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FAR and DFARS › FAR Part 32: Contract Financing › Subpart 32.3

FAR 32.305 Loan guarantees for terminated contracts.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section explains that guaranteed loans, normally used to finance defense production contracts, can also help contractors whose contracts have been terminated for the Government's convenience. The loans are meant to provide financing while termination settlements and payments are pending, and the guarantee process is similar to the standard procedure except that certificates of eligibility are not required for terminated contracts or terminated portions. Guarantees cannot be provided until specific terminations are certain.

Applies to: Contractors with defense production contracts that are terminated or about to be terminated for the Government's convenience

What it requires

  • The agency shall take precautions necessary to avoid Government losses and to ensure the loans will be self-liquidating from the proceeds of defense production contracts.

Key terms: guaranteed loans · terminated for the convenience of the Government · certificates of eligibility · self-liquidating · termination settlements

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) The purpose of guaranteed loans; i.e., to provide for financing based on the borrower's recoverable investment in defense production contracts, may also apply to contracts that have been terminated (partially or totally) for the convenience of the Government. Guaranteed loans also may be made before such termination if it is known that termination of particular contracts for the convenience of the Government is about to occur. These loans are expected to provide necessary financing pending termination settlements and payments. They may also finance continuing performance of defense production contracts that are eligible for guaranteed loans.

(b) The procedure for such guarantees is substantially the same as that outlined in 32.304, except that certificates of eligibility are not required for (1) contracts that have been totally terminated or (2) the terminated portion of contracts that have been partially terminated. The agency shall take precautions necessary to avoid Government losses and to ensure the loans will be self-liquidating from the proceeds of defense production contracts.

(c) Loan guarantees for contract termination financing shall not be provided before specific contract terminations are certain.

Sections it refers to

← 32.304-8 Other borrowing. · 32.306 Loan guarantees for subcontracts. →

Rule changes for FAR Part 32

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 32.305 Loan guarantees for terminated contracts · SpendQuery