DES MOINES, Iowa - The U.S. Department of Agriculture on Monday announced a new $150 million program designed to provide investment capital to help small, agriculture-related start-up businesses in rural areas 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, as a new business entity, is a way for the 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 company will 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 startup businesses.
Advantage Capital will choose the companies in which the new funds will be invested.
In addition to the creation of the first 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 a rural business investment company and intending to raise a minimum of $10 million in private equity capital.
Vilsack said a second application is already under review. The USDA intends to accept applications through 2016.
Vilsack said examples of the types of businesses that could receive money include biotechnology companies, regional food hubs or companies making agriculture-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.
Business, Pages 23 on 04/22/2014