§ 1700.21 - Insured telephone loans pursuant to section 305 of the Rural Electrification Act, as amended.

(a) General. (1) These loans are made from the Rural Electrification and Telephone Revolving Fund for purposes authorized by section 201 of the RE Act. The standard interest rate on these loans is 5 percent, but a rate as low as 2 percent is authorized by section 305(b) of the RE Act under the same conditions as specified in § 1700.20(a) of this part.

(2) These loans are made for the purpose of improvement, expansion, construction, acquisition and operation of telephone lines, facilities, or systems to furnish or improve telephone service in rural areas. Borrowers may be required to provide a portion of the investment themselves. The loans, approval of which rests solely within the discretion of the Administrator, must be repaid within a period, not to exceed 35 years, that approximates the expected useful life of the facilities financed and must be reasonably secured in the judgment of the Administrator. The loans may be made to any type of commercial or nonprofit corporation now providing or who may hereafter provide telephone service in rural areas. Preference is given to persons already providing telephone service in rural areas and to cooperative, nonprofit, limited dividend or mutual associations.

(b) Loan applications. Applications for these loans are made on forms prescribed by RUS, copies of which are available from RUS on request. Loan applicants are assisted, as necessary, in conducting area coverage surveys and in preparing loan applications. If an application is acceptable after legal, engineering, economic and financial studies, funds are obligated by a loan contract and the borrower gives a note, mortgage and, in some cases, other security.

(c) Construction. Under the loan agreements, RUS reserves the right to approve the design and construction of facilities and to require progress reports on construction and audits of the borrower's records relating to construction.

(d) Advance of loan funds. Loan funds are advanced on the basis of requisitions submitted by borrowers in accordance with the loan contract and 7 CFR part 1744.