This product guarantees loans from highly liquid institutions (called the “Primary Lender” and including large banks, pension funds, etc.) to pre qualified rural financial institutions to be used only for loanable funds supporting those institutions’ agribusiness portfolios. The rural financial institutions may then place their agribusiness loans under PASS Traditional or Lender’s Option guarantees and thus indirectly provide the Primary Lender an effective 75% guarantee (that is a guarantee on 50% of the value loaned to the rural financial institution and an additional 50% on the loan from the rural financial institution to their agribusiness borrower). PASS will charge a risk sharing fee at contractually agreed rate with the respective financial institution paid from the date the loan from the Primary Lender is disbursed. Failure to effect the fee payment will invalidate the Guarantee Agreement.
The rural financial institution must first undergo a standard due diligence performed by PASS or PASS’s consultant. The value of the Primary Lender’s loan cannot exceed three times the value of the rural financial institution’s net worth; and under no circumstances will the rural financial institution be enabled to borrow more than five times its net worth including the guaranteed loan from the Primary Lender plus all other liabilities. Beyond these, PASS specifies: the maximum value of the loan or line of credit from Primary Lender to rural financial institution beyond which PASS will not honor claims against the guarantee. The guarantee will under no circumstance cover fees, interest or penalties accrued by the borrower. The guarantee will not cover restructured or refinanced loans without prior consent of PASS.