1 usda rural development. “usda rural development’s mission is to improve economic opportunity...
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“USDA Rural Development’s mission is to improve economic opportunity and enhance the quality of life in rural America.”
Locally or Regionally Produced Agricultural Food Products
• Section 6015: “… any agricultural food product that is raised, produced, and distributed in the locality or region in which the final product is marketed, so that the total distance that the product is transported is less than 400 miles from the origin of the product; or the State in which the product is produced.”
“In my role as Chairman of the House Agriculture Committee, I’ve emphasized the importance of the growing markets for organic, locally grown and sustainable agriculture as exciting new opportunities in agriculture and rural development.”
“Local food can provide opportunities for profit for farmers and other rural entrepreneurs and main street businesses who want to participate in processing and distributing food.”
-- Congressman Collin Peterson
Memorandum of Understanding on Organic Agriculture
M.S. 31.94: “… promotion of organic agriculture in Minnesota,” “identify opportunities and needs,” coordinate state and federal “efforts regarding research, teaching and extension work relating to organic agriculture.”
MDA, DNR, MPCA; USDA FSA-RD-NRCS-RMA;
U of M College of Food, Ag, Nat. Resources-Extension Service-Agricultural Experiment Station. 2/28/2008.
Rural Business and Cooperative Programs
1. Business & Industry Loan Guarantees2. Rural Business Enterprise Program 3. Rural Business Opportunity Program4. Rural Economic Development Loans & Grants5. Value-Added Producer Grants6. Rural Energy for America Program7. Rural Micro-Entrepreneur Assistance Program
Rural Business and Cooperative Programs
VAPG - Value-Added Producer GrantsREAP - Rural Energy for America Program REDLG - Rural Economic Development Loans & Grants RBEG - Rural Business Enterprise Grants RBOG - Rural Business Opportunity GrantsRMAP - Rural Microentrepreneur Assistance Program B&I - Business & Industry Loan Guarantees
Forms of Assistance
• Grants
• Loans
• Loan Guarantees
• Technical Assistance (TA)
• Industrial Development (ID)
Rate: 4.4% 6.5% 42.9% 21.8% 100.0%
USDA RBS Program Cost
$-
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
$800,000,000
$900,000,000
$1,000,000,000
B&I -Guarantees
9006 -Guarantees
IRP Loans RED Loans All Grants
Subsidy
Program Level
Program Level Subsidy Rate SubsidyB&I - Guarantees 923,953,201$ 0.0436 40,284,360$ 9006 - Guarantees 176,511,618$ 0.0649 11,455,604$ IRP Loans 33,869,875$ 0.4289 14,526,789$ RED Loans 25,215,484$ 0.2184 5,507,062$ REDG 10,000,000$ 10,000,000$ RBEG 40,831,105$ 40,831,105$ RBOG 3,071,706$ 3,071,706$ 9006 11,385,000$ 11,385,000$ 9008 18,000,000$ 1.0000 18,000,000$ RCDG 3,753,338$ 3,753,338$ VAPG 19,626,419$ 19,626,419$ Coop Agreements 500,000$ 500,000$ SMPG 1,239,112$ 1,239,112$
1,267,956,858$ 0.1421 180,180,495$
Rural Areas
A rural area is other than an urban area of 50,000 or more in population and its adjacent urbanized areas, as determined by the latest federal decennial census. Rural area determinations can be made by accessing the following website: http://maps.ers.usda.gov/loanlookup/viewer.htm.
• Twin Cities area• Duluth • Rochester • St. Cloud• Moorhead (pop = 32,177; Fargo = 90,599)• La Crescent (pop = 4,923; La Crosse = 51,818)
Non-rural Areas
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“I’m thinking of starting a business, and I’m wondering what kind of grants or low-interest loans you have.”
Most-Asked Question
USDARD Business Programs
Business
Grant
USDARD Business Programs
Business
VAPG - REAPGrants
Applicant eligibility:
• Independent agricultural producer
• Cooperative
• Agricultural producer group
• Majority-controlled producer-based business venture
Value-Added Producer Grants (VAPG)
Product eligibility:• Change in physical state (e.g. lamb chops,
diced tomatoes)• Differentiated production or marketing (e.g.
organic) - must reference a business plan• Product segregation (e.g. non-GMO corn)• Farm-based renewable energy
VAPG
Section 2501(e)(1) of the Food, Agriculture, Conservation, and Trade Act of 1990
SOCIALLY DISADVANTAGED GROUP -a group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities.
