The ILP makes loans to campus borrowers and manages repayment in accordance with financing agreements between the campus borrower and the University. Benefits of the ILP include:
- A stable borrowing rate to campus
- Reduced institutional borrowing cost
Funding of ILP loans will be determined by the Treasury Office and may include external borrowing and the use of institutional funds.
There are two loan options associated with the Internal Loan Program:
- ILP Loan: Long-term capital projects are typically funded using a loan from the ILP. All campus projects pay the same ILP rate, loans may not exceed the useful life of the facility, and typically have a repayment term of 30 years.
- Operating Loan: An operating loan program exists to provide temporary relief to campus borrowers. This program provides operating loans up to $25 million and has a maximum term of two years.
A FAST (Financing Assets Short Term) loan may be perferable to an ILP loan for short-term capital expenditures and operating loans. Review the program description and contact the Treasury Office to determine the most suitable program.
Before a loan is granted, it must be approved by both Central Administration and the Board of Regents.
- Large Capital Expenditures (above $15 million): The approval of the Board of Regents is required.
- Small Capital Expenditures (less than $15 million): The approval of the President or his or her designee is required.
- Operating Loans: Operating loans less than $15 million will require the approval of the Treasurer of the Board of Regents. Operating loans exceeding $15 million require the approval of the Board of Regents.
Loan Application Process
Contacting the Treasury Office is the first step in applying for any type of University financing. This will start the process, and will allow the Treasury Office to file a Notice of Intent to Reimburse, often a necessary step in issuing tax-exempt debt for your project.
Once contacted, the Treasury Office will work with Central Administration to determine whether debt issuance is appropriate for your project.
The Treasury Office then works with the borrowing unit to perform financial due diligence on the loan. This process assess the risk of the project to the University and the impact on institutional debt capacity. Below are the four steps that make up the process:
- Develop a base case proforma
- Idenitfy key financial risks
- Stress the proforma with key risks both individually and together
- Discuss how risks would be mitigated
Internal Lending Rate: An internal lending rate is uniformly applied to approved loans. The rate reflects the external debt portfolio's weighted average interest rate and includes a reserve component that can be used to stabilize rates should interest rates increase. The current ILP rate is 4.25%.
Rate Adjustment: The internal lending rate is reviewed annually and is subject to adjustment by the Board of Regents.
Related Cost of Issuance: Borrowers are currently charged an internal cost of issuance of 0.7% (percent of borrowed amount). The percentage is reviewed annually and is subject to adjustment by the Treasury Office.