DEPARTMENT OF AGRICULTURE


by the Cooperative Bank Commissioner. The commodi-
ties must be of sufficient value at the time the loan is
made to afford an adequate margin of security without
the necessity for additional collateral of other kinds.
 Operating Capital Loans generally are short-term
loans. They are frequently used to supplement the co-
operative association's own capital funds during times
of peak seasonal activity. There are no legal require-
ments as to the collateral which must be taken to secure
such loans, but in many cases the banks require liens
on real estate, equipment, or other property.
 Facility Loans are made for the purpose of financing
or refinancing the acquisition of land, buildings, and
equipment used in the business activities of cooperative
associations. The security usually consists of a first lien
on the land, buildings and equipment. No loan on physi-
cal facilities may be made in excess of 60 per cent of
the appraised value of the security offered and no loan
may be made unless the purchase or lease price is con-
sidered reasonable. The statute limits the term of facility
loans to 20 years, but generally they are made to mature
within ten years.
 Interest Rates-The current effective interest rates
 on the three classes of loans in continental United States
 are as follows:

 Type of Loan Interest Rate
 (Per Year)
 Commodity 23/ per cent
 Operating capital 3/ per cent
 Facility 41 per cent

 The banks for cooperatives charge interest on only
 the unpaid principal portion of the loans.
 Repayment Provisions-Repayment plans are adapted
 to the types and requirements of the enterprises financed.
 Commodity loans are generally repaid out of the sales