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Statement of Need: The new regulation for the program will be user friendly and responsive to industry comments. Publication of the proposed rule is crucial to program implementation. The program will directly create new businesses, assist with the expansion of existing microbusinesses (for purposes of this program, a microenterprise is a rural business that employs 10 or fewer Full Time Employees (FTE)), create jobs, increase the flow of tax dollars to rural communities, and add lasting value in terms of rural community impact.

Summary of the Legal Basis: The RMAP was authorized by the Food Conservation and Energy Act of 2008. The Act establishes the Rural Microentrepreneur Assistance Program and mandates that the new program will make loans and grants to support microentrepreneurs in the development and ongoing success of rural microenterprises. It further mandates that entities will use funds borrowed from the Agency to make microloans of not more than $50,000 to rural microenterprises for eligible purposes; that the Agency will make grants to provide business based training and technical assistance; and that the Agency will provide funding to improve the capacity of rural MDOs to provide services to rural microenterprise clients. The purpose of the program is to increase access to capital and business based training in rural areas for rural business owners and potential business owners at the start up and micro levels.

Alternatives: The proposed rule process is our only current route for implementation. Funding for the initial four years (2009-2012) of the program is mandatory and FY2009 funding will be expendable in FY2010. The proposed rule will allow the Agency to use both years’ funding in the inaugural year of program implementation.

Anticipated Costs and Benefits: Costs: Initial costs include the cost of the listening conference; staff time; and the cost of the regulation writing contractor that works in close concert with staff. Ongoing costs include a minimal increase of one FTE, and space for same, at the National Office level. The state offices are not currently under consideration for more FTEs as a result of this program. Other costs will/do include the cost of automation of distribution of funding, loan servicing, grant servicing, repayment systems, and oversight systems. The assigned office (Specialty Programs Division) has been working with the Information Technology (IT) offices to implement the program through RULSS which is the newer generation of agency automation systems and is the most flexible in terms of meeting the needs of the statute. Finally, Training will be required for field staff. Cost Mitigation--To mitigate implementation costs the proposed rule has considered existing programs to ensure that implementation will be less process based and more results driven when compared to other programs. Automated processes will help ensure efficiency. Use of existing field staff will keep new FTEs to a minimum. Benefits: The initial benefits to program implementation include the addition of a small rural business lending program that increases access to Rural Development programming by adding to the starting end of the business financing continuum of services. The program allows Rural Development to open its doors to rural clients at the very beginning level of the business start-up and initial growth phases, and provide assistance to businesses that are often too small to be considered viable for a bank loan. The long term benefits to program implementation include long term availability of this new pathway to assist rural start-up businesses; increased access to business capital in rural areas, at a grass roots level, and often to pre-bankable ultimate recipients; expansion of business opportunities in rural areas; increased tax flow as businesses become profitable; increased job creation and rural job retention as new and existing microbusinesses sprout and grow; support of micro level entities producing organic food product, locally grown food product, and locally manufactured goods for intra and interstate export; service industry growth; increased opportunity for rural youth; and legal immigrants; and increased exposure of Rural Development funding programs to the target constituency. Mandatory funding is set at $4 million for FY2009; $4 million for FY2010; $4 million for FY2011; and $3 million for FY2012. The statute authorizes up to $40 million per year for each of the years in addition to mandatory funding.

Risks: Program risks include making of loans and grants to multiple types of entities for multiple purposes with a singular goal; ability to select appropriately capable lending and training entities; reliance on selected entities for sound microloan underwriting and appropriate portfolio management; and availability of enough grant funding for ongoing technical assistance in the out years. We anticipate mitigating these risks via sound regulatory guidance, appropriate training, and clear communication of expectations to selected participants. Further, the statute is based in part on a successful non-USDA program of a similar nature with which many of the stakeholders and selected participants will be familiar providing this agency with a level of confidence.