USDA Rural Advantage for Biz Development - for Maricopa Outlook Event
The Rural Advantage forBusiness Development Maricopa Economic Development Forum December 8, 2011 Alan Stephens, State Director USDA Rural Development/Arizona
ARE THERE ADVANTAGES FOR RURAL BUSINESSES?Metro area businesses have lots of advantages • bigger labor pool, • proximity of • markets, • distributors, • services but for rural businesses, many resources exist that are specifically FOR rural business development ONLY
WHAT ARE SOME OF THOSE RESOURCES?• Rural Information Center (RIC) – USDA program for downtown revitalization• National Institute of Food and Agriculture (formally CSREES: the Cooperative State Research, Education, and Extension Service)• Small Business Administration• Department of Commerce• USDA Rural Development
RURAL INFORMATION CENTERThe Rural Information Center (RIC) assists localcommunities by providing information and referral servicesto local, tribal, state, and federal government officials;community organizations; libraries; businesses; andcitizens working to maintain the vitality of Americas ruralareas.The RIC Web site contains over 3,000 links to current andreliable information on a wide variety of rural resources andfunding sources, including RIC’s Database: FederalFunding Sources for Rural Areas Database.http://ric.nal.usda.gov/nal_display/index.php?info_center=5&tax_level=1&tax_subject=205
National Institute of Food and AgricultureThe National Institute of Food and Agriculture (NIFA) is anagency within the U.S. Department of Agriculture (USDA), partof the executive branch of the Federal Government. Congresscreated NIFA through the Food, Conservation, and Energy Actof 2008. NIFA replaced the former Cooperative StateResearch, Education, and Extension Service (CSREES), whichhad been in existence since 1994.NIFAs unique mission is to advance knowledge foragriculture, the environment, human health and well-being, and communities by supporting research, education andextension programs in the Land-Grant University System andother partner organizations. NIFA doesnt perform actualresearch, education, and extension but rather helps fund it atthe state and local level and provides program leadership inthese areas. http://www.nifa.usda.gov/
Small Business AdministrationThe Rural Business Investment Program (RBIP) is a jointinitiative between the U. S. Department of Agriculture (USDA)and the Small Business Administration (SBA).It was created to promote economic development and jobcreation in rural areas. The program is similar to existing SBAventure capital programs. Rural Business InvestmentCompanies (RBICs) must identify targeted Rural Areas anddemonstrate how they will assist those areas throughdisciplined, profit-oriented investing in rural enterprises andthrough hands-on technical assistance to rural enterprises viaOperational Assistance (OA) Grant funding.The SBA also supports Small Business Development Centersin various locations. Check out SBA services at:http://archive.sba.gov/aboutsba/sbaprograms/inv/rbip/
US Department of CommerceThe DOC has several programs/agencies that areavailable to help rural businesses, including the newMinority Business Development Agency, which hasprograms for rural areas.For a more comprehensive list of DOC resources, go to: www.commerce.gov/
WHAT USDA RD PROGRAMS ARE AVAILABLE FOR RURAL BUSINESSES? • Business and Industry (B&I) Guaranteed Loan • Intermediary Relending Program Loan (IRP) • Rural Business Enterprise Grant (RBEG) • Rural Business Opportunity Grant (RBOG) • Rural Economic Development Loan and Grant (REDLG) • Value-Added Producer Grant (VAPG) • Rural Cooperative Development Grant (RCDG) • Section 9007 REAP Loans/Grants
Who is eligible for B & I Loans? Any legal entity, including – Individuals – Corporations – Partnerships – Cooperatives – Trusts – Non-profits – Indian tribes or federally recognized Indian tribal groups All Native American communities are eligible.
What can B&I funds be used for? Business acquisitions, construction, expansion, repair, or modernization Purchase and develop land Purchase of machinery, equipment, leasehold improvements, supplies or inventory Start-up costs and working capital Processing and marketing facilities Refinance outstanding debt Take out interim lender financing
How does the B & I Program work? Lender-driven program (business finds lender, we make guarantee to the lender) 80% guarantee for $5 million or less 70% guarantee for over $5 million up to and including $10 million 60% guarantee for loans exceeding $10 million and up to and including $25 million A 3% guarantee fee must be paid to Rural Development at the time of issuance of the Loan Guarantee The lender and their borrower negotiate the rate, term, fees, security and loan covenant requirements, subject to Rural Development approval Annual servicing fee: ¼ of 1% x principal balance.
