Sen. Bennett promotes business in Rural Utah Part V Raising cash to grow your business continued
Perry Mathews / Business and Cooperative Program Director, USDA Rural Development, helps administer approximately $30 million in USDA loans and grants to assist rural Utah businesses.
Rural Development was born out of the reorganization of the Farm Home Administration. Rural Development is one of the three agencies that came out of that reorganization in the 1990s. Farm Service Agency is another and Natural Conservation Service is the other. The focus for rural development is to increase economic opportunity and improve the way of life for all rural Americans. Rural development has multiple programs. "We have more than 45 different programs that we administer in our communities through financial and technical assistance. Our programs are primarily community programs. So if you are looking for anything that would be essential to your community such as a police station, a fire station, senior assisted living facility, things like that. We also have water and sewer infrastructure that we can finance, and then we have housing programs. We can look at portable housing for communities," said Mathews.
"With the business programs we can provide financial assistance to small businesses or large businesses. Our lending authority in Utah is $5 million and that will be going up to $7.5 million. Keep in mind that our focus is on rural communities and how we can empower or impact those communities in Utah. In regards to our program it is very similar to the SBA. We have an 80 percent guarantee up to that $5 million threshold. If it goes above that $5 million threshold then the guarantee drops down to 70 percent between the $5 and $10 million range. At the $25 million range we have a 60 percent guarantee. We can actually go up to $40 million on some packing facilities.
"Keep in mind that rural development is in partnership with FSA, Farm Service Agency. Farm Service Agency provides financing to the agriculture producers directly. We provide financing to the processing facilities. Our rates and terms within rural development is negotiated between the borrower and the lender. You look at the guarantee from us and take that to the bank. The bank at the same time has to look at having something that they can sell to Secretary Martin. We can make a loan for up to 30 years on real estate investments, equipment we can go 15 years, in addition we can do seven years on working capital. The borrowers that we can provide financing for are public bodies, non-profit, Indian Tribes, Cooperatives and to private industry. We will work with you to find the best nitch for your project.
"Another benefit that has come about, is that we can actually issue our guarantee prior to construction. So when we look at the risk to the lenders, a lot of time we are looking at a year in securing financing. The direction we have received from the national office is that we can issue a guarantee back to construction. So we share that risk. With regards to financing projects, as long as it is not a golf course, a gaming institution or any illegal activity we can finance it. We can look at infrastructure, we can look at acquisition, we can look at buildings, and we can also do non-owner occupied facilities.
"Another program is our Rural Guarantee for America program. If a business is out there that wants to look at renewable energy systems. We can provide financing through our program that gives a 25 percent grant toward the total cost of that project with a 50 percent guaranteed loan. That borrower would have to bring in 25 percent of that equity or investments. A number of states have looked at identifying cooperatives to facilitate some of those initiatives. So if we are looking at wind, solar, geothermal, micro-hydro, any of those energy types of systems we can use the financing mechanism to do that energy generation. Another is energy efficiency improvements under the Rural Guarantee America program. If you're in business and want to add solar to it, insulation, windows any type of repairs that will reduce the over all energy efficiency and over all costs to your business, we will finance that.
"We have an initiative right now where we are looking at trying to expand the opportunities in the revolving loan program. It is called the intermediary reliving program and it is a revolving loan. We have seven partnerships across the state where we are looking at some of our financing at 1 percent being loaned to small working capital type loans. We see the need with the economy and the way things are right now, to revamp and provide stimulus into some other programs and expand the revolving loan programs," said Mathews.
Debbie Hatt is the manager of Department of Economic, Community and Housing Development, Southeastern Utah Association of Government and is responsible for administration of the district's $1.2 Million revolving loan fund program.
Hatt said, "The Association of Governments is an umbrella organization that operates a fair number of programs. Programs that the audience may be aware of, but not exactly know where they are coming from. We are also the Utah Southeastern Economic Development District and that is the organization that operates the revolving loan fund. We also house the business and technical assistance center here in Price. Other programs that the Association of Governments has are the heating programs in the district, the housing weatherization program, utility heat assistance program, food bank program, economic development programs and the procurement and technical assistance program.
"The Association of Governments here in Price covers Carbon, Emery, Grand and San Juan Counties including the Indian Reservation area. For the rural areas of Utah there are five other Association of Governments agencies that provide most of the same types of sertypes of services. We have a web site.
Our revolving loan fund is a program available in other areas of the state from Association of Governments. We are talking about small businesses. Most of the loans we make are to businesses that have less than $200,000 in revenue sales and less than 10 employees. The average is about five employees. The primary purpose of our loan program is to provide debt financing. We have to provide debt financing. We work closely with the other organizations you have heard mentioned. For instance our clients use the small business development center and the planning process while the loan is being applied for. We also work closely with the county economic development officers in the business expansion and retention programs. We make referrals to the various agencies involved in the process of helping businesses get the capital they need.
"Our program is primarily funded with Economic Development Administration funding, although we do have a significant amount of Farm Home money. That is how long the revolving loan fund in this area has been running since the early 1990s. We will loan up to $100,000. Our average loan is $50,000. Our average interest rate at this time is 6 to 6.5 percent. We are prevented from going lower than 4 percent by Federal regulation. We try to keep the interest rate as low as we can because of current business conditions. The primary purpose for our loans is for capital equipment and or land although we can do some operating expense loans.
"A good business plan is essential to show us and your banker not only the need for the capital, but also the repayment ability of that loan. Our terms are generally five years. We will go up to 10 years if there is real estate collateral or some serious capital equipment collateral. However we are willing to take a position on a lot of these loans.
"Start by talking to your banker. You have to have a really good working relationship with your banker. Before you can come to these other programs you need to know exactly where you stand with your bank. How much money are they willing to loan and where they are going to want to have collateral and their position on your assets. Most of the programs have money to lend right now. This money can be applied for generally year around.
"We also run a mini or micro loan, up to $10,000, where you do not have to have a bank involved. Those loans are almost always for small businesses and new businesses. The collateral is not as restrictive as on the larger loans.
"If you are trying to find capital for your business, try to think of the other resources rather than actual cash, that are available through the agencies.
Start with your banker, start with your local Economic Development Agency and take advantage of the Bear Program available in your community," said Hatt.