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Progress Payments - Loan Guarantees
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Federal loan guarantee are the last method under the FAR Part 32.3 to finance noncommercial contracts. Loan guarantees are available only to borrowers performing contracts related to "the national defense" – "military, atomic energy production or construction, military assistance to any foreign nation, stockpilling or space." Procedure. Under the regulations a contractor does not receive a guaranteed loan directly from the government nor a loan guaranteed at the request of the contractor. Instead, a contractor or subcontractor or supplier requiring operating funds to perform applies to a financial institution for a loan and then the institution applies to the Federal Reserve Bank in its district. Eligibility. The FAR generally warns COs that the contract financing methods should only apply to finance working capital, not expansion or capital asset but in the case of loan guarantees it may be used for expansion of a contractor’s permanent facilities. Contractor eligibility is determined by COs at the request of the agency’s financing office or other interested agency.
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