This portion of the financial summary was completed with the assistance of local representatives at the district office of Rural Development, a subsidiary of the U.S. Department of Agriculture (USDA). Among the various programs offered by the USDA, the Business and Industry (BI) Guaranteed Loan Program is the most applicable to the Plainview Hilton project. While the USDA does offer some direct loans to investors of multifamily or congregate housing, these loans are reserved strictly for non-profit sponsors.

The BI program guarantees loans by eligible local lenders to businesses that benefit rural areas. Rural areas are defined as all areas other than cities of more than 50,000 people and their immediately adjacent urban areas. Priority is given to applications for loans in rural communities of 25,000 inhabitants or less. The primary purpose is to create and maintain employment and improve the economic and environmental climate in rural communities. Typically, losses of up to 80 percent of the original loan amount are guaranteed. The program can mitigate the concerns of small community lending institutions regarding collateral/appraisal issues. Higher loan amounts, lower interest rates, and longer repayment terms assist businesses that may not qualify for conventional lender financing. These loans encourage businesses in providing economic stability, growth, and rural employment.

Any legal entity, including individuals and public or private organizations, may borrow for the purposes of business and industrial acquisitions, construction, conversion, expansion, repair, modernization, or development costs. Costs may include start-up and working capital, the purchase of equipment or supplies, processing and marketing of facilities, pollution control and abatement, and refinancing for viable projects under certain conditions.

Maximum loan guarantee percentages apply to the entire loan and are as follows: 80% for 5 million or less, 70% for 5-10 million, and 60% for 10-25 million. It is important to note that the entire loan must be secured by collateral. A qualified appraisal report is required on property that will serve as collateral. Maximum repayment terms are as follows: working capital – 7 years, equipment – 15 years (or useful life),

Real estate – 30 years. A one-time guarantee fee of 2 percent of the guaranteed principal is typically passed on to the borrower. A minimum of 10% tangible balance equity is required at the time of the guarantee issuance. Fixed or variable interest rates are to be negotiated between lender and borrower. Quarterly financial statements and a written credit analysis by the lender are required. Lenders will service and, if necessary, liquidate the loans with USDA Rural Development concurrence.

The preceding is summarized from USDA pamphlet # PA-1565, revised June 1997. For more information contact:

Joe Gilvers or Walter Head

Rural Development Office

USDA Service Center

6113 43^rd Street – Suite B

Lubbock, TX

(806)785-5644

or

http://www.rurdev.usda.gov