USDA Rural Development

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USDA Rural Development
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• USDA Rural Developments mission is to improve
  economic opportunity and enhance the quality of
  life in rural America.

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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.

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• In my role as Chairman of the House Agriculture
  Committee, Ive 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

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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.

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Rural Business and Cooperative Programs

• Business Industry Loan Guarantees
• Rural Business Enterprise Program
• Rural Business Opportunity Program
• Rural Economic Development Loans Grants
• Value-Added Producer Grants
• Rural Energy for America Program
• Rural Micro-Entrepreneur Assistance Program

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Rural Business and Cooperative Programs

• VAPG - Value-Added Producer Grants
• REAP - Rural Energy for America Program
• REDLG - Rural Economic Development Loans Grants
  
• RBEG - Rural Business Enterprise Grants
• RBOG - Rural Business Opportunity Grants
• RMAP - Rural Microentrepreneur Assistance
  Program
• BI - Business Industry Loan Guarantees

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Forms of Assistance

• Grants
• Loans
• Loan Guarantees
• Technical Assistance (TA)
• Industrial Development (ID)

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Rate 4.4 6.5 42.9
21.8 100.0
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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/loanl
  ookup/viewer.htm.

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Non-rural Areas

• Twin Cities area
• Duluth
• Rochester
• St. Cloud
• Moorhead (pop 32,177 Fargo 90,599)
• La Crescent (pop 4,923 La Crosse 51,818)

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Most-Asked Question

• Im thinking of starting a business, and Im
  wondering what kind of grants or low-interest
  loans you have.

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Value-Added Producer Grants (VAPG)

• Applicant eligibility
• Independent agricultural producer
• Cooperative
• Agricultural producer group
• Majority-controlled producer-based business
  venture

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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

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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.

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VAPG

• 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.

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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 Minnesotas 2 biodiesel
  mandate.

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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.

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REAP

• 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).

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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.

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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

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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.

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REDLG

• Eligible Project Purposes
• Start-up ventures and business expansion
• Business incubator facilities
• Advanced telecommunications services
• Community facility projects

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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

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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

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RBEG

• Eligible applicants
• Public bodies, private/non-profit corporations,
  tribal groups.
• In FY2008, 498,000 was allocated to Minnesota.

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RBEG

• Use of grant funds
• RLF Financial assistance to third parties
  through a revolving loan program.
• TA Technical Assistance for private business
  enterprises (e.g. training).
• ID Industrial development for benefit of
  private business purchase and development of
  land, easements and rights-ofway construction
  and improvements to buildings sewer and water
  extension business incubators.

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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

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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.

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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.

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Rural Business Opportunity Grant (RBOG)

• 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.

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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.

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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.

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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

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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.

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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

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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 PI deferral possible
• 9.0 million available nationwide

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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

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Business Industry Loan Guarantees (BI)

• 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.

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BI

• Reasons for a guarantee
• Risk reduction (startups, a large expansions,
  unproven products, inexperienced management,
  refinance)
• Guaranteed portion does not count against loan
  limits. The bank would not have to find a
  participant for the loan.
• The guaranteed portion can be sold in the
  secondary market, earning the bank a greater
  return on its investment

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BI

• Maximum percent of guarantee
• 80 for loans up to 5 million
• 70 for loans between 5 and 10 million and
• 60 for loans above 10 million.

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BI

• 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.

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BI

• 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).

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BI

• 500,000 to 7,500,000 loan
• 10 tangible balance sheet equity, per GAAP
• RE, ME, working capital, refinance
• Owner has successful track record
• Realistic projections and assumptions
• Time enough to do it right

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Some of our Projects

• car dealerships wild rice processing
• hog processing implement dealers
• motorcycle mfg. farm elevators
• hardware stores vegetable canning
• machine shops natural gas line extensions
• food processing livestock auction facility
• airplane mfg. commercial rental buildings
• pool table mfg. hotels/motels
• convenience stores farm implement mfg.
• gas stations internet service provider
• ethanol plants publishing company
• sugar beet plant grocery stores restaurants
• cooperative stock retail carpet
• paving stone mfg. auto parts supply
• sawmill hybrid corn processing and sales

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ARRA American Recovery and Reinvestment Act
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Rural Business Service Field Specialists


Thomas Leach 7118 Clearwater Road Baxter, MN
56425 [phone] x150 thomas.leach_at_mn.usda.gov
Paul Dornfeld 380 South Garfield
Street Cambridge, MN 55008 [phone]
x114 paul.dornfeld_at_mn.usda.gov Naomi Lenz 1408
21st Avenue NW, Suite 3 Austin, MN 55912 (507)
437-8247 x159 naomi.lenz_at_mn.usda.gov

• Francis Koehmstedt
• 201 Sherwood Avenue, Box 16
• Thief River Falls, MN 56701
• [phone] x114
• francis.koehmstedt_at_mn.usda.gov
• Kathy Coyle
• 809 8th Street SE
• Detroit Lakes, MN 56501
• [phone] x121
• kathy.coyle_at_mn.usda.gov
• John Strand
• 900 Robert Street NE
• Alexandria, MN 56308
• [phone] x108
• john.strand_at_mn.usda.gov
• Paul Pierson

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Rural Business Service, Minnesota

• David Gaffaney
• St. Paul 651-602-7814
• david.gaffaney_at_mn.usda.gov
• Lisa Noty
• Albert Lea 507-373-7960, ext. 120
• lisa.noty_at_mn.usda.gov
• Cheryl Seanoa
• St. Paul 651-602-7813
• cheryl.seanoa_at_mn.usda.gov

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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