Very small businesses are the lifeblood of rural America, yet small entrepreneurs often struggle to access credit and business training. Fortunately, the U.S. Department of Agriculture (USDA) operates a rural development program — the Rural Microentrepreneur Assistance Program (RMAP) — aimed at addressing this gap.
RMAP provides loans and grants to Microenterprise Development Organizations (MDOs) — non-profit organizations, community-based financial institutions, and local economic development councils — that in turn provide technical services and microloans to rural small business owners in their states and local communities.
On Friday, June 19, USDA announced the availability of RMAP funding to support nearly $14.2 million in loans as well as $2.1 million in training and technical assistance grants for small business development in rural areas.
NSAC and its member groups helped create RMAP in the 2008 Farm Bill and then renew its authority in the 2014 Farm Bill. The 2014 Farm Bill provides RMAP with sufficient funding to support most of the $16.3 million available in FY 2016, though a small portion will come from carry over funds from previous years.
We are currently working to secure additional discretionary funding for this highly successful program through the annual appropriations process. On top of the very limited mandatory funding provided by the the Farm Bill, the President requested discretionary funding to support an additional $25 million in loans and grants in FY 2016. We are hopeful that final FY 2016 appropriations legislation will include this funding.
RMAP defines a “microentrepreneur” as a rural sole proprietorship or business with less than ten employees. Additionally, potential borrowers are required to show that they cannot obtain funding from other lending sources due to lack of credit or limited business development experience. The microbusinesses must be located in rural areas defined as any area other than a city or town that has a population of greater than 50,000 and the urbanized area contiguous and adjacent to such a city or town according to the latest decennial census.
Types of Funding Available
There are three categories of funding that are available through RMAP:
- Loan capital to MDOs to provide fixed interest rate microloans of less than $50,000 to rural entrepreneurs for the development of microenterprises in rural areas. Loans through MDOs cannot exceed a 20-year timeframe and need to bear an annual interest rate of at least one percent. Each MDO must establish a loan loss reserve fund and keep at least five percent of the outstanding loan balance in reserve.
- Technical assistance grants to MDOs to provide marketing, management, and other technical assistance to microentrepreneurs who have already received or applied for an RMAP loan through an MDO. The maximum annual grant award can be no more than 25 percent of the organization’s outstanding microloan balance. This assistance could include but is not be limited to networking, online collaboration and marketing, grant-writing, entrepreneurship workshops or conferences.
- Technical assistance-only grants to MDOs that seek to provide business-based training to eligible microentrepreneurs and microenterprises, but do not seek loan funding.
The federal share of the cost of a microentrepreneur’s project shall not exceed 75 percent, meaning that the MDO must provide or secure the remaining 25 percent from non-federal sources. For any RMAP grant, MDOs must match at least 15 percent of the total amount of the grant in the form of matching funds, indirect costs, or in-kind goods or services.
How to Apply
Applicants must deliver completed applications for loans, and combination loan and grant applications to their USDA Rural Development state office by 4:30 p.m. (local time) on the last day prior to the beginning of each federal fiscal quarter to be considered for funding in that quarter. Applications received after a federal fiscal quarter deadline will be reviewed and evaluated for funding in the next federal fiscal quarter.
Microlender technical assistance grants for existing MDOs with a microentrepenuer revolving loan fund will be made, non-competitively, based on the MDO’s microlending activity and availability of funds. To determine the MDO’s technical assistance grant awards for FY 2015, the Agency will use the MDO’s outstanding balance of microloans as of June 30, 2015.
MDOs can obtain applications and forms from their Rural Development state office or online at http://www.rd.usda.gov/programsservices/rural-microentrepreneurassistance-program. A list of the USDA Rural Development State Offices addresses and telephone numbers can be found online at http://www.rurdev.usda.gov/StateOfficeAddresses.html.