Indian Loans Economic Development: Who Is Eligible?

For Native American individuals, governments and organizations, there are special SBA loans available. The US Department of the Interior sponsors a program titled Indian Loans--Economic Development that guarantees up to 90 percent of principal and interest on loans to eligible individuals and groups. This program was created to assist businesses on Indian reservations and to revive reservation economies. The lender submits an application to the local office, such as the Tribal Loan Administration Office or the Bureau of Indian Affairs, and waits for the loan to be approved. Once the loan is approved, the bank awards the amount to the borrower, knowing that the loan is 90 percent insured against default. This program has awarded as much as $847,000,000 in guaranteed loans in 2007 for eligible individuals and/or organizations.

Who Is Eligible?

Indian tribal governments and Native American individuals and/or organizations recognized under their respective Indian tribal governments are all eligible for this assistance. Though not classified as Native Americans, Alaska natives also qualify for assistance under this program.

Documentation needs to be presented in order to receive assistance under this program. A certificate signed by an authorized tribal representative stating that an individual is a member of its organization is needed. An organization or tribal government needs to submit a resolution of its governing body as part of the loan packet. In addition to this documentation, an individual or organization needs to demonstrate the inability to get financing on his, her or their own.

Constructing the Proposal

A proposal must be presented along with the loan application to the Tribal Loan Administration Office or the Bureau of Indian Affairs. The proposal must show that the borrower has a reasonable payment plan. Fifty-one percent of the ownership in the business that the loan is financing must be Indian. The proposal must also show that this business or project will benefit the economy at its respective Indian reservation.

Loan Terms

A borrower must show that he or she has 20 percent equity in the business the loan is for. Loan terms are limited to 30 years. Loans can be guaranteed up to a maximum of 90 percent in unpaid principal and interest. Individuals can borrow amounts from $150,000 up to $10,500,000. Tribal governments and/or Native American organizations can borrow amounts from $10,000,000 up to $12,000,000.

Requirements for Maintaining Loan

Lenders and individuals are required to keep loan records up to date for the life of the loan. Also, lenders are required to report to the Director of Indian Affairs Office where the loan originated on a quarterly basis.Audits are required for all loans over $300,000 in a fiscal year except those given to non-federal entities. Audits are not required for non-federal entities that do not borrow amounts exceeding $500,000.

When first applying for this assistance, make sure that all documentation is accurate and that a proper business plan has been included in the proposal. Look for a lender who has previous experience applying for this type of assistance. Small mistakes can add up to wasted time and added frustration. Also, because there are post assistance requirements for this loan, the borrower will want a lender who is responsible with record keeping for the life of the loan.