“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 Guarantees 2.Rural Business Enterprise Program 3.Rural Business Opportunity Program 4.Rural Economic Development Loans & Grants 5.Value-Added Producer Grants 6.Rural Energy for America Program 7.Rural Micro-Entrepreneur Assistance Program
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 B&I - Business & Industry Loan Guarantees
Forms of Assistance Grants Loans Loan Guarantees Technical Assistance (TA) Industrial Development (ID)
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. 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
USDA RD Business Programs Business VAPG - REAP Grants
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
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
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
USDA RD Business Programs Business VAPG - REAP Grants Intermediary non-profit, co-op, tribe
USDA RD Business Programs Business VAPG - REAP Grants Intermediary non-profit, co-op, tribe Grants and 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
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
USDA RD Business Programs Business VAPG - REAP Grants Intermediary non-profit, co-op, tribe REDG - RBEG - RBOG; REDL - RMAP Loans; Loan/TA/ID Bank
USDA RD Business Programs Business VAPG - REAP Grants Intermediary non-profit, co-op, tribe REDG - RBEG - RBOG; REDL - RMAP Loans; Loan/TA/ID Bank Loan Guarantee
USDA RD Business Programs Business VAPG - REAP Grants Intermediary non-profit, co-op, tribe REDG - RBEG - RBOG; REDL - RMAP Loans; Loan/TA/ID Bank Loan B&I - REAP Guarantees
52 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 million 70% 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
57 $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
58 Some of our Projects car dealershipswild rice processing hog processingimplement dealers motorcycle mfg.farm elevators hardware storesvegetable canning machine shopsnatural gas line extensions food processinglivestock auction facility airplane mfg.commercial rental buildings pool table mfg.hotels/motels convenience storesfarm implement mfg. gas stationsinternet service provider ethanol plantspublishing company sugar beet plantgrocery stores & restaurants cooperative stockretail carpet paving stone mfg. auto parts supply sawmillhybrid corn processing and sales
USDA RD Business Programs Business VAPG - REAP Grants Intermediary non-profit, co-op, tribe REDG - RBEG – RBOG; REDL – RMAP Loans; Loan/TA/ID Bank Loan B&I - REAP Guarantees
Francis Koehmstedt 201 Sherwood Avenue, Box 16 Thief River Falls, MN 56701 (218) 681-2843 x114 firstname.lastname@example.org Kathy Coyle 809 8th Street SE Detroit Lakes, MN 56501 (218) 847-9392 x121 email@example.com John Strand 900 Robert Street NE Alexandria, MN 56308 (320) 763-3191 x108 firstname.lastname@example.org Paul Pierson 1567 North McMillian Worthington, MN 56187 (507) 372-7784 x122 email@example.com Thomas Leach 7118 Clearwater Road Baxter, MN 56425 (218) 829-5965 x150 firstname.lastname@example.org Paul Dornfeld 380 South Garfield Street Cambridge, MN 55008 (763) 689-3354 x114 email@example.com Naomi Lenz 1408 21st Avenue NW, Suite 3 Austin, MN 55912 (507) 437-8247 x159 firstname.lastname@example.org Rural Business Service Field Specialists
Rural Business Service, Minnesota David Gaffaney St. Paul: 651-602-7814 email@example.com Lisa Noty Albert Lea: 507-373-7960, ext. 120 firstname.lastname@example.org Cheryl Seanoa St. Paul: 651-602-7813 email@example.com
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