USDA Rural Development Lending. Small Business, Energy & Infrastructure Investing Opportunities

Transcription

1 USDA Rural Development Lending Small Business, Energy & Infrastructure Investing Opportunities

2 Panel Agenda Bette Brand Administrator USDA/Rural Development/Rural Business Cooperative Service Mark Brodziski Energy Programs Deputy Administrator USDA/Rural Development/Rural Business Cooperative Service Question & Answer Session

3 Bette Brand Administrator Rural Business-Cooperative Service

4 Task Force on Agriculture and Rural Prosperity To Promote: Agriculture Economic Development Job Growth Infrastructure Improvements Established by President Trump

5 Task Force on Agriculture and Rural Prosperity To Promote: Technological Innovation Energy Security Quality of Life in rural America

6 Task Force on Agriculture and Rural Prosperity Rural Business-Cooperative Service Vision:

7 Task Force on Agriculture and Rural Prosperity Rural Business-Cooperative Service Why Rural Prosperity? Nation s prosperity is intrinsically tied to rural America s ability to thrive in the new global economy, using its abundant natural resources to provide food, fiber, forest products, energy, and recreation and diverse bench of human capital, including hard working men & women in all occupations, creative entrepreneurs, devoted veterans, and military and other families of all sizes and varieties. To capture opportunities for agriculture and rural prosperity, the federal government s role in answering the call to action for rural America is critical.

8 Task Force on Agriculture and Rural Prosperity Rural Business-Cooperative Service Rural Prosperity A Call to Action 1. E-Connectivity for Rural America 2. Improving Quality of Life 3. Supporting a Rural Workforce 4. Harnessing Technological Innovation 5. Developing the Rural Economy

9 Developing the Rural Economy Infusing rural areas with stronger businesses and agricultural economies empowers all of America. Rural business men and women, entrepreneurs, as well as beginning farmers and ranchers require improved access to capital to facilitate them to start, grow, and expand their businesses. Enabling rural based investment partnerships public or private can help communities identify and develop projects best suited for investment and promotion of economic growth and job creation. Rural areas have especially high concentrations of natural resource-related industries and manufacturing, providing considerable opportunity for meeting and exceeding productivity goals. Identifying key regulatory reforms, streamlining processes, and improving interagency coordination are required to create conditions in which the rural economy can thrive. American agriculture and the rural economy can be unleashed by optimal government policies that open markets abroad, ensure fair and science-based regulatory treatment for American products, and execute strong enforcement that hold trading partners to mutual commitments.

10 Mark Brodziski Deputy Administrator for Energy Programs Rural Business-Cooperative Service

11 Rural Development s Mission To assist rural communities in creating prosperity so they are self-sustaining and economically thriving through investments that create ladders of opportunity, build regional resilience, and support the growth of emerging markets. Rural Development Rural Housing Service Rural Utilities Service Rural Business- Cooperative Service

12 Rural Development: At the Forefront of U.S. Infrastructure expansion 1901 to 1926 Cooperative Programs Evolves for Rural Businesses 1935 Rural Electrification Administration 1937 Water Facilities Act 1949 The Housing Act (Establishes Singleand Multi-Family Affordable Housing) 1949 Rural Telephone Program 1968 The Self Help Housing Program is Established 1990 Distance Learning/Telemedicine Program 1994 Restructuring: REA Plus Water and Waste Programs Every five years Congress sets some direction for RD in the Farm Bill 2002 U.S. Farm Bill: Broadband Program, 9006 Renewable Energy Program, Value-Added, and Others 2009 American Recovery and Reinvestment Act of Additional (one-time) funding for water and broadband infrastructure 2014 U.S. Farm Bill: Broadband Program, Renewable Energy Programs, Value-Added, and Others

13 RD s Mission Driven Actions Invest in financial resources and provide technical assistance to businesses located in rural communities Establish strategic alliances and partnerships that leverage public, private, and cooperative resources to create jobs and stimulate rural economic activity Support and strive to increase access to capital in rural America RD s investment portfolio nearly $216 Billion

