Borrowing Policy and Loan Guidelines

Definitions

The following terms are used in this guideline.

Term

Definition

Federal Funds Rate

The interest rate that banks charge to each other for overnight loans made to fulfill reserve funding requirements

London Interbank Offered Rate

(LIBOR) rate

The rate of interest at which banks offer to lend money to one another in the wholesale money markets in London. It is a standard financial index used in U.S. capital markets and can be found in the Wall Street Journal. LIBOR rates change daily.

The LIBOR interest rate is set on the day of the borrowing and is then "locked" for a specified term (i.e., one month, two months, three months, six months or one year).

Maturity Date (Due Date)

The date on which the loan must be paid.

Prime Rate (Prime Lending Rate)

Term applied in many countries to a reference interest rate used by banks.

In the US, the prime rate runs approximately 300 basis points (or 3 percentage points) above the federal funds rate.

The interest rate that banks charge to each other for overnight loans made to fulfill reserve funding requirements: (federal funds rate) + (3 %) = (prime rate)

Guideline

RF management established two programs: a working capital line of credit for daily cash liquidity needs and a project finance line of credit for campus sponsored program needs. The RF lines of credit can be used for:

  1. Major sponsored program activity that requires short-term (less than 1 year) financing greater than $2 million.
  2. Sponsored program deficits as directed by the RF's CFO or the EVP.
  3. Day-to-day cash-flow operating needs.

    Occasionally campuses, affiliated organizations or other SUNY-related organizations require support through loan guarantees or other long-term financing options that are not related to sponsored programs. The RF is committed to supporting other financing needs and will consider all inquiries.

Terms and Conditions

The following outlines the interest rate, payment terms and maturity for each type of loan.

Type of Loan

Interest Rate Basis

Payment terms and Maturity

Working Capital Line of Credit

The prime rate, minus 200 basis points

On the maturity or due date, the loan becomes payable. Loans cannot be paid off early.

If the loan will be paid off on the maturity or due date, the operations manager must notify the vice president treasury at central office five days in advance.

On the maturity date if central office is not notified that the loan will be repaid, the loan will be automatically renewed for the existing principal amount, at the existing term, and at the LIBOR rate in effect on the date of renewal.

* At maturity, interest rates may change based on the LIBOR rate at the time. Interest is assessed and charged monthly to the campus's RF-funded allocation.

 

Project Finance Line of Credit

(LIBOR), plus 75 basis points*

How to Request a Loan

  1. Complete the RF Loan Application and include a detailed description of the project. All loan requests must be submitted in writing to the vice president treasury at central office. The Loan Application must be signed by the RF operations manager.
  2. The application will be reviewed by:
  3. The application will be approved or disapproved by the executive vice president, general counsel and secretary, and other staff as appropriate. They will assess whether the request has sufficient merit for support by the RF (fits within the mission of the RF, appears to be financially sound and is in the best interest of the RF) and/or if it should be sent to the RF board for approval.
  4. The service owner will inform the operations manager as to the disposition of the application.
  5. CFO will review for compliance with policy and guidelines and approve and then sign all documents with the bank or other financial institutions.

Basis for Guideline

In May 2005, the RF board of directors authorized management to borrow up to $80 million to meet daily operational and sponsored program needs.

Responsibilities

These guidelines identify the following responsibilities as assigned to those cited below.

Role

Department/Unit

Contact Information

Comply with

All RF Staff

n/a

Fund Monitoring

Campus

n/a

Notification of loan pay off

Operations Managers

n/a

Approval Authority

RF Board of Directors

n/a

Approval of Variations from the Policy and Guideline

RF Officers

n/a

Policy Owner

Finance Office

518-434-7050

Related Resources

Below are related resources to carry out the guidelines or that provides other relevant information or instructions.

Resources

Responsibility for Losses Policy

RF Loan Application

Current Prime Rate (www.bankrate.com)

Current LIBOR Rate (www.bankrate.com)

Change History

Date

Change History

May 12, 2011

Revision to rates.

April 13, 2010

Revisions to rates and amounts.

December 8, 2006

New Document.

Effective Date: December 8, 2006
Responsible Party: Finance Office
Contact Information: 518-434-7050

 

 

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