U.S. Department of Agriculture Rural Business-Cooperative Service administrator Sam Rikkers unveiled new rules to expand access to capital for rural businesses.
"Access to capital is one of the most important needs for businesses," Rikkers said. "USDA is partnering with the Treasury Department and other agencies to ensure that rural businesses have the resources they need to prosper and grow. The regulatory changes I am announcing today will help businesses expand their operations and create jobs."
The changes, published in the June 3 Federal Register, make it easier for rural businesses to qualify for loans in USDA's Business & Industry (B&I) Guaranteed Loan Program.
They allow businesses to use the New Markets Tax Credit as a form of equity and, for the first time, allow employees of a business to qualify for loan guarantees to purchase stock in a business by forming an Employee Stock Ownership Plan or worker cooperative.
Other improvements include:
- New, loan application scoring criteria, including priority for loans to businesses that will create quality jobs, such as those with health care benefits;
- Reduced paperwork requirements to refinance loans;
- Strengthened eligibility criteria for non-regulated lenders (such as privately owned finance companies) to participate in the B&I program, and
- Expanded loan eligibility, including in urban areas, for projects that process, distribute, aggregate, store and/or market locally or regionally produced foods.
The stock ownership provisions are modeled after rural cooperative businesses. Co-ops have been economic development partners with USDA for decades. A January 2016 USDA report indicated that cooperatives earned $6.5 billion in net income and generated $246.7 billion in total revenue in 2014.
For a complete overview of the new rules, see page 35984 of the June 3, 2016, Federal Register.
USDA awarded more than 3,500 B&I program loans totaling $9.7 billion between 2009 and 2015 to help rural businesses create or retain jobs.
The expanded loan eligibility for projects that process, distribute, aggregate, store and/or market locally or regionally produced foods is part of USDA's broader effort to support strong local and regional food systems that connect rural and urban communities.