By SARAH B. AUBREY
Indiana Correspondent

INDIANAPOLIS, Ind. — Starting a farm-based or value-added enterprise seems to be the new ideal for success in niche or small-farm agriculture. Often financing is what holds people back.

Though one of many options, according to producer-assistance groups such as the Indiana Cooperative Development Center (ICDC), acquiring start-up money effectively can be done through a variety of sources, including using grants.

“Grants are there to help producers create new business ventures and help with the feasibility study and business plan components of the venture,” explained Chad Martin, business development specialist with the ICDC in Indianapolis.

The ICDC was founded in 2003 as a non-profit organization. Martin said ICDC provides technical assistance for groups looking to create cooperatives and other collaborative business entities in agriculture, including alliances or Limited Liability Companies (LLCs).

Funding for grants comes from a variety of sources. One common source is the USDA Rural Development’s Value-Added Producer Grant program, though there are many state-funded programs as well as community foundations which offer grants. While a grant is money that typically is given without the requirement that it be repaid, grants are not without stipulations.

“There is a perception that grants are ‘free money’, that’s not necessarily true,” Martin said explaining that many grants, including USDA’s rural development grant, are matching grants.

A producer applying for a $50,000 matching grant, for example, would be required to show proof of $50,000 available from other sources to receive the grant. Martin also said that some grants do not provide the money up front, but work on a reimbursement basis requiring the producer to show receipts to validate purchases.

USDA also offers a loan guarantee program which works through a separate financial institution such as the producer’s local bank, Martin said.

Grants also require some work to manage if the producer receives the funds.

“They’re not always simple; you will have to stick to a timeline, accomplish what you said you would do with the money, and do some reporting,” Martin explained, noting that for producers who don’t like paperwork, applying for and managing grant money could be a drawback.

Resources are available to assist producers in managing their grant money; he recommends contacting a qualified accountant, or looking your county extension office for resource information. Another great resource for producers is the regional RC&D office usually affiliated with a local NRCS branch.

Additionally, Martin said the business should have established a taxable, legal entity which is required when applying for grant money. Simply applying for a grant does not guarantee acceptance, though in some cases grants go unrewarded because too few people take the time to apply.

“One way to help ensure you get funded is to do your homework well in anticipating the announcement of a grant program to collect information and organize a project seeking grant funds,” he said.

“Getting key partners within the community aware of your project and acquiring a support letter from a credible source can also be beneficial.”

Martin suggested that support-letter sources could be financial institutions, universities or extension. His tips for a successful grant application are:

•Have a documented business plan showing valid research information
•Have a definite market for your product and a target client
•Have the matching capital ready and be able to provide proof
•Have a timeline for the dollars you need and make sure it fits the grant program time requirements
•Contact another producer who has previously been awarded a grant from the particular program who can provide valuable insight
•Clearly understand the granting organization’s goals and objectives; make certain your project is a fit
•Make contact with the grant program and ask questions before applying
•Be neat, complete, and fill out the application on time

If funding isn’t received on the first attempt, Martin encourages producers to try again as granting organizations may provide useful feedback on the initially rejected application. “Your chances of getting funded on your second attempt increases greatly, especially with the more competitive programs,” Martin said.

This farm news was published in the June 27, 2007 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.