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Loan guarantee funding from USDA under question

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  • Mon, Jan 24, 2011 - 09:19am



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    Loan guarantee funding from USDA under question

Though delays continue to plague the process, the USDA is set to offer loan guarantees for four different biofuels projects. These companies are facing a long process of securing short-term loans. The USDA guarantee process would just double-insure the funding for these biofuel projects. A new legislature may cut funding from the USDA. The Department of Energy is also fighting against these loan guarantees. If they end up at risk these corporations might be seeking personal financing in other areas. Source of article – USDA getting into the loan guarantee business by MoneyBlogNewz.


The USDA loan guarantees information 

Four short term loans are going to be offered by the United States DOA. Four biofuel projects will get it. “Section 9003 program” is the name of it. There are conditions to the loan guarantees though. USDA secretary Tom Vilsack has been pushing the section 9003 programs as proof that the USDA can create jobs. Biofuel firms in states like Texas would be able to do better with their companies with these guarantees.


Funding biofuels with emergency cash 

The United States Department of Agriculture is attempting to fund new biofuel projects with the section 9003 emergency financing. It may not take place though. The Office of Management and Budget does not think the program will work. The money that would be needed for all four guarantees just isn’t there. The Department of Energy is also lobbying to cut the USDA guarantee program out of the funding bills working their way through Congress. The Omnibus spending bill was certainly going to have it at first. The spending budget had the funding taken out though.


The basics of the USDA loan guarantee 

$10 for each $1 of funding within the coffers is what the USDA’s loan guarantee program wants. There’s a safety net in case the four firms all default. The loan will be paid back by the USDA. The Republican-controlled Congress that could be convening in a few weeks is likely to pull funding from this program, among others. Several hundred jobs will no longer be created if this happens. This is because traditional banks and other lending sources probably will not be willing to fund the biofuels projects.


Articles cited

 BioFuels Digest 



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