Ga. Comp. R. & Regs. R. 80-1-5-.03 - Commodity Loans
(1)
In order that commodity loans and advances may be exempt from the twenty-five
(25) percent legal loan limitation of the lending bank, strict compliance with
the following requirements must be met.
(a)
The commodity must have a market value with ready sale in the open
market.
(b) First lien security
title to the commodity must be indicated on record in the name of the bank.
Where commodities are stored in a warehouse, such lien must be evidenced by the
bank's physical possession of warehouse receipts covering the commodities or,
if electronic warehouse receipts are utilized, by recordation of bank's lien
position on the electronic warehouse receipt or the electronic records of the
state approved electronic receipt provider, which must be accessible to the
bank. Bank must also have appropriately executed security agreements and
financing statements.
(c) The
commodity must be covered by insurance against fire and other appropriate
hazards with loss payee designated as the lending bank.
(d) The initial advance or loan shall not
exceed eighty-five (85) percent of the market value of the commodity on the
date of the loan, the margin of fifteen (15) percent between the market value
and outstanding loan is maintained at all times, and to that end, the bank
shall have the right to call for additional collateral if the margin falls
below fifteen (15) percent, and, if the additional collateral is not provided,
the bank shall have the right to sell the commodity on the open market. For
purposes of this paragraph, "market value" shall mean the local cash price bid
for the commodity in question or the nearby future price applicable to future
contracts to sell existing commodities but in no event shall the market value
exceed fifty (50) percent of the originating bank's statutory capital
base.
(e) Where the borrower is not
independent of the warehouseman or other person holding the commodity, the
commodity must be subjected to inspection by the lender or his agent at least
monthly and a written record of such inspections must be maintained.
(f) The obligation matures in not more than
twelve (12) months if secured by nonperishable staples; or the obligation
matures in not more than six (6) months if secured by refrigerated or frozen
staples.
(g) There must be a
written agreement, signed by both the bank and the borrower, which clearly
outlines the requirements of the bank and the duties and responsibilities of
the borrower.
(2)
Manufactured or agricultural products in the processing stages shall not be
considered as commodities within the meaning of this regulation, but are
inventory or goods-in-process to be treated as additional collateral
only.
(3) In order for livestock to
qualify as commodities subject to treatment under Section (1) of this Rule, the
borrower must be engaged in livestock production and the collateral must be
marked for identification and confined to feed lots ready for sale in the open
market. Livestock held as fixed assets such as for reproduction or dairy
purposes do not qualify for the treatment accorded under Section (1) of this
Rule.
(4) Manufactured products
commonly financed under floor-plan arrangements shall be subject to treatment
as commodities under Section (1) of this Rule if they meet the requirements of
that section and the conveyance of title identifies each individual unit and
does not convey merchandise in bulk. Liens on merchandise in bulk are
considered as inventory loans and not commodity loans.
Notes
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