What is the Intermediary Relending Program (IRP)? IRP provides loans at 1% interest to intermediaries which, in turn, provide loans to recipients who are developing business facilities or community development projects in rural areas. IRP loans are scheduled for repayment over a period of up to 30 years. Rural areas are any areas, except cities of more than 25,000 people.
Who are eligible intermediaries for the IRP program? Eligible intermediaries include: • Public Bodies • Nonprofit Organizations • Indian Tribes • CooperativesWhat can IRP loans to ultimate recipients be used for? • Pay business start-up costs and working capital • Build a new building or remodel an existing building on fee land or leasehold • Purchase new equipment, inventory or supplies • Refinance existing debt
What are Rural Business Enterprise Grants (RBEGs)? RBEGs are grants used to support the development of small and emerging private business enterprises in rural areas. They are NOT a grant for individual businesses Rural areas are all areas except cities of more than 50,000 people. Eligible grantees are non-profits, public bodies and federally recognized Indian Tribes.
What are eligible RBEG project purposes?RBEG funds can be used• To establish or supplement a revolving loan fund• To provide technical assistance to small businesses through education or training courses or seminars• For site development by an eligible grantee (e.g. small business incubator, infrastructure improvements) in conjunction with other funds
In 2009, USDA Rural Development funded a Rural Business Enterprise Grant to the City of Maricopa for $30,000 in ARRA funds.The funds were to provide an extensive training program for prospective rural entrepreneurs and managers, as well as existing small business owners. The training was to help business development and growth to create and save jobs. The program was to enhance and compliment existing economic development activities in the area.
What are Rural Business Opportunity Grants (RBOGs)? Rural Business Opportunity Grants are to fund technical assistance and planning activities in rural areas for the purpose of improving economic conditions in the areas. Rural is any area of a state that is not within the boundaries of a city with a population in excess of 50,000 people.
How may RBOG funds may be used?RBOG funds may be used for:• Technical assistance for business development and economic development planning• Identifying & analyzing business opportunities that will use rural materials or resources• Identifying, training, & providing technical assistance to existing or prospective rural managers• Establishing centers for training
What is the Rural Economic Development Loan and Grant (REDLG) program?• REDLG provides zero interest loans or grants to eligible RUS electric or telecommunications borrowers to promote rural economic development and job creation projects• Maximum loan term is 10 years• Requires a minimum amount of 20% supplemental funds for all loans and grants• Loans are specifically to RUS borrowers to relend to private for profit entities
What are Rural Cooperative Development Grants?Rural Cooperative Development Grants are used to establish and operate centers to assist in the development of cooperatives in rural areas.Eligible applicants are non-profits and institutions of higher education.The matching fund requirement is 25% of the total project cost.
What are Value-Added Producer Grants?• Value-Added grants are to assist producers who have measurable value realized as a result of a physical change in the product, change in marketing, or product identity• Examples are a group of growers processing grain into bread or pizza; a tomato grower marketing the product as a organic tomato; and/or tracing hormone-free livestock to a retailer.
How do Value-Added Producer Grants work?• Eligible grantees are independent producers, farmer or rancher cooperatives, or agricultural producer groups.• Applicants must provide matching funds at least equal to the grant request.• Grant funds can be used for planning activities (i.e. feasibility study and/or business plan) or for working capital purposes.
9007 Renewable Energy and Energy Efficiency Improvements Grant ProgramDesigned to assist farmers, ranchers and rural smallbusinesses with energy projects. Over $150 million in funds have been provided. Grant funds can pay for up to 25% of eligible projectcosts. Applicant must provide the other 75% or obtain from other non Federal sources.
USDA Rural Development Housing Programs:• Single Family Direct Loans• Single Family Guarantee Loans• Multi-family• Multi-family Rental Assistance• Self-help Housing• Home Repair Loans/Grants
Single Family Direct -- 502• Funded directly to applicant by USDA RD• Lowest fixed interest rate• Available for low and very low income households• 100% financing available for purchase of existing dwelling or to Purchase a newly constructed dwelling• Provides financing at reasonable rates and terms with -0- down• Mortgage payments based on adjusted income • Monthly payments must not be over 29%-33% • Total debt may not be over 41%Borrowers must: • Have the ability to personally occupy the dwelling • Be a citizen of the United States or be admitted for permanent residency • Non-occupant co-borrowers are not permitted • Have stable, dependable income; credit worthiness
Single Family Guaranteed Loans - 502Applicants for loans may have an income of up to80% of median income for direct and 115% of themedian income for guaranteed for thearea. Families must be without adequatehousing, but be able to afford the mortgagepayments, including taxes and insurance. Inaddition, applicants must have reasonable credithistories.
