FAQ for Guaranteed or Insured Loans

What is a loan guaranteed or insured by the Department? A loan made by a private lender may be guaranteed or insured up to 90% of the principal amount loaned to a qualified borrower. An “Insurance Guaranty Loan Approval Conditions” agreement is executed by and between the private lender and the Division. The Division issues the private lender an “Insurance Guaranty” certificate when the loan is booked and payment of the insurance fee is received.

What is the difference between an insured versus a guaranteed loan? The two facilities are essentially very similar. Where they differ is two primary areas. These are the allowable interest rates that the private lender may charge the borrower and a credit elsewhere requirement.

Facility Credit Denial Allowable Interest Rate Charged By Private Lender
Insured Required¹ Market rate for a similar type of loan and requires concurrence by the Division and approval by the Board of Agriculture
Guaranteed Not Required Equal to the sum of 2% over the prime rate charged by the private lender

¹ The private lender must include a letter requesting the insured facility stating reasons for the request.

Who is a private lender? A private lender includes banks, savings & loan associations, credit unions, mortgage companies and other qualified companies whose business includes the making of loans within the State of Hawaii.

Can fees be charged? The private lender may charge the borrower fees, however, fees cannot be paid through the use of loan funds. The Division requires a one-time guaranty or insurance fee, payable at the time the loan is booked. The fee structure is tiered depending on the loan amount and term as follows:

Fee Parameter
One Percent Loans of $75,000 or less, with a maturity exceeding 12 months
One Percent Loans with a maturity of 12 months or less
Two Percent All other loans

_ Fees are based on the percentage multiplied by the insured principal amount.

Who services the loan? During the loan application and underwriting period, the Division’s staff is available to provide assistance to the private lender in completing the loan package. After the approval process, through loan closing and disbursement, the private lender coordinates with the borrower and keeps the Division advised. Installment payments are collected by the private lender. Field visits are routinely conducted once or twice a year and are made jointly with the private lender and Division staff. The private lender is also required to provide the Division with semi-annual status reports of the loan, including current financial condition.

The private lender should contact the Division prior to seeking and securing approvals for changes or modifications to a participation loan. Changes and/or modifications to any loan will require separate concurrence by the Division and final approval by the Chairperson, Board of Agriculture.

What is the approval process? After completing the loan package, the private lender may seek the necessary approvals from its institution. Final approval at the Department of Agriculture level requires approval by the Board of Agriculture. Normally, the Board conducts meetings once a month. Due to sunshine laws, all submissions to the Board are due approximately 3 weeks prior to the scheduled meeting.

It is advisable that a private lender make submissions well in advance of the 3 week deadline as the Division will need to make a final review of the package before making a recommendation and presentation to the Board. The loan package should include the private lender’s analysis, with all supporting documentation required by the Division. The Division may accept the private lender’s application forms and other documents, provided that they contain all information required by the Division.

What kinds of loans can a private lender participate in? Loans can be made to entities meeting the definition, general eligibility and other requirements of a:

  • Qualified Farmer
  • New Farmer
  • Farmers Cooperatives and Corporations
  • Food Manufacturer
  • Qualified Aquaculturist

For more information, call or visit one of our offices.

Oahu: Department of Agriculture
1428 South King Street, Honolulu, Hawaii 96813
Telephone: (808) 973-9460

Hawaii: Department of Agriculture
16 East Lanikaula Street, Hilo, Hawaii 96720
Telephone: (808) 974-4140

Kona Civic Center
82-6130 Mamalahoa Highway, Captain Cook, Hawaii 96704
Telephone: (808) 323-7591

Kauai: Telephone: 274-3141, extension 39460 (Toll Free)

Maui: Telephone: 984-2400, extension 39460 (Toll Free)

Molokai: Telephone: 1-800-468-4644, extension 39460 (Toll Free)