---
kind: "section"
citation: "7 C.F.R. § 1942.114"
title: "7"
number: "1942.114"
heading: "Security."
url: "https://uscodex.org/cfr/7/1942.114"
---

# §1942.114. Security.


Specific requirements for security for each loan will be included in the letter of conditions. Loans must be secured by the best security position practicable, in a manner which will adequately protect the interest of RD during the repayment period of the loan, and in accordance with the following;

- (a) Security must include one of the following:
  - (1) A pledge of revenue and a lien on all real estate and major equipment purchased or developed with the Agency loan; or
  - (2) **General obligation bonds or bonds pledging other taxes.**
- (b) Additional security may be required as determined necessary by the loan approval official. In determining the need for additional security the loan approval official should carefully consider:
  - (1) **The estimated market value of real estate and equipment security.**
  - (2) The adequacy and dependability of the applicant's revenues, based on the applicant's financial records, the project financial feasibility report, and the project budgets.
  - (3) The degree of community commitment to the project, as evidenced by items such as active broad based membership, aggressive leadership, broad based fund drives, or contributions by local public bodies.
- (c) Additional security may include, but is not limited to, the following:
  - (1) **Liens on additional real estate or equipment.**
  - (2) **A pledge of revenues from additional sources.**
  - (3) An assignment of assured income in accordance with [§ 1942.17(g)(3)(iii)(A)(1)](/cfr/7/1942.17.md?p=g-3-iii-A-1) of [subpart A](/cfr/7/subpartA.md) of this part 1942.
- (d) Review and approval or concurrence in the State Office is required if the security will not include a pledge of taxes and the applicant cannot provide evidence of the financially successful operation of a similar facility for the 5 years immediately prior to loan application.
- (e) Review and concurrence in the National Office is required if the security will not include a pledge of taxes, the applicant cannot provide evidence of the financially successful operation of a similar facility for the 5 years immediately prior to loan application, and the amount of the loan will exceed $250,000.
- (f) Loans under this subpart are subject to the provisions of [§ 1942.17(g)(1)](/cfr/7/1942.17.md?p=g-1) of [subpart A](/cfr/7/subpartA.md) of this part 1942, regarding security for projects utilizing joint financing.

## Notes

### Amendments

[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]

### Source

Source: 52 FR 43726, Nov. 16, 1987, unless otherwise noted.

### Authority

Authority: 5 U.S.C. 301; 7 U.S.C. 1989.

### Amendments

[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]