Rural Business Investment Program Update
The USDA has begun full implementation of the Rural Business Investment
Program which was authorized in the 2002 Farm Bill. The RBIP is designed
to attract venture capital to rural communities by providing venture
capital organizations with operational assistance grants and federal
debentures.
On June 8th, the USDA issued an Interim Final Rule and
Notice of Funds Availability for the program. Comments were due on July
8th. The USDA has set a September 17 deadline for RBIP applications
and expects to announce selections in May or June of next year.
As currently drafted, the interim rule for the RBIP closely tracks
the regulations for the Small Business Investment Program and the New
Markets Venture Capital Program that are operated by the Small Business
Administration, which is jointly implementing the Rural Business Investment
Program with the USDA. As currently designed, Rural Business Investment
Companies would pay fees similar to fees levied on Small Business Investment
Companies, for costs associated with administering the program, including
examination fees, transaction fees and on-going operational fees. Several
rural community development organizations as well as the Community Development
Venture Capital Alliance, the trade association for community development
venture capital funds, have protested the use of these fees and have
urged USDA to remove them.
The June 8th NOFA indicates that USDA intends to license three Rural
Business Investment Companies and provide each of them $20 million of
guaranteed debenture financing for investment capital and up to $1 million
in grant financing for RBICs to provide operational assistance to portfolio
companies. The Administration's FY05 Budget limited expenditures for
this program to only $60 million for debenture financing and more limited
funding for grant financing. Although the Administration's Budget has
yet to enacted by Congress, USDA is following its budget recommendation
for this first round of licenses.
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