments, commercial
facilities, system and exchange boundaries, and proposed acquisitions. RUS
shall review the LD to determine that
the system design is acceptable to
RUS, that the design is technically
correct, that the cost estimates are
reasonable, and that the design provides for area coverage service. RUS
shall also review the population and incorporation status of all communities
served or to be served by the borrower
to determine if any nonrural areas are
served and if municipal franchises are
required.
Any
RUS
lending
for
nonrural areas must be in accordance
with 7 CFR part 1735. RUS shall also
check the ‘‘List of Parties Excluded
from Federal Procurement of Nonprocurement
Programs’’,
compiled,
maintained and distributed by General
Services Administration, to determine

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§ 1737.51

7 CFR Ch. XVII (1–1–11 Edition)

whether the borrower is debarred, suspended, ineligible, or voluntarily excluded (see 7 CFR 3017.505).
(c) RUS will notify the borrower if
RUS recommends major changes in
subscriber projections, design, cost estimates, or other significant matters.
RUS will not continue loan processing
until RUS and the borrower agree on
all major changes.
[54 FR 13356, Apr. 3, 1989; 54 FR 16194, Apr. 21,
1989. Redesignated at 55 FR 39396, Sept. 27,
1990, as amended at 58 FR 66256, Dec. 20, 1993]

§ 1737.51 Approval of loan design.
RUS shall notify the borrower when
the preloan data concerning the system
design and costs and subscriber projections have been approved. If found acceptable, RUS will approve the LD
with any required changes. A copy of
the approved LD, with any significant
changes, as determined by RUS, will be
returned to the borrower.
§§ 1737.52–1737.59

[Reserved]

jdjones on DSKHWCL6B1PROD with CFR

Subpart G—Project Cost
Estimation Procedures
§ 1737.60 Telephone loan budget.
(a) RUS shall prepare a ‘‘Telephone
Loan Budget’’ (RUS Form 493) showing
all costs for the proposed project and
the amount of loan and nonloan funds
to be used. The budget shall show, as
applicable, amounts for central offices,
outside plant and station equipment,
right-of-way procurement, land, buildings, removal costs, special projects,
engineering, vehicles and work equipment, office equipment, operating
funds, refinancing with loan funds,
debt retirement with nonloan funds,
acquisitions, and contingencies. The
amounts budgeted, exclusive of prior
loan reserves, generally shall be rounded to the nearest $1,000.
(1) If the loan is to be made by the
Rural Telephone Bank (RTB) or concurrently with RTB, the budget shall
include the amount required for the
purchase of RTB Class B stock. This is
5 percent of the amount to be borrowed
from RTB for all purposes other than
the purchase of RTB Class B stock. The
borrower may elect to use nonloan
funds for all or part of this requirement.

(2) The amount of funds included in
any loan shall be limited for certain
items:
(i) Operating funds for working capital or current operating deficiencies
shall be included only in cases of financial hardship as determined by the Administrator.
(ii) Contingencies shall not exceed 3
percent of the total amount of loan
funds to be used for construction, engineering, operating equipment and operating funds.
(b) RUS shall prepare the cost estimates based on the data in RUS Form
494, ‘‘Loan Design Summary,’’ and RUS
Form 495, ‘‘Construction Cost Estimates,’’ or their equivalents, and other
parts of the LD submitted by the borrower, and on other pertinent information. See subpart D of this part. The
amounts included in the proposed
budget shall be the estimated costs,
less the value of materials and supplies
on hand or acquired that can be used in
the proposed construction. The cost estimates in the LD may be adjusted by
RUS in consultation with the borrower. See § 1737.50(c).
(c) Generally, the new loan shall be
reduced by any required equity funds
and funds available in reserves no
longer needed for prior loan purposes
to determine the proposed loan requirement.
(d) When amounts are available in reserves no longer needed for prior loan
purposes, RUS may, at its option, deny
further advances of these funds if they
will be used to finance projects in the
proposed loan.
(e) The budget shall also show, if applicable, the reserves for each budget
item as of the date of the latest RUS
Form 481, ‘‘Financial Requirement
Statement,’’ submitted by the borrower. To ensure that sufficient funds
are included in the budget to finance
all proposed construction, RUS includes in the budget any funds deposited by the borrower for approved interim financing.
§ 1737.61 Cost allocation for rural and
nonrural areas.
(a) Pursuant to the requirements in 7
CFR part 1735, if loan funds are proposed for facilities to serve subscribers
in nonrural areas, RUS shall allocate

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Rural Utilities Service, USDA

