Farm program aims to boost rural businesses-For-profit companies to inject capital into enterprises

Economic development in South Dakota could get a financial boost if President George W. Bush signs the new farm bill.

The legislation includes a new Rural Business Investment Program, designed to stimulate as much as $350 million in new investment in rural
America.

By:
Melanie Brandert
Sioux Falls Argus Leader
Sioux Falls, SD
http://www.argusleader.com

While the House-Senate conference committee met to hammer out a final version of the Farm Bill, questions were posed about the program’s
structure and size, Senate Majority Leader Tom Daschle, D-S.D., said Friday.

"I’m very pleased over that period Republicans and Democrats came to the realization that if we don’t help rural America and if we don’t have
opportunities for investment, we won’t go beyond where we are today," he said.

The program is being billed as a vital component for driving economic development in the state.

RBIP creates new, for-profit rural business investment companies that will raise private capital and invest it and U.S. Department of Agriculture
loans into rural small businesses.

Each company must raise at least $5 million in private capital or binding capital commitments. That can be leveraged on a 3-to-1 ratio by
USDA loans. The federal agency is limited to issuing $280 million in loans to match capital.

Venture capital companies may invest in small businesses with a maximum net worth of $6 million and average two-year net income cap of $2
million.

Only newly formed for-profit entities or their new subsidiaries are eligible. A rural investment company must have a management team with
experience in community development financing or relevant venture capital financing.

Daschle said the program would benefit rural South Dakotans by providing access to once unattainable capital, targeting rural businesses and
allowing businessmen to network with each other.

"They (businesses) could be technology- or service-oriented, agriculture-oriented or community-based," he said.

Jim Mirehouse, chief executive officer of Genesis Equity Fund in Rapid City, worked with Northern Great Plains Inc. and congressional
delegations from North Dakota, South Dakota, Minnesota, Iowa and Nebraska to develop legislation for the program.

The program requires investment companies to invest 75 percent of their total capital in cities or towns with less than 50,000 residents,
excluding urban areas next to a city with more than 50,000 residents. No more than 10 percent of investments can be in cities larger than
150,000.

"It’s a component we don’t have much of in South Dakota," Mirehouse said. "It allows us to start agriculture, value-added agriculture or
businesses in small towns. We are geared toward this."

Lack of capital is the main challenge when creating new rural businesses, said Amy Bales, executive director of Value Added Agriculture
Development Center in Aberdeen. The center has 25 projects ranging from wind energy to large-scale dairies being developed.

"A program like that would hit a lot of capital with projects we are working with in the state right now," she said.

Northern Great Plains, a regional economic development group, will help authorize at least $3 million in grants a year to the five states,
Mirehouse said.

Daschle noted additional federal assistance – either technical, managerial or networking – could be sought. USDA can issue up to $44 million
in operational assistance grants to venture capital companies to provide small businesses with help. Grants require a $1 million or 10 percent
of total capital match.

"It sets up more of a likely opportunity for small businesses to have access to additional tools," he said.