USDA Rural Development Economic Development Tools

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1 USDA Rural Development Economic Development Tools Business & Industry (B&I) Loan Guarantees Rural Energy for America Program (REAP) Loan Guarantees and Grants Intermediary Relending Program (IRP) Loans Rural Microentrepreneur Assistance Program (RMAP) Loans and Grants Community Facility (CF) Loan Guarantees, Loans and Grants

2 Business & Industry (B&I) Guaranteed Loan Program Description: The purpose of the B&I Guaranteed Loan Program is to bolster the existing private credit structure through the guarantee of quality loans, which will provide lasting community benefitsto areas 50,000 pop. or less (all of ME, except Portland & parts of adjacent communities.) Who may apply: Generally, any federally-or state-chartered bank that is subject to regulatory examination and supervision and certain approved non-traditional lenders (guarantee), and any legally-organized business entity or individual business owner (loan). Loan Purposes: Real estate, equipment, permanent working capital, debt refinancing. Maximum Guarantee: 90% for loans up to $2MM, which are high-priority projects and where the lender certifies the higher guarantee is necessary. 80% for loans up to $5MM, 70% up to $10MM, and 60% over $10MM. The Maine State Director s loan approval authority is $10MM. Fees: 3% initial fee and 0.5% annual renewal fee, both only on the guaranteed portion. Benefits: Mitigates lender s risk and can enhance yield with secondary market sale of guarantee. Funding: Maine s state allocation was $10,570,000 in FY 2014, but we obligated $18,248,851. $11,085,080 is immediately available in FY Rural Development

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5 Secondary Market Sale & Benefits to Borrower & Lender (example) $1,000,000 Loan x 80% Guarantee $ 3.5% 20-Yr. Sec. Mkt. Rate + 1.5% Servicing Fee = 5.0% $ 5.0% Interest Borrower s rate is 5.0%, fixed for 20 years Lender s return on the same loan is: $800,000 x 1.5% Servicing Fee = $ 12,000 $200,000 x 5.0% Interest Income = $ 10,000 $ 22,000 $ 22,000 = 11.0% $200,000

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7 Rural Energy for America Program (REAP) Loan Guarantees & Grants Description: Assistance in purchasing and installing renewable energy systems (RES) and energyefficiency improvements (EEI). Who may apply:eligible B&I lenders (guarantee), and agricultural producers and rural small businesses (loan and grant). Rural small businesses must comply with SBA size standards. Technologies (RES) and improvements (EEI): Solar, wind, biomass, geothermal, hydrogen, small hydro, and tidal; HVAC, lighting, refrigeration and freezers, pumps, insulation, doors and windows, and other energy-saving measures. Maximum Loans and Grants: $25MM guaranteed loan, Maine s approval authority is $10MM. Up to $500,000 grant (RES) and $250,000 grant (EEI). Grant cannot exceed 25% of total eligible project cost (TEPC), and loan or combination loan and grant cannot exceed 75% TEPC. Funding: $200MM in loan guarantees and $70MM in grants for FY Maine s grant allocations are $169,000 for grants <$20,000 and $1,144,000 for others. Application due dates are April 30 and June 30, Loan guarantee applications can be received on an ongoing basis. Rural Development

8 Intermediary Relending Program (IRP) Loans Description: Direct loans for revolving funds to help finance business facilities and community development projects in rural areas of 50,000 population or less. Who may apply:public bodies, not-for-profit corporations, Native American Tribes, and cooperatives, all as intermediaries; and private businesses and community development projects as ultimate-recipient borrowers. Maximum award: Up to $1,000,000 per fiscal year. Theoretically, intermediaries can borrow up to $15MM, in aggregate. Loan purposes: Intermediaries can loan to ultimate-recipient borrowers for real estate; machinery and equipment; working capital, including revolving lines of credit with certain limitations, and debt refinancing. Loans are not to exceed 75% of the cost of an ultimate recipient s project and generally not be greater than $150,000. Typically, these loans are subordinate to bank financing. Funding: In Maine, 13 intermediaries currently participate in the IRP program throughout the State. Collectively, they have loan funds approximating $20MM. New loan funds available nationally for new and existing intermediaries to compete for in FY 2015 are $19MM+. Rural Development

9 Rural Microentrepreneur Assistance Program (RMAP) Loans and Grants Description: Microloans and business-based training and technical assistance to support the development and ongoing success of rural microentrepreneurs and microenterprises. Who may apply: Microenterprise development organizations (MDO), including not-for-profit corporations, Native American Tribes, and public institutions of higher education(all as intermediaries). Maximum awards:$500,000 loan and $105,000 grant. Grants are determined at the rate of 25% for the first $400,000 in loan funds and 5% for any amount exceeding that. Loans to an MDO will not exceed $2,500,000, in aggregate. Subsequent grants may be available, based on lending activity. Loan and Grant Purposes: Loans of up to 75% of project cost, not to exceed $50,000, to sole proprietors or microenterprises with ten or fewer employees. Loans may be used for working capital, equipment, debt refinancing, business acquisitions, the purchase of improved real estate, but not for construction and/or demolition. Funding: In Maine, 8 MDO s currently participate in the RMAP program throughout the State. Collectively, they have loan funds exceeding $4MM. $8.3MM in loan funds is available nationally for new and existing intermediaries to compete for in FY Rural Development

10 Community Facilities (CF) Loan Guarantees, Loans & Grants Description: The CF program funds projects that provide essential services to local rural communities not exceeding 20,000 in population. This includes healthcare, social services, education, and public safety. Who may apply: Eligible lenders (guarantees) and public bodies, not-for-profit corporations, and Native American Tribes (loans and grants). Opportunities: CF may fund hospitals, health clinics, nursing homes, assisted living, group homes, child care, community centers, private schools, libraries, along with police, fire, and other facilities requisite to the orderly development of a rural community. Loan guarantees: Maximum guarantee is 90%. One-time, initial fee is 1%. Rates and terms are negotiable. Direct loans: Rates are based on MHI of service area and typically range from 4.5% (poverty) to market rate, but all are currently at 3.5%. Terms are up to 40 years. Grants: 75%, 55%, 35%, 15%, or 0%, depending upon population and MHI, with lower in each being more favorable. Funding: FY15 appropriations are $73,200,000 for guaranteed loans and $2,200,000,000 for direct loans and grants. Maine was allocated $23,000,000 in direct loan and $130,000 in grant funding. Rural Development

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12 Priorities and Initiatives Comprehensive community economic development Building sustainable rural communities through wealth (increasing family income & wealth), work (stimulating local & regional economic activity & opportunity for growth), wisdom (improving access to quality education), health (fostering livable, safe, and healthy environments), and homes (expanding investment in housing and other real estate). Bioeconomy-The bioeconomyis based on the use of research and innovation in the biological sciences to create economic activity and public benefit. Local and regional food systems -Businesses that process, distribute, aggregate, store, and market foods produced either in-state or transported less than 400 miles from the origin of the product. Renewable energy -Energy that comes from resources which are naturally replenished on a human timescale such as sunlight, wind, rain, tides, waves and geothermal heat. High-poverty areas -are defined as nonmetroareas with a poverty rate of 20 percent or more. A mapping system is available for identifying these at: 54f64ab0c4b44abedc821.