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 inve, he said. The program is designed to help fill that void.