Internal Banking Center Loan FAQs
- Am I eligible for a loan?
- Loan eligibility is based upon a variety of factors including but not limited to current operating performance, existing debt, other fund sources and the nature of the project. Loan funds are a last resort and are considered only after all other potential department resources have been explored.
How long does it take to get a loan?
Loan distribution timelines vary depending on the nature of the loan. Loans with multiple stakeholders such as Capital Loans may take several months to be approved. Campus loans with clear project descriptions and strong ability to be repaid may occur within 2-4 weeks. In general, Borrowers should allocate at least 1 month for loan review and approval.
- Will I have to pay interest?
Most loans are interest bearing. In some instances, such as Sales and Service loans whereby loans are repaid directly with federal funds, interest is not applicable.
- How is the interest rate determined?
Loan funds are effectively the use of UCLA working capital and therefore have an opportunity cost. Funds distributed to a Borrower would be a loss on investment return to the Chancellor unless an interest rate is applied to the loan. The interest rate for a given loan are generally associated with the source of funds and time of the investment. Short term loans may have rates based upon STIP. Medium term loans (3-10) years may have rates based upon TRIP. Loan term rates are generally for Capital Projects and have rates reflective of UCLA’s long term cost of capital such as the Century Bond. Interest rates also help to preserve the Chancellor’s returns by ensuring that Borrowers use other available fund sources before applying for a loan.
- What security or collateral is considered in loan approval?
Loans may be secured with quasi-endowment (FFE-Funds Functioning as Endowments), Income from Endowments or other investments.
- What happens if I cannot repay the loan?
If the Borrower cannot repay, re-financing options (such as a temporary interest only period) may be granted. However, if the ability to repay is long-term, the Lender may secure repayment through the Borrower’s Security/Collateral (see previous question and answer).
- Are there any penalties for pre-payments of the loan?
Prepayments of principal are allowed at any time with 30 days notice. When making a prepayment, Borrower will provide written advance notice to the Lender of its intent to prepay. Borrower may make a full prepayment or partial prepayments without penalty.
The Lender will apply the proceeds of prepayments received to: (1) payment of accrued interest (if applicable); and (2) reduce the principal amounts of loans outstanding. In the event of partial prepayments, the Loan Payment Schedule will be amended to reflect the reduction of principal.