Resources to strengthen rural communities and businesses

February 27, 2015

Lillian Salerno, administrator for Rural Business-Cooperative Service for the USDA, discusses the resources available to assist rural communities and businesses across the country.

Made in Rural America initiative

You previously discussed the Made in Rural America initiative; tell us more about the program and opportunities that exist for rural businesses and communities.

Made in Rural America was developed to help grow manufacturing in rural areas and provide new markets to small businesses across our nation’s heartland. As part of the president’s initiative launched in February 2014, the White House has brought federal resources together to help rural businesses and communities take advantage of new investment opportunities and to access additional markets at home and abroad. 

Key components

What are the key components of the Made in Rural America initiative?

It includes a series of trade missions for rural businesses to meet foreign buyers, partners and trade experts and gain access to additional markets; a new national Rural Export Innovation Team that works hand in hand with rural businesses currently exporting or that have an interest in exporting; a new bond rating for rural infrastructure that will encourage additional investments in roads, bridges, water supply system, information technology and community facilities that are vital to manufacturing and export. The initiative also created a new public-private partnership through a $10 billion fund, the U.S. Rural Infrastructure Opportunity Fund, to serve as a catalyst for private investment in infrastructure projects across rural America.

USDA efforts

What is USDA doing to Increase Investment in Rural America?

In July 2014, the White House Rural Council hosted the inaugural Rural Opportunity Investment Conference (ROI) to promote potential investment opportunities that exist throughout rural America. Top leaders from the business community and financial institutions, senior government officials, rural economic development experts and others from across the country, came together to discuss ways to develop partnerships that create jobs, grow small businesses and invest in critical rural infrastructure.

What are examples of opportunities identified under USDA’s ROI efforts?

Public-Partnerships at Work

  • Rural Infrastructure Opportunity Fund. The fund is a new approach designed to stimulate private investment in infrastructure projects in rural America. CoBank, a national cooperative bank and a member of the Farm Credit System, has committed $10 billion as the fund’s anchor investor. The fund enhances rural America’s access to capital for infrastructure projects and speeds up the process of these improvements. The fund will allow a variety of new, nontraditional participants, including pension funds, endowments and foundations, to invest in rural development. Target investments include rural community facilities (especially healthcare and educational facilities), rural water and wastewater systems, rural energy projects, rural broadband expansion efforts and local and regional food systems.
  • New rural investment fund designed to help small businesses grow; create jobs in rural America. In July 2014, Secretary Tom Vilsack announced the creation of an investment fund designed to facilitate private equity investments in rural, agriculture-related businesses. Fund manager Advantage Capital Agribusiness Partners and nine Farm Credit institution partners have pledged investments of more than $150 million. USDA programs have historically provided loans or loan guarantees to help rural businesses grow, but before the creation of the Rural Business Investment Program, many small cutting-edge businesses were unable to obtain equity support. USDA continues to accept applications for additional new rural equity funds under this program.

Rural Energy for America Program (REAP)

There is new funding for the Rural Energy for America Program (REAP). Many of the states in the Tenth District are undersubscribed in loan guarantees and grants. What does the program do and what are the available resources?

REAP provides guaranteed loan financing and grant funding to agricultural producers and rural small businesses to purchase or install renewable energy systems or make energy efficiency improvements. In fiscal year 2014, there were 540 projects that benefitted from REAP funding. This funding included grant totals of just under $12.4 million and total loan guarantees of $56.5 million. For fiscal year 2015, we (USDA) are projecting roughly $85 million in grants and $215 million in guaranteed loan authority.

REAP funds

Who can apply for and how can the REAP funds be used?

Agricultural producers with at least 50 percent of gross income generated from agricultural operations, and small businesses in eligible rural areas may apply, so long as they hold no outstanding delinquent federal taxes, debt, judgment or debarment. Businesses also must be in an area with a population less than 50,000 inhabitants. Agricultural producers may be in rural or nonrural areas.

Funds may be used for the purchase, installation and construction of renewable energy systems, such as: biomass (i.e., biodiesel and ethanol, anaerobic digesters and solid fuels); geothermal for electric generation or direct use; hydropower below 30 megawatts; hydrogen; small and large wind generation; and small and large solar generation.

Funds also may be used for the purchase, installation and construction of energy efficiency improvements, such as: high efficiency heating, ventilation and air-conditioning systems (HVAC); insulation; lighting; cooling or refrigeration units; doors and windows; electric, solar or gravity pumps for sprinkler pivots; switching from a diesel to electric irrigation motor; and replacement of energy-inefficient equipment.

Types of REAP funding

What funding is available through REAP and what are the loan guarantee terms?

The program offers loan guarantees up to 75 percent of total eligible project costs; grants for up to 25 percent of total eligible project costs; or combined grant and loan guarantee funding up to 75 percent of total eligible project costs. Loan amounts must be between $5,000 and $25 million, and can be guaranteed up to 85 percent. The rates and terms are negotiated with the lender and are subject to USDA approval. The maximum loan terms are seven years for capital loans, 20 years for machinery and equipment, 30 years for real estate and 30 years for combined real estate and equipment loans.

Community Development in Rural Development

Can you share information about the new Community Economic Development approach planned for Rural Development?

In fiscal year 2015, Rural Development will integrate a community economic development (CED) approach into its core work and way of doing business across the mission area, including housing, community facilities, infrastructure and business and cooperative programs. Rural Business-Cooperative Service (RBCS) has been designated as the lead coordinating agency to continue integrating, institutionalizing, and managing the strategic implementation of existing and upcoming CED initiatives and to expand partnerships that increase investments in high need communities. RBCS is building a functional team that has the required skill sets to transform our core business model, integrate CED, attract and retain a talented rural labor force, improve rural connectivity and access to information and education, move products to market, make communities more competitive and tap into the economic potential of rural America.  

For more information on USDA Rural Development programs you can connect with your local state office.

About Lillian Salerno

Since 2013, Salerno has served as administrator for the RBCS, an agency within the Rural Development mission area of the USDA. As administrator, Salerno oversees the USDA’s $10.7 billion guaranteed loan portfolio. RBCS provides financial and technical assistance to small businesses and cooperatives throughout rural America to expand job opportunities, helps businesses grow, promotes energy independence through energy efficiency and the development of clean, renewable forms of energy. Salerno has focused on strengthening economic development capacity in rural communities including initiatives for job creation, increased access to capital, regional collaboration and energy efficiency. Salerno further promotes the Secretary of Agriculture’s priorities for strengthening the bioeconomy and supporting local and regional foods.

Small Business Lenders Summit

To learn more about the resources discussed by Lillian Salerno and other small business lending enhancement programs, visit the webpage for the Small Business Lenders Summit, Nov. 7, 2014, hosted by the Kansas City Fed.