Activity eligibility. Either:
• Planning Activities (e.g. feasibility study, business plan, marketing plan), $100,000 maximum; or
• Working Capital (e.g. labor, inventory, advertising), $300,000 maximum.
VAPG
VAPG
Example:
Farmers Union Marketing and Processing Association, parent of Central Bi-Products, received a working capital grant for its $3.25 million biodiesel plant in Redwood Falls. The 2.7-million-gallon plant uses animal fats and vegetable oils to produce biodiesel, and was one of three to meet Minnesota’s 2% biodiesel mandate.
Rural Energy for America Program (REAP)
• Assists farmers, ranchers and rural small businesses with renewable energy and energy efficiency projects.
• Provides $60 million in grants and loan guarantees in FY 2009.
• Biomass – any organic material that is available on a renewable or recurring basis, including:• agricultural crops• trees grown for energy production• wood waste and wood residues• plants (including aquatic plants and grasses)• residues• fibers• animal wastes and other waste materials • fats, oils and greases (including those that are recycled).
REAP
REAP
Eligible Applicants:
• Agricultural Producer
• Rural Small Business - meets SBA definition of small business (typically 500 or fewer employees and $20 million or less in total annual receipts). Most non-profits, such as schools, are ineligible.
REAP
Maximum Loan guarantee: $25,000,000
Grants cannot exceed the lesser of 25% of eligible project costs, or:$500,000 ($2,500 minimum) -- renewable
energy$250,000 ($1,500 minimum) -- energy
efficiency
USDARD Business Programs
Business
VAPG - REAPGrants
Intermediarynon-profit, co-op, tribe
USDARD Business Programs
Business
VAPG - REAPGrants
Intermediarynon-profit, co-op, tribe
Grants and Loans
Loan/TA/ID
USDARD Business Programs
Business
VAPG - REAPGrants
Intermediarynon-profit, co-op, tribe
REDG - RBEG - RBOG; REDL - RMAP Loans;
Loan/TA/ID
Rural Economic Development Loan and Grant Program (REDLG)
• Funding is either a zero-interest loan or a grant. In FY2009, maximum loan is $740,000 and grant is $300,000. Maximum loan term is 10 years.
• The applicant is an eligible electric cooperative or telephone company, the “intermediary.”
• Intermediary must match grants with 20%.
REDLG
Eligible Project Purposes:
• Start-up ventures and business expansion• Business incubator facilities• Advanced telecommunications services• Community facility projects
REDG
Ultimate recipients are non-profit entities, public bodies, or Indian tribes for:
– Community facility projects (e.g. school, hospital, community swimming pool, fire hall, fire truck, rescue equipment, city hall)
– Business incubators
– Education/training
– Medical facilities, health care, or training
– Computer networks for health care, education or training
Rural Business Enterprise Grants (RBEG)
Purpose is to support the development of small and emerging private business enterprises that:
• Have less than $1 million in projected gross revenues.
• Will employ 50 or fewer new employees
Eligible applicants:
Public bodies, private/non-profit corporations, tribal groups.
In FY2008, $498,000 was allocated to Minnesota.
RBEG
Use of grant funds:
1. RLF: Financial assistance to third parties through a revolving loan program.
2. TA: Technical Assistance for private business enterprises (e.g. training).
3. ID: Industrial development for benefit of private business – purchase and development of land, easements and rights-of–way; construction and improvements to buildings; sewer and water extension; business incubators.
RBEG
Examples of RBEG RLF:• City of Arlington - $95,000, 100 jobs, 15 businesses• City of Medford - $99,000, 11 jobs. 1 business• City of Springfield - $100,900, 12 jobs, 3 business • City of Easton - $50,000, 12 jobs, 3 businesses • City of Mt. Lake - $100,000, 23 jobs, 6 businesses• Prairieland EDC - $102,000, 20 jobs, 3 businesses
RBEG
Example of RBEG TA:
• Southwest Minnesota Foundation $184,000 Micro-Enterprise Technical Assistance Grant. Small business assistance to minority and low incomes business (89 clients) in 18 counties in southwest Minnesota.
