The U.S. Department of Agriculture's Rural Development Office has loan, loan guarantee and grant programs to help farmers improve energy efficiency and expand their markets and to help rural businesses and economies grow.
Get in touch with the Rural Development Office at:
410 Farm Credit Service Building
375 Jackson Street
St. Paul, MN 55101
651-602-7800
The primary programs of the USDA Rural Development Office are: the Renewable Energy/Energy Efficiency Program, Value-Added Producer Grants, Business and Industry Loan Guarantee Program, Intermediary Relending Program, Rural Economic Development and Grant Program, Rural Business Enterprise Grant Program, and Rural Business Opportunity Grant Program.
Loans, loan guarantees and grants are available to help agricultural producers and rural small business purchase renewable energy systems and make energy efficiency improvements. Rural is defined as an area of less than 50,000 in population or its immediately adjacent incorporated communities.
Renewable energy means energy derived from wind, solar, biomass, or a geothermal source; or hydrogen derived from biomass or water using one of those energy sources. It does not include hydro-power.
Biomass includes 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; and fats, oils, and greases. Biomass does not include paper that is commonly recycled or unsegregated solid waste.
The amount of the grant cannot exceed 25% of the cost of the activity funded under this program. To be eligible for a grant, the applicant must demonstrate financial need. Applications for renewable energy systems must be for a minimum grant request of $2,500, but no more than $500,000.
Applications for energy efficiency improvements must be for a minimum grant request of $1,500, but no more than $250,000. Individual applicants must be citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence.
Grants help producers expand their customer base by entering into emerging markets for their products or commodities and ensure that a greater portion of the revenues derived from the value-added activity is available to the producer.
Independent producers, farmer-owned cooperatives, agricultural producer groups and majority-controlled producer-based groups are eligible to apply.
Four categories are considered value-added under this program.
Ventures in which agricultural producers add value to their products through changing the physical state or form of the product (processing wheat into flour, corn into ethanol, slaughtering livestock).
Producing products in a manner that enhances its value (organic).
Physical segregation of an agricultural commodity or product in a manner that results in the enhancement of the value of that product.
Any agricultural commodity or product that is used to produce renewable energy on a farm or ranch (methane digesters, wind turbines).
Priority will be given to proposals that emphasize the development of renewable energy from agricultural production and the use of innovative technologies to develop value-added products.
Planning grants can be awarded for such activities as conducting feasibility analyses, developing business and marketing plans. Working Capital grants may be used for expenses associated with operations while the venture develops cash flow. Some things that grant funds CANNOT be used for:
The development or acquisition of land, buildings or other facilities,
To purchase, rent, or install fixed equipment,
To pay costs incurred prior to receiving the grant,
To pay expenses associated with agricultural production
The maximum allowable grant amount is $100,000 for planning grants and $150,000 for working capital. Grant recipients must provide 1-to-1 matching funds. Projects must be completed within 1 year.
These are loan guarantees with an upper limit of $10 million. Some high-priority projects may be guaranteed up to $25 million by the administrator in Washington.
Most business purposes are eligible, e.g. building and equipment purchase or development, working capital (no lines of credit); aquaculture; commercial nurseries; tourist and recreation facilities (except golf courses); hotels and motels; community facility-type projects; facilities for lease to private businesses; and housing development sites.
Eligible borrowers may generally be an individual, cooperative, corporation, partnership, non-profit corporation, Indian tribes or public body. Applications are made by the lender and business to USDA.
Rates and terms are negotiated between lender and borrower. A minimum of 20% tangible balance sheet equity is required on a new business and 10% on an existing business.
The Intermediary Relending Program (IRP) is a loan provided to an entity (intermediary) to establish a revolving loan fund to re-lend to eligible ultimate recipients (businesses) at reasonable rates and terms.
Eligible intermediaries are private non-profit corporations, any state or local government, an Indian tribe, or a cooperative.
IRP funds can be used to finance business facilities and community development projects in rural areas, innovative projects, land, building construction or repair, equipment, working capital, interest, feasibility studies, and fees for professional services. Ultimate recipients must be located in a rural area of fewer than 25,000 in population.
This program provides financing to develop projects that will result in a sustainable increase in economic productivity, job creation, and incomes in rural areas.
Eligible borrowers (or grantees) of this program are current or prepaid RUS electric and telephone borrowers. Funds are either a zero-interest loan or a grant to the utility, which in turn is re-lent as a zero-interest loan to the eligible business for a specific project. Grant funds must be matched 20% up-front by the borrower utility company.
Grant funds will be used initially as a zero-interest revolving loan for community development assistance to non-profit entities and public bodies; business incubators established by non-profits; and facilities and equipment for education, training, or medical care of rural residents owned by public, for profit and non-profit entities.
Projects may include business start-ups and expansion, community development, incubator projects, medical and training projects, and feasibility studies.
Funds from other sources must at least equal 20% of the loan amount. The project does not have to be within the utility company's service area. Principal may be deferred up to two years for new businesses. Existing businesses may have a one-year deferral.
Ineligible purposes are those which directly benefit the borrower, conflicts of interest, and costs incurred prior to the application.
Applicants are public bodies, non-profit associations, and Indian tribes. The purpose of the grant is to assist in financing and developing small and emerging private businesses.
Funds can be used for a revolving loan program to provide financing to businesses that meet all of the following requirements:
50 or fewer new employees
Less than $1 million in projected gross revenues
Uses new processes
Uses technological innovations and commercialization of new products that can be produced in rural areas
The grant cannot be passed through to the business.
Grant funds may be used to assist in the economic development of rural areas by providing technical assistance for business development and economic development planning. Grant requests are limited to $50,000 per state.
Grants may be used to:
Identify and analyze business opportunities that will use local rural materials or human resources. This includes opportunities in export markets, as well as feasibility and business plan studies.
Identify, train, and provide technical assistance to existing or prospective rural entrepreneurs and managers.
Establish business support centers and otherwise assist in the creation of new rural businesses.
Conduct local community or multi-county economic development planning.
Establish centers for training, technology, and trade that will provide training to rural businesses in the utilization of interactive communications technologies to develop international trade opportunities and markets.
Conduct leadership development training of existing or prospective rural entrepreneurs and managers.
Pay reasonable fees and charges for professional services necessary to conduct the technical assistance, training, or planning functions.
Grants may be made to public bodies, nonprofit corporations, Indian tribes on federal or state reservations and other federally recognized tribal groups, and cooperatives with members that are primarily rural residents and that conduct activities for the mutual benefit of the members.
Applicants must have sufficient financial strength and expertise in activities proposed in the application to ensure accomplishment of the described activities and objectives.