14 Rural Development Funding Programs by Agency Rural Utilities Service Rural Housing & Community Facilities Rural Business & Cooperative Service Electric Program Water & Environmental Programs Telecommunications and Broadband Programs Homeownership Loans Home Repair Loans & Grants Mutual Self-Help Technical Assistance Grants Multi-Family Housing Loans Farm Labor Housing Loans & Grants Housing Preservation Grants Community Facilities Loans & Grants Business and Industry Guaranteed Loans Intermediary Relending Program Rural Business Development Grants Rural Energy for America Program Value Added Producer Grants Cooperative Development Assistance

15 RBS Investments and Impact (FY2017) Rural Business-Cooperative Service

16 USDA Loan Guarantee Federally guaranteed portion of the loan is protected against loss, reducing lenders credit risk exposure. Full Faith & Credit of Federal Government.

17 Benefits of USDA Loan Guarantees Mitigate Risk Credit Enhancements Increase ROI

18 Lender Benefits Expand Legal Lending Limits Secondary Market Single or Multi note sale of Guarantee Increase ROI Servicing Fee Collection Community Reinvestment Act Consideration Mitigate Risk Guarantee against potential loss Reduces risk of specialized collateral Local People and Local Access New Business Development Opportunities

19 Flexibility Structuring options are flexible to maximize risk mitigation Personal guarantee options Deal size Rural Business-Cooperative Service Lender Benefits Access to long term fixed rates Up to 30 years Secondary market sales (e.g. Farmer Mac & Institutional Investors)

20 Business & Industry Loan Guarantees Becoming a Rural Development Lender Applications are accepted from lenders through USDA local offices year round Interested borrowers should inquire about the program with their lender Lenders interested in participating in this program should contact the USDA Rural Development Business Programs Director in the state where the project is located Contact our local office that serves your area.

21 Lender Benefits Rural Development Staff Focused on finding a way Excellent guidance through the process Continuing assistance after closing

22 Benefits for Borrowers Provides the ability to receive: Longer Repayment Terms Higher Loan Amounts Competitive Interest Rate

23 Eligible Project Location Generally, a location of 50,000 people or less and not adjacent to an urbanized area is eligible The borrower s headquarters may be based within a larger city as long as the project is located in an eligible rural area The lender may be located anywhere Eligibility of project location can be accessed by address on the RD website

24 Rural Development Guaranteed Loan Programs Business and Industry Guaranteed Loan Program Rural Energy for America Program (REAP) Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program (Section 9003) Community Facilities Water and Environmental Programs (WEP)

25 Business & Industry Loan Guarantees Business & Industry (B&I) Guaranteed Loan Program This program is authorized by the Consolidated Farm and Rural Development Act Purpose is to improve, develop, or finance business, industry, and employment, and improve the economic and environmental climate in rural communities Bolster the existing private credit structure through the guarantee of quality loans that will provide lasting community benefits

26 Business & Industry Loan Guarantees Loan Guarantee Percentages 80% for loans of $5 million or less 70% for loans between $5 and $10 million 60% for loans exceeding $10 million, up to $25 million maximum The initial guarantee fee is 3% upon issuance of the Loan Note Guarantee An annual renewal fee of 0.5% is due based on the 12/31 principal balance

27 Business & Industry Loan Guarantees For-profit businesses Nonprofits Cooperatives Federally-recognized Tribes Public bodies Individuals Eligible Borrowers

28 Business & Industry Loan Guarantees Eligible Purposes Business conversion, enlargement, repair, modernization or development Purchase and development of land, buildings, or facilities Purchase of equipment, machinery, supplies, or inventory Debt refinancing when refinancing improves cash flow and creates or saves jobs Business and industrial acquisitions when the loan will create or save jobs

29 Success Stories Rural Business-Cooperative Service

30 Integrico Composites Loan Amount: *5,000,000 Guarantee: 90% Location: Cullen, LA Lender: Bank of Montgomery Year: 2015 Purpose: The company produces composite crossties for use in rail applications using recyclable materials. Loan proceeds were used to purchase machinery and equipment to operate the company s new facility in Louisiana. *This example is for illustrative purposes.