In 2010, USDA Rural Development made 193 Guaranteed Home Loans in Maricopa totaling $21,461,170! The Total Funding for PinalCounty for Guaranteed HomeLoans for FY10 and FY11 is: FY10—1324 loans totaling $153,049,362.00 FY11—782 loans totaling $82,779,539.00
Multi-Family HousingRural rental housing loans are direct, competitivemortgage loans made to provide affordablemultifamily rental housing for very low-, low-, andmoderate-income families; the elderly; and personswith disabilities.This is primarily a direct mortgage program, butfunds may also be used to buy and improve landand to provide necessary facilities such as water andwaste disposal systems.
Rental Assistance The rural rental assistance program providesan additional source of support for households with incomes too low to pay basic rent from their own resources. RD pays the owner of a multi-family housing complex the difference between the tenants contribution (30 percent of adjusted income) and the monthly rental rate.
Mutual Self-help Housing The 502 mutual self-help housing loan program is used primarily to help very low- and low-income households construct their ownhomes. Families perform approximately 65 percent of the construction labor on each others homes under qualified supervision. The savings from the reduction in labor costs allows otherwise ineligible families to own their homes. Applicants must be able to afford the mortgage payments including principal, interest, taxes and insurance. These payments are 22 to 26percent of an applicants income. Applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories. Families with very low incomes living in substandard housing are given first priority.
Repair and Rehabilitation Grants - 504Rural Housing Repair and Rehabilitation Grants arefunded directly by the Government. A grant isavailable to dwelling owner/occupant who is 62 yearsof age or older. Funds may only be used for repairs orimprovements to remove health and safety hazards, orto complete repairs to make the dwelling accessible forhousehold members with disabilities. The amount ofthe grant is based on the applicants ability to repayand must be used in conjunction with the repair andrehabilitation loan. The lifetime maximum grantamount is $7,500.
The Bottom Line…In FY2010, with the addition of special funding through the American Recovery and Reinvestment Act (ARRA), USDA Rural Development invested over $750,000,000 in rural Arizona! In FY2011, the agency’s investment, excluding ARRA funds which were no longer available, STILL outstrippedthe previous year, with a record investment of regular state allocation funds of over $355 million, not counting the projects funded through our national office
CONTACTS AREA ONE OFFICES AREA TWO OFFICES AREA THREE OFFICES Prescott Valley Area Office Phoenix Area Office Willcox Area Office 8841 Florentine, Suite A 230 N. 1st Avenue, Suite 206 Suite 658 Bisbee Ave. Prescott Valley, AZ 86314 Phoenix, AZ 85003 Willcox, AZ 85643 928.759.9301, ext. 3 602.285.6376 520.384.3529, ext. 4 928.759.9284 fax 602.285.6379 fax 520.384.2735 fax Show Low Sub-Area Office Yuma Sub-Area Office Green Valley Sub-Area Office 1801 W. Deuce of Clubs 2197 S. 4th Avenue 1131 S. La Canada Suite 120 Suite 104 Suite 203 Show Low, AZ 85901 Yuma, AZ 85364 Green Valley, AZ 85622 928.532.2270 928.782.0860, ext. 4 520.648.1769 928.532.2273 fax 928-782-0951 fax 520.648.0335 Flagstaff Satellite Office St. Michaels Satellite Kingman Satellite Office 1585 S. Plaza Way, #120 Office 101 E. Beale St., Suite B Flagstaff, AZ 86001 Hwy 264, P.O. Box 859 Kingman, AZ 86401 928.774.2401, ext. 3 St. Michaels, AZ 86511 928.753.6181, ext. 4 928.774.2780 fax 928.871.5038, ext. 4 928.753.3524 928.871.4530 faxARIZONA STATE OFFICE All Business Program230 N. First Avenue, Suite 206 Inquiries Should go to:Phoenix, AZ 85003602.280.8701 – Fax 602.280.8770www.rurdev.usda.gov/az/ 602.280.8738