USDA Rural Development

1. USDA Rural Development 1

2. “USDA Rural Development’s mission is to improve economic opportunity and enhance the quality of life in rural America.”

3. 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.”

4. “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

5. 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.

6. 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

7. 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

8. Forms of Assistance • Grants • Loans • Loan Guarantees • Technical Assistance (TA) • Industrial Development (ID)

9. Rate: 4.4% 6.5% 42.9% 21.8% 100.0%

11. 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.

12. 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)

15. “I’m thinking of starting a business, and I’m wondering what kind of grants or low-interest loans you have.” Most-Asked Question 15

17. USDA RD Business Programs Grant Business

18. USDA RD Business Programs VAPG - REAP Grants Business

19. Value-Added Producer Grants (VAPG) Applicant eligibility: • Independent agricultural producer • Cooperative • Agricultural producer group • Majority-controlled producer-based business venture

20. 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

21. 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.

22. 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.

23. 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.

24. 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.

26. 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).

27. 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.

28. 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

29. USDA RD Business Programs VAPG - REAP Grants Intermediary non-profit, co-op, tribe Business

30. USDA RD Business Programs Grants and Loans VAPG - REAP Grants Intermediary non-profit, co-op, tribe Loan/TA/ID Business

31. USDA RD Business Programs REDG - RBEG - RBOG; REDL - RMAP Loans; VAPG - REAP Grants Intermediary non-profit, co-op, tribe Loan/TA/ID Business

32. 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%.

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

34. 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

35. 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

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

37. 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-of–way; construction and improvements to buildings; sewer and water extension; business incubators.

38. 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

39. 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.

40. 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.

41. 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.”

42. 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.

43. 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.

44. 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

45. 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.”

46. 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

47. 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

48. 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

49. USDA RD Business Programs REDG - RBEG - RBOG; REDL - RMAP Loans; VAPG - REAP Grants Bank Intermediary non-profit, co-op, tribe Loan/TA/ID Business

50. USDA RD Business Programs REDG - RBEG - RBOG; REDL - RMAP Loans; Guarantee VAPG - REAP Grants Bank Intermediary non-profit, co-op, tribe Loan Loan/TA/ID Business