RBEG
Example of RBEG Industrial Development:• City of Benson $87,000, 24 jobs to extend utility
services to Heartland Ranch.• City of Boyd $102,000, 8 jobs to provide for business
incubator Boyd Community Health Clinic.• City of Morton $100,000 to extend sewer & water to
new gas station/convenience store.
RBEG
RBOG grant money is used to provide for technical assistance for sustainable business development in rural areas.
TA is “a non-construction, problem-solving activity performed for the benefit of a business or community to assist in the economic development of a rural area.”
Rural Business Opportunity Grant (RBOG)
Applicants:
Public bodies such as cities and counties, tribal governments, rural cooperatives, and non-profit community development groups serving rural areas in America. Applicants must have sufficient financial strength and expertise to ensure accomplishment of the proposed activities and objectives. The project must reasonably be expected to be completed within 2 full years after it is begun.
RBOG
RBOG
Purposes:• Identify and analyze business opportunities that will use local rural
materials or human resources, opportunities in export markets, and feasibility and business plan studies.
• Identify, train, and provide technical assistance to existing or prospective rural entrepreneurs and managers.
• Establish business support centers and assist in the creation of new rural businesses.
• Conduct local community or multi-county economic development planning.
• Conduct leadership development training of rural entrepreneurs and managers.
RBOG
Funds Availability:
• In fiscal year 2009, $2.48 million is available nationwide.
• Maximum application $50,000
• Minnesota usually has one or two awarded.
• FY09 deadline is April 30
Rural Microentrepreneur Assistance Program (RMAP)
• Purpose (Section 6022): “To provide microentrepreneurs with the skills necessary to establish new rural microenterprises and continuing technical and financial assistance related to the successful operation of rural microenterprises.”
RMAP
• Microentrepreneur – owner or operator of a microenterprise who is unable to obtain sufficient training, technical assistance, or credit.
• Microenterprise Development Organization – a non-profit or Indian Tribe for which no microentrepreneur assistance program exists; that provides training, technical assistance, access to capital; and has a demonstrated record.
• Microloan - $50,000 or less
RMAP
• Loans – to microenterprise development organizations at a fixed interest rate of at least 1% and a term of 20 years or less.
– 5% loan-loss reserve required
– Two-year P+I deferral possible
– $9.0 million available nationwide
RMAP
• Grants – annual grant of not more than 25% of outstanding balance of microloans made.– Used to provide training, planning, market development assistance
and other technical assistance to rural microentrepreneurs– Grant cannot exceed 75% of project – MDO must match 15% of grant– 10% or less of grants can be used to pay for MDO administrative
expenses– $1.0 million available nationwide
USDARD Business Programs
Business
VAPG - REAPGrants
Intermediarynon-profit, co-op, tribe
REDG - RBEG - RBOG; REDL - RMAP Loans;
Loan/TA/ID
Bank
USDARD Business Programs
Business
VAPG - REAPGrants
Intermediarynon-profit, co-op, tribe
REDG - RBEG - RBOG; REDL - RMAP Loans;
Loan/TA/ID
Bank
Loan
Guarantee
USDARD Business Programs
Business
VAPG - REAPGrants
Intermediarynon-profit, co-op, tribe
REDG - RBEG - RBOG; REDL - RMAP Loans;
Loan/TA/ID
Bank
Loan
B&I - REAPGuarantees
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Business & Industry Loan Guarantees (B&I)
Loan guarantees with an upper loan limit of $25 million. There is no lower limit.
Quality loans are made by lenders to businesses which save or create jobs or improve the economic or environmental climate in rural areas.
Reasons for a guarantee:
1. Risk reduction (startups, a large expansions, unproven products, inexperienced management, refinance)
2. Guaranteed portion does not count against loan limits. The bank would not have to find a participant for the loan.
3. The guaranteed portion can be sold in the secondary market, earning the bank a greater return on its investment
B&I
Maximum percent of guarantee:80% for loans up to $5 million70% for loans between $5 and $10 million;
and 60% for loans above $10 million.
