Poverty target of federal program

By: - August 3, 2011 11:15 am

The USDA’s Intermediary Relending Program works in areas where big banks won’t by using infusions of federal cash to fight rural poverty through small business loans.

The program has sent $280 million into the national economy over the last seven years, including $25 million in North Carolina.

Officials based in North Carolina, one of the largest participants in the program, say it’s been an important weapon in fighting poverty in the state’s rural counties. That comes despite the program being one of the smaller monetary-wise in the state rural development office, which administered $2.2 billion in grants and programs worth of federal dollars in the state last year.

“Our intermediaries have helped start businesses that otherwise would not have been in existence if not for that program,” said Bruce Pleasant, the head of business lending programs for the USDA’s Rural Development division in North Carolina.

The federal agriculture department selects non-profit organizations to directly seek out and manage the small business loans and take on the significant risk that lending to inexperienced entrepreneurs can carry. The intermediaries, limited to non-profit organizations or public agencies, pay the federal money back at a nominal one-percent interest rate, and then loan out the money to small businesses who have been turned down for financing by commercial banks. As businesses repay the initial loans back to the intermediary, the lender is supposed to take those funds and continue making loans to businesses in the community. The ultimate goal is for the small businesses to take off, and create jobs that can help chip away at the unemployment that plagues rural communities.

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N.C. Rep. Stephen LaRoque runs two of the 17 N.C. intermediaries, and was the subject of a recent N.C. Policy Watch investigation. The investigation found LaRoque compensated himself with generous six-figure salaries, placed immediate family members on the boards of his non-profits and used some of the federally-backed loans to help out his close associates. The USDA didn’t monitor LaRoque’s non-profits as closely as it should have. Records show the agency went four years without conducting required visits to review the non-profit organizations’ work.

But USDA officials based in North Carolina stressed that when the IRP program works as intended, it fills a necessary need by giving business people in rural areas the ability to start and grow their small businesses.

For those that have benefitted from the program, the program gives opportunities that wouldn’t otherwise exist.

On the western edge of the state in Burnsville, Greg Yuziuk credits the IRP program with helping his family-owned delicatessen take off, when no bank was willing to take a risk and loan him $150,000 for a renovation.

“Whenever we needed a break, it was there,” Yuziuk said about the rural lending program. “The big banks do nothing for small businesses.”

The Burnsville Garden Deli Restaurant had five employees in 1995, the year Yuziuk took out a loan from the non-profit MAY Coalition, a intermediary lender that serves Macon, Avery and Yancey counties near the Pisgah National Forest. He now has a staff of 17 in his busy summer season, and has seen growth every year since he took out the loan.

Bill Weeks, the director and sole employee of the MAY Coalition since its 1991 founding, said the non-profit has been an important tool for job creation in the area. The coalition, which keeps its overhead lows and pays Weeks less than $60,000 a year, has lent money to day care operators, clothing stores and veterinary offices.

Weeks credits much of the success on having an active and diverse board of directors pulled from the area’s business and government communities that are involved with every loan decision that’s made. He sees both the federal funds and the money repaid by borrowers as belonging to the larger three-county community, and a tool to increase employment and strengthen the area’s fragile economy.

“As long as good loan decisions are made, it’ll be here for the community forever,” Weeks said. “If bad decisions are made and we lose money, the community won’t have that asset.”

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or [email protected].

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Sarah Ovaska-Few

Sarah Ovaska-Few, former Investigative Reporter for N.C. Policy Watch for five years, conducted investigations and watchdog reports into issues of statewide importance. Ovaska-Few was also staff writer and reporter for six years with the News & Observer in Raleigh, where she reported on governmental, legal, political and criminal justice issues.