(a) To be eligible for a loan, an applicant must demonstrate a minimum equity position equal to 10 percent of the requested loan amount at the time of application which must remain available at loan closing. In addition to this minimum equity requirement, please refer to section Sec. 1738.208, Additional Cash Requirements which could cause the equity requirement to be higher than 10 percent.
(b) If the applicant does not have the required equity at the time the application is submitted, the applicant may satisfy the equity requirement at the time of application with an investor's unconditional legal commitment to cover the shortfall by providing additional equity. The additional equity must be transferred to the applicant prior to loan closing. If this option is elected, the applicant must provide evidence in the application that clearly identifies the investor's commitment to the applicant; the amount, terms, and conditions of the investment; and the investor's bank or financial statements that demonstrate its ability to fulfill its commitment. The terms and conditions of the investment must be acceptable to the Agency, which generally prohibits redemption of the investment until such time as stated requirements and financial thresholds are achieved by the applicant. The Agency will reject applications that do not provide evidence acceptable to the Agency regarding the investor's commitment.
(c) For State and local government applicants, the equity requirement can be satisfied with a general obligation bond, as long as the additional equity will be available to the applicant at closing. If the equity requirement is satisfied with a general obligation bond, the broadband loan cannot be subordinate to the bond. The applicant must submit an opinion from its legal counsel that the applicant has the authority to issue a general obligation bond in an amount sufficient to meet the minimum equity requirement. Revenue bonds supported by the operations to be funded cannot be used to satisfy the equity requirement.