• Equity. Equity is the amount of the RD-accepted market value that exceeds the
total of all currently outstanding RD direct loans and any other parity, or senior
debts approved by RD, or to which RD has an outstanding subordination.
• Exit Incentive. An Exit Incentive is an amount of incentive compensation
determined by RD that may be paid to the selling borrower to facilitate
transferring the property to an eligible buyer when there is no equity as determined
by the RD-accepted market value used in the underwriting analysis. See also 7.2 C
8 for mandatory applicable Guiding Principles.
• Identity-of-Interest. A relationship between applicants, borrowers, grantees,
management agents, or suppliers of materials or services described under, but not
limited to, any of the following conditions (7CFR 3560.102 (g)):
1. There is a financial interest between the applicant, borrower, grantee and a
management agent or the supplying entity;
2. One or more of the officers, directors, stockholders, or partners of the applicant,
borrower, or management agent is also an officer, director, stockholder, or
partner of the supplying entity;
3. An officer, director, stockholder, or partner of the applicant, borrower, or
management agent has a 10 percent or more financial interest in the supplying
entity;
4. The supplying entity has or will advance funds to an applicant, borrower, or
management agent;
5. The supplying entity provides or pays on behalf of the applicant, borrower, or
management agent the cost of any materials or services in connection with
obligations under the management plan or management agreement;
6. The supplying entity takes stock or a financial interest in the applicant,
borrower, or management agent as part of the consideration to be paid them; or
7. There exists or come into being any side deals, agreements, contracts or
understandings entered into thereby altering, amending, or canceling any of the
management plan, management agreement documents, organization
documents, or other legal documents pertaining to the property by the Agency.
See 7 CFR 3560.11.
• Key Principle. A key principle is the party or parties involved in the organization,
decision-making and operational authority that may control the applicant and any sub-
applicant entities involved
and includes the actual individual(s) of any sub-entity
(i.e., other organizations, partnerships, etc.) which cannot demonstrate financial
ability, creditworthiness or experience in the name of the transferee or identified
sub-entity, to mitigate any creditworthiness, financial capacity and/or experience in
the transferee’s own right or may not have equal strength with respect to all of the
eligibility criteria.
• Non-Equity Compensation. Non-equity compensation is a payment to the Seller,
from the buyer when no equity exists in the property. This payment should come
from non-loan funds and must not affect project rents at any time during the term of
the RD direct loan or any modification thereof. See Paragraph 7.8 D.
• Portfolio Transaction. A portfolio transfer transaction is a transaction involving
multiple projects within one State being acquired by a single purchaser.
• RD Funds. RD funds include, for example, a subsequent Section 515 loan or a
Section 538 loan.