The Indian Loan Guaranty, Insurance and Interest Subsidy Program is a program through the Department of the Interior that encourages eligible borrowers to develop businesses through conventional financing leveraged by the government. The program serves as an important bridge in building a relationship between private sector banks that are willing to lend to Indian Country and tribes that have difficulty accessing capital. The program helps facilitate loans for borrowers while securing reasonable interest rates and reducing loan defaults. Each $1 million in federal funding creates at least a tenfold investment in Indian Country.
The program has long-term loans that are needed for any government, an enviable default rate at fewer than 2 percent, and an incentive in the form of a loan guarantee up to 90 percent to minimize the risk to community banks willing to lend to the tribal market. The guarantee also helps banks make larger loans internally or with the help of other lenders. This program serves an important role for initial and early tribal government growth; however, the total federal funds allocated for the program for fiscal year 2016 was $8 million.
NAFOA continues to request that the program receive an additional $7 million to increase the total to $15 million. This budget increase would spur investment in economic development to $150 million, or almost double the current funding. A $15 million budget would allow for larger and higher demand mid-tier loans with little impact on current staffing for underwriting.
Current Status and Action:
The Indian Loan Guarantee Program is an important capital program that simply needs more funding and flexibility. The program will be part of a study included in the Senate Committee on Indian Affairs’ Indian Community Economic Enhancement Act of 2016 (S. 3234). NAFOA is supporting the program’s inclusion in the study to better understand the potential market, funding needs, and any improvements needed for the program.