FAR 32.301—Definitions.
Plain-English Summary
FAR 32.301 is a definitions section for the loan-guarantee subpart, and it establishes the meaning of four terms that control how the rest of the subpart is applied: borrower, Federal Reserve Board, guaranteed loan (also called a V loan), and guaranteeing agency. Its purpose is to remove ambiguity before the rules on guaranteed loans are used, especially because these arrangements involve multiple parties, Federal Reserve System procedures, and government-backed risk sharing. In practice, these definitions determine who qualifies as a borrower, what kinds of financing instruments are covered, which federal body’s Regulation V framework applies, and which agencies have authority to participate. For contractors and subcontractors, the section matters because it identifies when a financing arrangement is treated as a guaranteed loan under federal procurement rules. For agencies and contracting officers, it matters because it limits the program to loans authorized by the President and tied to national defense production through Federal Reserve Banks.
Key Rules
Borrower is broadly defined
A borrower includes a contractor, subcontractor at any tier, or other supplier that receives a guaranteed loan. This means the subpart can apply not only to prime contractors but also to lower-tier firms and suppliers involved in the defense production chain.
Guaranteed loan means a V loan
A guaranteed loan, or V loan, is a loan, revolving credit fund, or other financial arrangement made under Regulation V of the Federal Reserve Board. The defining feature is that the guaranteeing agency must, on the lender’s demand, purchase a stated percentage of the loan and share losses up to the guaranteed percentage.
Federal Reserve Board controls Regulation V
The Federal Reserve Board is defined as the Board of Governors of the Federal Reserve System, which anchors the meaning of Regulation V referenced in the definition of a guaranteed loan. This ties the subpart to the Federal Reserve’s regulatory framework rather than to a separate procurement-specific definition.
Guaranteeing agency must be authorized by the President
A guaranteeing agency is any agency the President has authorized to guarantee loans through Federal Reserve Banks for expediting national defense production. The authority is not automatic; it depends on presidential authorization and the defense-production purpose.
Loss sharing is part of the guarantee
The guarantee is not merely a promise to support financing; it requires the guaranteeing agency to buy a stated percentage of the loan if the lender demands it and to absorb losses in the guaranteed percentage. This makes the government’s exposure and the lender’s protection explicit.
Responsibilities
Contractor
Determine whether its financing arrangement is a guaranteed loan under this subpart and whether it qualifies as a borrower. If seeking or using such financing, the contractor must understand that the arrangement is tied to Regulation V and may involve government-backed purchase and loss-sharing terms.
Subcontractor
Recognize that the definition of borrower extends to subcontractors at any tier, so lower-tier firms may also be covered when they receive a guaranteed loan. Subcontractors should verify the financing terms and the applicable federal guarantee structure before relying on the credit arrangement.
Other Supplier
Assess whether it is receiving a guaranteed loan within the meaning of the subpart, since suppliers are expressly included in the borrower definition. Suppliers should confirm that the financing instrument is actually a V loan and not another type of credit arrangement.
Contracting Officer
Use these definitions to determine whether the subpart applies to a particular financing situation connected to a procurement. The contracting officer should ensure that any referenced guarantee authority, borrower status, and loan structure fit the regulatory definitions before relying on the subpart.
Guaranteeing Agency
Act only within presidentially authorized authority and only for loans guaranteed through Federal Reserve Banks for expediting national defense production. The agency must honor the guarantee structure by purchasing the stated percentage on demand and sharing losses as defined.
Federal Reserve Board
Provide the Regulation V framework referenced by the subpart and serve as the defined regulatory authority for the term. The Board’s role is to establish the governing structure under which V loans are made.
Lender
Offer financing only within the Regulation V structure when treating a loan as a guaranteed loan under this subpart. The lender must understand that the guarantee includes a right to demand purchase of the guaranteed portion and that loss sharing is limited to the guaranteed percentage.
Practical Implications
This section is foundational: if a financing arrangement does not fit these definitions, the rest of the subpart on guaranteed loans does not apply as intended.
The borrower definition is broad, so contractors should not assume only prime contractors can be involved; subcontractors and suppliers may also be covered.
A common pitfall is treating any government-supported financing as a V loan; here, the arrangement must be made under Regulation V and include the specific guarantee mechanics.
Another frequent issue is assuming an agency can guarantee loans simply because it is part of the federal government; the agency must have presidential authorization for this purpose.
Contracting officers and lenders should verify the exact guarantee percentage, the demand-purchase obligation, and the national defense production purpose before proceeding.
Official Regulatory Text
As used in this subpart- Borrower means a contractor, subcontractor (at any tier), or other supplier who receives a guaranteed loan. Federal Reserve Board means the Board of Governors of the Federal Reserve System. Guaranteed loan or "V loan" means a loan, revolving credit fund, or other financial arrangement made pursuant to Regulation V of the Federal Reserve Board, under which the guaranteeing agency is obligated, on demand of the lender, to purchase a stated percentage of the loan and to share any losses in the amount of the guaranteed percentage. Guaranteeing agency means any agency that the President has authorized to guarantee loans, through Federal Reserve Banks, for expediting national defense production.