§ 1737.70

costs between rural and nonrural areas.
This allocation will be used to determine whether the use of loan funds in
nonrural areas is necessary and incidental to furnishing and improving
telephone service in rural areas. Cost
estimates shall be provided by the borrower in the LD. See subpart D of this
part. RUS will use the following method to review the cost breakdowns and
to determine their appropriateness:
(1) The costs of facilities associated
directly with particular subscribers
shall be allocated to those subscribers.
(2) The costs of facilities that serve
both rural and nonrural subscribers
shall be allocated based on the relative
number of rural and nonrural subscribers receiving service from those
facilities.
(3) When a borrower’s exchange that
includes a nonrural community will
have an extended area of service (EAS)
with other exchanges of the borrower,
the breakdown of subscribers and funds
in the allocation for rural and nonrural
areas included in the proposed loan
shall show the number of rural and
nonrural subscribers and the costs to
serve each group, as determined per
paragraphs (a)(1) and (a)(2) of this section, in the subject exchange and in all
exchanges connected by EAS.
(b) If RUS determines that costs cannot be adequately allocated using the
procedures in paragraphs (a)(1) through
(a)(3) of this section, RUS shall, on a
case by case basis, allocate costs between the rural and nonrural subscribers using whatever methodology it
deems reasonable. All allocations in
paragraphs (a) and (b) of this section
shall be documented.
§§ 1737.62–1737.69

[Reserved]

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Subpart H—Feasibility
Determination Procedures
§ 1737.70 Description
of
feasibility
study
(a) In connection with each loan RUS
shall prepare a feasibility study that
includes sections on consolidated loan
estimates, operating statistics, projected telecommunications, plant, projected retirement computations, and
projected revenue and expense estimates (including detailed estimates of

depreciation and amortization expense,
scheduled debt service payments, toll
and access charge revenues, and local
service revenues). Normally, projections will be for a 5-year period and
used to determine the ability of the
borrower to repay its loans in accordance with the terms thereof. RUS will
not require borrowers to raise local
service rates. Local service revenue
projections will be based on the borrower’s existing local service rates or
regulatory body approved rates not yet
in effect but to be implemented within
the Forecast period. In the latter case,
if a borrower is not required to obtain
regulatory body approval for the implementation of such rates, RUS will require a resolution of the board of directors indicating when those rates will be
in effect.
(b) RUS makes loans only to rural
telephone systems that are financially
feasible. RUS shall consider the factors
discussed in paragraphs (c) through (j)
of this section in determining feasibility.
(c) The revenue and expense estimates for the feasibility study generally will be based on the borrower’s
operating experience provided that:
(1) Adjustments are made for any
nonrecurring revenues and expenses
that are not representative of the borrower’s past operations and would thus
make the borrower’s experience data
inappropriate for the forecast; and
(2) Adjustments are made for any
special or new characteristics or other
considerations deemed necessary by
the Administrator.
(d) [Reserved]
(e) Depreciation expense will be determined using depreciation rates appropriate to the normal operation of
the borrower, based on:
(1) The borrowers regulatory body approved depreciation rates; and
(2) Where such rates as described in
paragraph (e)(1) of this section do not
exist for items which the borrower is
seeking financing, the most recent median depreciation rates published by
RUS for all borrowers. RUS will publish such depreciation rates annually
in RUS’s ‘‘Statistical Report, Rural
Telephone Borrowers.’’
(f) Projected scheduled debt service
payments will generally be based on all

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§ 1737.71

7 CFR Ch. XVII (1–1–11 Edition)

of the borrower’s outstanding and proposed loans from RUS and all other
lenders as of the end of the feasibility
Forecast period (i.e. for a 5-year Forecast period, the amount of debt outstanding in year 5).
(g) The financial and statistical data
are derived from RUS Form 479, ‘‘Financial and Statistical Data for Telephone Borrowers,’’ or for initial loans,
the data may be obtained from the borrower’s financial statements and other
reports, and from other information
supplied with the completed loan applications (see 7 CFR 1737.21 and 1737.22).
(h) When, in RUS’s opinion, the borrower’s operating experience is not
adequate or the borrower’s current operations are not representative, the estimates in the feasibility study normally will be developed from state and
regional standards based on the experience of RUS borrowers. These standards are included in the Borrower’s
Statistical Profile (BSP), which is revised annually by RUS. If the borrower’s operating experience is not the
basis for one or more per-subscriber estimates used in the feasibility study,
the estimates generally may not vary
from the standard by more than 20 percent to reflect the particular characteristics of the loan applicant. Any
variation from the standard shall be
documented.
(i) In cases where these per-subscriber standards do not represent a
reasonable forecast of a particular borrower’s operations (for example, when
a variation greater than 20 percent is
necessary), estimates based upon a special analysis of the borrower’s projected operations shall be used. The
special analysis will accompany the
feasibility study.
(j) When it is reasonably expected
that a subscriber, classified as a special
project, may discontinue service, a second feasibility study will be prepared,
for comparison purposes, omitting revenues and expenses from this subscriber.
(k) RUS may obtain and review commercially available credit reports on
applicants for a loan or loan guarantee
to verify income, assets, and credit history, and to determine whether there
are any outstanding delinquent Federal
or other debts. Such reports will also