B&I
Guarantee Fees:
• One-time, up-front fee of 2% of the amount guaranteed. On a $1 million loan with an 80% guarantee, the fee would be $800,000 x 2% = $16,000.
• Annual fee of ¼ of 1% of the guaranteed portion of the principal balance.
B&I
Equity:
• A minimum of 20% tangible balance sheet equity is required on a new business and 10% on an existing business, in accordance with Generally Accepted Accounting Principles (GAAP).
B&I
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• $500,000 to $7,500,000 loan
• 10% + tangible balance sheet equity, per GAAP
• RE, M&E, working capital, refinance
• Owner has successful track record
• Realistic projections and assumptions
• Time enough to do it right
B&I
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Some of our Projectscar dealerships wild rice processinghog processing implement dealersmotorcycle mfg. farm elevatorshardware stores vegetable canningmachine shops natural gas line extensionsfood processing livestock auction facilityairplane mfg. commercial rental buildingspool table mfg. hotels/motelsconvenience stores farm implement mfg.gas stations internet service providerethanol plants publishing companysugar beet plant grocery stores & restaurantscooperative stock retail carpetpaving stone mfg. auto parts supplysawmill hybrid corn processing and sales
USDARD Business Programs
Business
VAPG - REAPGrants
Intermediarynon-profit, co-op, tribe
REDG - RBEG – RBOG; REDL – RMAP Loans;
Loan/TA/ID
Bank
Loan
B&I - REAPGuarantees
ARRA = American Recovery and Reinvestment Act
Normal ARRA Total
B&I $1.0 billion $2.9 billion $3.9 billion
RBEG $40 million $20 million $60 million
Nationwide Minnesota
Grant Loan/Guarantee
B&I 3,900,000,000$ ~$78,000,000
RBEG 60,000,000$ ~$750,0000
RBOG 2,483,000$
REDLG 10,000,000$ 33,000,000$
VAPG 19,000,000$
REAP 31,000,000$ 303,000,000$
RMAP 1,000,000$ 9,000,000$
Deadline
B&I Continuous
RBEG ~May 1st
RBOG April 30
REDLG Continuous: 1/31, 3/31,6/30/9/30
VAPG ?
REAP ?
RMAP ?
Applicant/Intermediary Recipient
Bank For-profit Non-profit Public bodies Educational Co-op Tribe
B&I x
RBEG x x x
RBOG x x x x
REDLG x x
VAPG x x
REAP x x
RMAP x x x
Type of Assistance Match
Grant Loan Guarantee
B&I x 10-20%
RBEG x None
RBOG x None
REDLG x x 20%
VAPG x 50%
REAP x x 25-75%
RMAP x x 15-25%
Francis Koehmstedt201 Sherwood Avenue, Box 16Thief River Falls, MN 56701(218) 681-2843 [email protected]
Kathy Coyle809 8th Street SEDetroit Lakes, MN 56501(218) 847-9392 [email protected]
John Strand900 Robert Street NEAlexandria, MN 56308(320) 763-3191 [email protected]
Paul Pierson1567 North McMillianWorthington, MN 56187(507) 372-7784 [email protected]
Thomas Leach7118 Clearwater RoadBaxter, MN 56425(218) 829-5965 [email protected]
Paul Dornfeld380 South Garfield StreetCambridge, MN 55008(763) 689-3354 [email protected]
Naomi Lenz1408 21st Avenue NW, Suite 3Austin, MN 55912(507) 437-8247 [email protected]
Rural Business Service Field Specialists
Rural Business Service, Minnesota
David GaffaneySt. Paul: [email protected]
Lisa NotyAlbert Lea: 507-373-7960, ext. [email protected]
Cheryl SeanoaSt. Paul: [email protected]
Further Information
• General information:
www.rurdev.usda.gov/rbs/busp/bpdir.htm• Minnesota web site:
www.rurdev.usda.gov/mn• E-forms:
http://www.rurdev.usda.gov/regs/formstoc.html