31 Bear Republic Brewing, Co. Loan Amount: $2,400,000 Guarantee: 80% Location: Cloverdale, CA Lender: First Community Bank Year: 2017 Purpose: Loan funds were used to help Bear Republic Brewing Company purchase a 36,000 square foot warehouse facility in Cloverdale, Ca. Without USDA s support we may not have been able to continue to expand and meet our goals. Tami Norgrove, CFO of Bear Republic Brewing Co.

32 Opportunities on Secondary Market Lenders have the ability to sell all or part of the guaranteed portion of the loan to holders on the secondary market. Lenders may charge a servicing fee to the holders. Lenders are encouraged to utilize the secondary market and pass the interestrate savings on to the borrower. Lender must retain title to the notes and security interest in the collateral. The lender is required to hold a minimum of 5% of the total loan amount, which must be of the unguaranteed portion. Unguaranteed portions may be participated to another lender.

33 Rural Energy for America Program (REAP) Lender ROI Income Stream 10 Year Adjustable Rate Loan Term Guaranteed Loan $141, (75% of Project) Prime (5.50%) $120,263 (85% Guaranteed) Sold at a Premium of $12,928 Premium on Guarantee $1,202 Retained Servicing Fee $1,126 Interest Income ($21,224 of Loan is Non-Guaranteed) $15,256 Total Income 1 st Year Non-Guaranteed Loan $47, Prime (5.50%) Interest $2,503 Combined Earnings $17,759 for a 26% return the first year, and a 7.1% return each following year

34 Rural Energy for America Program (REAP) Promotes energy efficiency and development of renewable energy for agricultural producers and rural small businesses. Provides loan guarantees and grants for energy efficiency improvements and renewable energy systems.

35 Rural Energy for America Program (REAP) Renewable Energy Systems Grant amount cannot exceed 25% of Eligible Project Cost Energy Efficiency Improvements Minimum Grant Request $2,500 Total eligible project costs > $10,000 Minimum Grant Request $1,500 Total eligible project costs > $6,000 Maximum Grant Request $500,000 Total eligible project costs > $2 million Maximum Grant Request $250,000 Total eligible project costs > $1 million Minimum Loan Amount Maximum Loan Amount $5,000 Total eligible project costs > $6,667 $25 million Total eligible project costs > $33.4 million Loan amount cannot exceed 75% of eligible project cost

36 Rural Energy for America Program (REAP) Eligible Applicants and Borrowers Agricultural Producer Rural Small Business Individual or entity that receives 51 percent or more of their gross income from agricultural production crops, livestock, aquaculture, forestry operations, nurseries, dairies For-profit small business - as defined by the Small Business Administration (SBA) Rural area or non-metro community of < 50,000

37 Rural Energy for America Program (REAP) Improve Profits for Your Farm or Ranch with REAP Energy Efficiency Lighting Heat & Power Refrigeration HVAC Equipment and Processes Automated Controls Buildings Updates Renewable Energy Solar Wind Small Hydroelectric Anaerobic Digesters Biomass Geothermal Wave/Ocean Power The technology must be commercially available. Research and development projects do not qualify.