be reviewed for parties that are or propose to be joint owners of a project
with a borrower.
(l) If it is determined that loan feasibility cannot be proven as described in
this section, the loan application will
be returned to the borrower with an explanation. A borrower whose application has been returned will have 90
working days, from the date the application was returned, to revise and resubmit its application. If a revised application is not received by RUS within
the 90-day period described above, the
application will be canceled and a new
application will need to be submitted if
the borrower wishes further consideration.
[54 FR 13356, Apr. 3, 1989. Redesignated at 55
FR 39396, Sept. 27, 1990, as amended at 56 FR
26599, June 10, 1991; 58 FR 66256, Dec. 20, 1993;
62 FR 46872, Sept. 5, 1997]

§ 1737.71 Interest rate to be considered
for the purpose of assessing feasibility for loans.
(a) For purposes of determining the
creditworthiness of a borrower for concurrent RUS cost-of-money and RTB
loans, the Administrator shall assume
that the loans, if made, would bear interest at the Treasury rate on the date
of determination as described in paragraph (b) of this section. If the Treasury rate exceeds 7 percent, the interest
rate used to determine eligibility for
the RUS cost-of-money loan will be 7
percent.
(b) The 30-year Treasury rate will be
used in all feasibility studies for loans
with a final maturity of at least 30
years. A straight-line interpolation between other Treasury rates will be used
to determine the rate used in feasibility studies for loans with final maturities of less than 30 years.
(c) The Treasury rate will be obtained each Tuesday, or as soon as possible thereafter, from the Federal Reserve. The rate for the current week,
from the column labeled ‘‘This week’’ in
the Federal Reserve statistical release,
will be used from that Wednesday
through the following Tuesday.
(d) As used in this section, the ‘‘date
of determination’’ means the date of
the feasibility study used in support of
the loan recommendation.
[58 FR 66257, Dec. 20, 1993]

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Rural Utilities Service, USDA
§§ 1737.72–1737.79

§ 1737.90

[Reserved]

Subpart I—Characteristics Letter
§ 1737.80 Description of characteristics
letter.
(a) After all of the studies and exhibits for the proposed loan have been prepared, but before the loan is recommended, RUS shall inform the borrower, in writing, of the characteristics
of the proposed loan. The purpose of
the characteristics letter is to inform
the borrower and obtain its concurrence, before further consideration by
RUS of the loan approval and the preparation of legal documents relating to
the loan, in such matters as the
amount of the proposed loan, its purposes, rate of interest, loan security requirements, and other prerequisites to
the advance of loan funds. The letter,
whether or not concurred in by the borrower, does not commit RUS to approve the loan on these or any other
terms.
(b) The Forecast of Revenues and Expenses and a copy of RUS Form 493,
‘‘Telephone Loan Budget,’’ shall be enclosed with the characteristics letter.
This copy of the budget shall be subject
to change by RUS with the borrower’s
agreement.
[54 FR 13356, Apr. 3, 1989. Redesignated at 55
FR 39396, Sept. 27, 1990, as amended at 56 FR
26600, June 10, 1991]

§§ 1737.81–1737.89

[Reserved]

Subpart J—Final Loan Approval
Procedures

jdjones on DSKHWCL6B1PROD with CFR

§ 1737.90

Loan approval requirements.

(a) In addition to requirements set
forth in 7 CFR part 1735, 7 CFR part
1737 and other applicable parts of 7
CFR chapter XVII, the following are
certain additional requirements that
must be met before RUS will approve a
loan:
(1) If the borrower had 100 or more
employees as of the prior December 31,
it must submit the current annual Employer Information Report EEO–1,
Standard Form 100, as required by the
Department of Labor; see 29 CFR 1602.7
through 1602.14.

