Reaffirming the value of rural economic development loan & grant programs and their impact

Rural communities often depend on strategic investments from innovative economic development programs to support local businesses, infrastructure and community development projects. The U.S. Department of Agriculture's (USDA) Rural Economic Development Loan & Grant (REDLG) Program has played an instrumental role in many such initiatives, providing low- or zero-interest loans in rural communities served by telephone or electric cooperatives.

These funds, in turn, empower rural businesses and communities to create jobs, enhance public services and improve overall quality of life. However, recent funding reductions have threatened to weaken the impact the USDA REDLG Program will have in coming years, with significantly less funding available for rural cooperatives to access in support of eligible projects.

Great River Energy economic development staff assists our member-owner cooperatives throughout the process of securing Federal funding. We work with the business applicants, end users, other lenders, and members owners to assure success. The low interest financing provides benefits by reducing the operational costs of small businesses. Through adequate securitization of the loans, the member owners of Great River Energy are able to minimize financial risks to their entire cooperative membership.

Why restoring funding matters

Since 2011, Great River Energy and its member-owner cooperatives have helped secure over $12 million in REDLG financing in Minnesota, supporting over $340 million in total project investments. The resulting initiatives have created over 300 jobs, improved public health and safety and enhanced infrastructure across the state. A shift to fewer applications approved with reduced funding will only stifle future opportunities for rural communities to thrive.  

The National Rural Economic Developers Association (NREDA) is leading the charge in advocating for restoring REDLG funding to 2023 levels. According to an open letter from NREDA to the House and Senate Committees on Agriculture, FY 2024 funding for the REDLG program decreased by nearly half, from an expected amount of roughly $90 million to about $52 million. The Rural Economic Development Loan program reportedly experienced a cut of over 40%, while the Rural Economic Development Grant program experienced a cut of over 30%.

The REDLG program offers pass-through loans of up to $1,000,000 at 0% interest for job-creating enterprises, and cooperatives can also apply for grants to provide loans for public health and safety projects. The grants can eventually provide the seed capital to create revolving loan funds (RLFs) that continue to support community projects, small business start-ups and business expansions for years to come.

The REDLG program's RLFs have proven their sustainability and effectiveness, with co-ops reinvesting repaid funds into new projects. This evergreen approach ensures continuous economic development and job creation. Great River Energy's member-owner cooperatives alone have approved well over $5 million in RLF loans since 2011.

The recent funding reduction means that fewer pass-through loans will be approved and less grant money will be available to help fund sustainable revolving loan fund programs in rural communities. By restoring REDLG funding to 2023 levels, communities can continue to reap these long-term benefits.

To illustrate the undeniable value of the program, these transformative projects demonstrate its success and underscore the need for full funding.  

Redhead Creamery: From whey to whiskey

Redhead Creamery, a family-owned cheesemaking business, innovatively created Minnesota's first whey-based distillery. This initiative helped transform cheesemaking byproducts into premium distilled spirits. The creamery received $1.5 million in funding through Stearns Electric Association via the REDLG program. With this support, Redhead Creamery has diversified its revenue streams, strengthened local agriculture and created new employment opportunities.

This project is a shining example of how REDLG funding fosters entrepreneurial innovation and drives rural business growth.

Senior living communities: critical healthcare closer to home

In Park Rapids, Minnesota, Itasca-Mantrap Cooperative Electric Association secured a total of $3,720,000 in REDLG financing to support the construction and expansion of a state-of-the-art 143,000-square-foot senior living facility with two connected memory care buildings, offering a level of health care not previously available in the surrounding region.

The REDLG funds leveraged total project investments of nearly $24 million, creating more than 56 good-paying jobs in rural Hubbard County while providing vital services to seniors who would have otherwise had to leave their community to find the care they needed.

Firefighters and first responders: protecting those who protect us

In 2023, Mille Lacs Energy Cooperative facilitated a $360,000 REDLG grant-to-loan to support the construction of a new $1.4 million fire hall and public safety building in the City of McGregor, resulting in safer working conditions for first responders and faster response times for residents and businesses in rural Aitkin County.

This fire department responds to emergencies in an area that encompasses busy state highway corridors 65 and 210, popular tourist destinations like Big Sandy Lodge and Covenant Pines Bible Camp, and vital manufacturing employers like Savannah Wood Pallets and FLOE International. 

Restoring REDLG funding is crucial for rural community growth and innovation  

Great River Energy's economic development team stands with NREDA in calling for the restoration of REDLG funding to pre-FY 2024 levels. The success stories above are a few examples of the program's transformative impact. Investing in REDLG is not merely about funding individual projects but empowering rural communities to innovate, grow and prosper.