DES MOINES, Iowa (AP) — The U.S. Department of
Agriculture announced Monday a new $150 million program designed to
provide investment capital to help small agriculture-related business in
rural areas with cash needed to expand.
Secretary of Agriculture
Tom Vilsack announced in Cedar Rapids the formation of the first Rural
Business Investment Company, a for-profit firm licensed by the USDA to
invest in businesses that otherwise might not have the capital to
increase business opportunities.
The USDA traditionally has
offered guaranteed loans or direct loans for rural businesses. The
creation of the Rural Business Investment Company is a new way for USDA
to establish a licensing procedure that makes Farm Credit bank funds
available as investment capital. The banks cannot directly hold
ownership stakes in companies through capital investment.
Under
the new program the government has created a new business entity, the
Rural Business Investment Company, to receive money from Farm Credit
banks and set up an investment capital fund. The money will be managed
by Advantage Capital Partners, a New-Orleans-based firm with experience
in investing in small rural businesses. Advantage Capital will choose
the companies in which the new funds will be invested.
The money
comes from eight Farm Credit banks. Three in Minnesota include AgStar
Financial Services in Mankato, AgriBank of St. Paul, and United Farm
Credit Service in Willmar. Two in Texas are Capital Farm Credit in Bryan
and Farm Credit Bank of Texas in Austin. Others are CoBank in Denver,
Colorado; Farm Credit Services of America in Omaha, Neb.; and Farm
Credit Services of Mid-America in Louisville, Kentucky.
In
addition to the creation of the first Rural Business Investment Company
announced Monday, the USDA is seeking applications for more. The
businesses must be newly formed for-profit venture capital companies
seeking to be licensed as an RBIC and intending to raise a minimum of
$10 million in private equity capital.
Vilsack said a second RBIC application is already under review. The USDA intends to accept RBIC
applications through 2016.
Vilsack
said examples of the types of businesses that could receive money
include biotechnology companies, regional food hubs, or companies making
ag-related products seeking to expand into the export market.
"This
new partnership will allow us to facilitate private investment in
businesses working in bio-manufacturing, advanced energy production,
local and regional food systems, improved farming technologies and other
cutting-edge fields," he said.
The program is aimed toward
established companies that have received enough money to get off the
ground but are now in position to increase the business but need
additional capital to grow but are not interested in more debt.
"It’s
designed to fill a very narrow but important piece that’s been missing
from assistance and help available in rural areas," Vilsack said.
Small
agriculture related business in rural areas have often encountered
difficulty getting investors interested in putting up money, Vilsack
said. The program is designed to help fill that void.
He said it’s
the first step in several activities planned this year he hopes will
"create a buzz" about business activity in the nation’s rural areas.
Other
steps include the formation of a nonprofit Foundation for Food and
Agricultural Research funded by Congress in the Farm Bill passed earlier
this year. It makes available $200 million in USDA money to create the
foundation that is designed to attract another $200 million in private
sector money to continue research in various agriculture-related fields.
Additionally,
the White House Rural Council’s Investing In Rural America conference
is set for July. The goal is to attract additional investments to rural
America by connecting major investors with rural business leaders,
government officials, economic development experts and other partners.
The conference will promote opportunities to invest in rural America by
highlighting successful projects in energy, biofuels and bio-products,
infrastructure, transportation, local and regional food systems, and
other areas.
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