USDA Release No. 0451.98
USDA PROVIDES $200 MILLION BOOST FOR CO-OP DEVELOPMENT
WASHINGTON, October 29, 1998 -- In an attempt to stimulate a new wave of rural economic development, the U.S. Department of Agriculture is allocating $200 million to support the creation of cooperatives during 1999, Agriculture Secretary Dan Glickman announced today. This action doubles the amount of money for co-op development which USDA set aside from its Business and Industry (B&I) Guaranteed Loan fund during 1998.
"This dramatic funding increase delivers on the commitment of the Clinton Administration to boost the role cooperatives will play in improving the rural economy and preserving family farmers in the 21st century," Glickman said. "USDA will be backing loans for a wide-variety of rural cooperatives, including farmer-owned co-ops that process raw crops into value-added products and consumer-owned co-ops that provide services such as daycare and credit."
Because cooperatives are producer- or consumer-owned businesses, they are structured specifically to meet local needs and profits are returned to members or reinvested in the business, he noted.
Cooperatives in rural areas may use the guaranteed loans to invest in machinery and equipment, real estate, or for working capital. Family farmers can use loan guarantees to help pay for stock in a start-up cooperative that processes their agricultural commodity into a value-added product.
"A major challenge facing farmers and other rural people is the need to make the transition from being producers of raw commodities to producers of value-added products, thereby keeping more of the profits from their labor at home," Jill Long Thompson, USDA Under Secretary for Rural Development said today during a speech at a cooperative development forum in Atlanta. "For many, the best way to accomplish this will be through a cooperative they own and direct. This not only benefits producers, but the rural communities in which they live."
USDA's Business and Industry Guaranteed Loan Program guarantees up to 60 percent of a loan between $10 million -- $25 million, 70 percent of a loan between $5 million up to and including $10 million, and up to 80 percent for a loan of $5 million or less. Local lenders are more able to finance rural business projects when USDA guarantees a business loan, as they often have their lending limits extended, Long Thompson said.
An example of a successful cooperative can be found in the rural Georgia community of Dawson. Last year, USDA provided a $1.4 million B&I guaranteed loan to reopen a closed textile plant as an employee-owned cooperative. Many of the 200 textile workers who lost their jobs when the previous owner shut the plant down are now back at work, and the small rural community where most of the workers live avoided a devastating economic blow.
The $200 million being allocated represents about one-fifth of the B&I program budget for 1999. The B&I loan guarantees work with the private sector to boost the nation's rural economy by supporting businesses that produce or preserve rural jobs. Borrowers first seek financing from a local lender in their area, and the lender in turn seeks a guarantee from USDA.
B&I loan guarantees must be obligated to rural cooperatives by July 9, 1999. After that, funds not used to finance a cooperative will be available to any eligible rural business for the rest of the year.
For more information, contact a USDA Rural Development office, or USDA's Rural Business-Cooperative Service in Washington, D.C. at (202) 720-0813.
Media Contact: Jim Brownlee, (202) 720-2091
jim.brownlee@usda.gov
Public Contact: Dan Campbell, (202) 720-6483
dcampbel@rurdev.usda.gov
Return to Rural Development News and Information Room