(2) The borrower must be in compliance
with
regulations
on
nondiscrimination. See 7 CFR part 1790 (or
RUS Bulletin 320–19).
(3) For subsequent loans, RUS must
determine whether the borrower’s accounting records are adequate. If the
records are not adequate, as determined by RUS based on Generally Accepted Accounting Principles or other
accounting conventions as deemed necessary by RUS, a provision will be included in the loan contract requiring
the borrower to improve its records to
an adequate level.
(4) The borrower must not have any
receivables, loans, guarantees, investments, or other obligations that are
contrary to the mortgage provisions or
any RUS regulations including, but not
limited to, 7 CFR part 1758 (or RUS
Bulletins 320–4, 320–22, 321–2, 322–2, 323–
1, or 326–1). If the borrower has any of
these items, the loan contract shall
contain a provision requiring that they
be eliminated prior to the release of
funds. See 7 CFR part 1744 for conditions under which RUS will provide a
shared first lien and/or a lien accommodation for non-RUS lenders.
(5) RUS must make a determination
on flood insurance requirements. In accordance with the National Flood Insurance Act of 1968, as amended by the
Flood Disaster Protection Act of 1973,
as amended (the ‘‘Flood Insurance
Act’’), RUS shall not approve financial
assistance for the acquisition, construction, repair or improvement of
any building or any machinery, equipment, fixtures or furnishings contained
or to be contained in any such building
located in an area which has been identified by the Director of the Federal
Emergency Management Agency (the
‘‘Director of FEMA’’) pursuant to the
Flood Insurance Act as an area having
special flood hazards unless:
(i) Flood insurance has been made
available, pursuant to the Flood Insurance Act, in the area in which the acquisition, construction, repair or improvement is proposed to occur; and
(ii) The borrower has obtained flood
insurance coverage with respect to
such building, machinery, equipment,
fixtures or furnishings as may be required pursuant to the Flood Insurance
Act.

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§ 1737.91

7 CFR Ch. XVII (1–1–11 Edition)

Accordingly, a finding shall be made on
whether loan funds will be used to finance buildings, machinery, fixtures or
furnishings located in an identified
special flood hazard area. If loan funds
are to be used in such a special flood
hazard area, a provision will be included in the loan contract restricting
the release of funds until all the requirements of the Flood Insurance Act
have been satisfied.
(6) All environmental requirements
must be met (see 7 CFR part 1794).
(b) [Reserved]
[54 FR 13356, Apr. 3, 1989. Redesignated at 55
FR 39396, Sept. 27, 1990, as amended at 56 FR
26600, June 10, 1991]

§ 1737.91

Loan documents.

Following approval of the loan, RUS
shall forward the necessary loan documents to the borrower for execution,
delivery, recording, and filing, as directed by RUS. See 7 CFR part 1758 for
details (or RUS Bulletins 320–4, 320–22,
321–2, 322–2, 323–1, or 326–1).
§§ 1737.93–1737.99

[Reserved]

§ 1737.101 Amounts spent for preloan
activities.
If the borrower desires to credit
amounts spent for preloan activities
against any equity or general funds required by the loan contract, it shall
submit an itemized statement of such
expenditures to the Area Office. These
expenditures will be accounted for on
RUS Form 503, ‘‘Release of Telephone
Loan Funds,’’ if RUS determines that
the amounts spent are reasonable
based on normal industry practice and
that the procedures set forth in 7 CFR
part 1737, subpart D, have been complied with. Statements of preloan expenditures will be verified as to accuracy by loan fund audits.
(Approved by the Office of Management and
Budget under control number 0572–0085)

Subpart K—Release of Funds
Procedure

§§ 1737.102–1737.109

§ 1737.100 Prerequisites to the release
and advance of funds.

jdjones on DSKHWCL6B1PROD with CFR

(Approved by the Office of Management and
Budget under control number 0572–0085)

Approval.

(a) A loan is approved when the Administrator, or whoever is delegated
authority, signs the administrative
findings and the letter to the borrower
announcing the loan.
(b) If the loan is not approved, RUS
shall notify the borrower, in writing, of
the reasons.
§ 1737.92

vanced even though certain loan contract prerequisites remain unsatisfied.
(d) Following release approval, loan
funds and related nonloan funds may
be advanced in accordance with 7 CFR
part 1744.
(e) The borrower may be required to
discharge indebtedness and/or to close
acquisitions before advances are made
for construction purposes. In such
cases, the borrower shall submit evidence that these actions have been
completed. If the evidence is satisfactory to RUS, RUS shall allow the remaining loan funds to be advanced in
accordance with 7 CFR part 1744.

(a) Standard prerequisites to the advance of funds, generally applied to all
loans, are set forth in Article II of the
form of loan contract attached as appendix A to 7 CFR part 1758. Additional
prerequisites may be added on a case
by case basis to the loan contract.
(b) Before any loan funds can be advanced, RUS must approve a release of
funds.
(c) RUS approves the release of funds
only after it determines that all prerequisites to the advance of loan funds
have been met or funds should be ad-

[Reserved]

PART 1738—RURAL
ACCESS LOANS
GUARANTEES

BROADBAND
AND LOAN

Subpart A—General
Sec.
1738.1 General statement.
1738.2 Definitions.
1738.3–1738.9 [Reserved]

Subpart B—Loan Purposes and Basic
Policies
1738.10
1738.11
1738.12
1738.13

General.
Availability of broadband service.
Location of facilities.
Allocation of funds.

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