38 Rural Energy for America Program (REAP) Eligible Project Costs Equipment: Purchase & installation New or refurbished Post-application construction & facility improvements Retrofitting Professional service fees Permits & license fees Working capital, land acquisition (Loan Guarantee ONLY with restrictions) Ineligible Project Costs Residential energy projects Equipment: Farm tillage equipment Used equipment Vehicles Pre-application construction & facility improvements Application preparation or grant writer fees Line of credit Lease payments Payment to the applicant/business owner, beneficiary, or relative

39 Rural Energy for America Program (REAP) GUARANTEE 60% for loans over $10 Million 70% for loans over $5 Million up to $10 Million 80% for loans over $600,000 up to $5 Million 85% for loans $600,000 or less REAP Loan Guarantee Terms FEES One-time guarantee fee of 1% ¼% annual renewal fee

40 MAXIMUM TERM LIMITS Working Capital 7 Years Machinery & Equipment 15 Years (or useful life, whichever is less) Real Estate 30 Years OTHER FUNDS REQUIRED 25% of project costs (B&I funds are allowed) INTEREST RATE Fixed or Variable; variable rates can be adjusted quarterly Negotiated between the lender and borrower Rural Business-Cooperative Service Rural Energy for America Program (REAP) REAP Loan Guarantee Terms

41 Success Stories Rural Business-Cooperative Service

42 Southeastern Illinois Tim Ridgley utilized REAP to install 90 solar panels on his 2,700-acre southeastern Illinois farm where he grows corn, soybeans and wheat. His son also raises beef cattle. Adding new panels to the 72 he previously installed, the Ridgley farm now generates 100% of their electricity needs for the farm, and saves approximately $300 per month.

43 De Smet, South Dakota A farm seed business installed this biomass burner to heat their offices. Their feedstock is carryover seed that didn t sell during the season. They can t sell it the next year because the germination drops and it has been treated, so it can t be used for food or feed. Before installing the biomass burner, the carryover seed was taken to the landfill. With the biomass burner, they re providing heat for no cost and keeping the seed out of the landfill!

44 Northern Ohio Anaerobic Digester installed in Northern Ohio. The bio-gas produced generates approximately 9,200,000 Kwh of energy per year. Anaerobic Digester

45 Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program (Section 9003) Provides loan funds for emerging technologies: Biorefineries o Advanced biofuels o Renewable chemicals o Biobased Products Biobased product manufacturing Maximum Loan - $250 Million

46 USDA Energy Investment Map Provides information on USDA programs that support renewable energy and energy efficiency projects. The map displays investment location, type of energy, assistance provided and the associated USDA program. The energy investment data is summarized by state, county and congressional districts by total number of investments and total dollar amounts.

47 Community Facilities Programs Overview Community Facilities Programs offer direct loans, loan guarantees and grants to develop or improve essential public services and facilities in communities across rural America. These amenities help increase the competitiveness of rural communities in attracting and retaining businesses that provide employment and services for their residents These facilities improve the basic quality of life, and assist in the development and sustainability of rural America.

48 Community Facilities Guarantee Rates, Terms, and Fees Interest rate is set by the lender (fixed or variable) Loan term is set by lender (maximum 40 year term or useful life) Adequate security to protect the interest of the Government Borrower must show repayment ability Lender must be unable to make the loan without a guarantee Up to a 90% guarantee to protect the lender on any loan loss One time, one percent (1%) fee payable upon issuance of Loan Note Guarantee

49 Community Facilities Infrastructure Tool Kit The Community Facilities Infrastructure Toolkit can be used as a guide to help organizations and community leaders better understand the complex process that is required to successfully develop and construct a new facility. Community Facilities Infrastructure Tool Kit Link:

50 Water and Environmental Guarantee Loan Program Rural Business-Cooperative Service

51 Eligibility is limited to: Public Bodies; Non-profits; and, Tribes That are located in a city or town with 10,000 inhabitants or less based on the most recent decennial census

52 Eligible Loan Purposes Construct, enlarge, extend or otherwise improve rural drinking water, sanitary sewage, solid waste disposal, and storm wastewater disposal facilities. Refinancing existing Agency debts

53 Panelist Contact Information Bette Brand Administrator Rural Business-Cooperative Service Mark Brodziski Deputy Administrator Energy Programs

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