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Larry Carnahan USDA Rural Development (620) 784-5431 [email protected] September 2003 USDA Rural Development Rural Business and Cooperative Service “Partners in helping the people of rural America develop sustainable communities”

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Usda rural development rural business and cooperative service l.jpg

Larry Carnahan

USDA Rural Development

(620) 784-5431

[email protected]

September 2003

USDA Rural DevelopmentRural Business and Cooperative Service

“Partners in helping the people of rural America develop sustainable communities”



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The Farm Security and Rural Investment Act of 2002

Farm Bill Highlights

  • $40 million per year for 6 years

  • Maximum Grant Amount $500,000 (priority points will be given for applications under the $500,000 max)

  • Applicants must provide matching non-Federal funds at least equal to the grant.

  • Expanded eligibility

The Farm Security and Rural Investment Act of 2002


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The primary objective:

Is to help eligible producers of agricultural commodities, agricultural producer groups, farmer and rancher cooperatives, and majority-owned producer-based business ventures develop businessplans for viable marketing opportunities and develop strategies to create marketing opportunities in emerging markets.


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What does this mean:

  • Get agricultural producers into adding value to the products they produce

  • Help producers expand the customer base for their products or commodities, and

  • To ensure that a greater portion of the revenues derived from the value-added activity is available to the producer


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Value-AddedAgricultural ProductMarket Development Grant Applications (FY 2002)

19

21

22

10

32

67

33

19

15

16

33

71

Nationally 714 Applications for $121 Million dollars


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Value-Added Agricultural Product Market Development Grant Selections (FY 2002)

13

1

5

6

9

4

5

3

20

9

20

2

14

1

4

5

29

13

7

2

0

0

3

1

8

4

8

12

12

2

1

4

1

0

1

0

4

0

4

0

5

2

9

231 Applications Selected for $37.2 Million dollars


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Kansas Projects Awarded Grants FY 2002

  • Jewel County Sunflower Processing ($41,000)

    To assist with a feasibility study, business plan , and legal advise regarding a proposed sunflower processing plant.

  • Padonia Grain Farmers, Inc. ($50,750)

    To conduct a feasibility study and develop a business plan for segregating and marketing high protein corn.

  • American White Wheat Producers Assoc.($218,710)

    For a feasibility study and business plan development regarding the processing of heavy bran for use in breakfast cereals and specialty breads.


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Kansas Projects Awarded Grants FY 2002

  • Western Plains Energy, LLC ($291,615)

    For working capital to assist in the start up of a 30 mgy ethanol plant

  • East Kansas Agri-Energy LLC ($450,000)

    For working capital to assist in the start-up of a 20 mgy ethanol plant.

  • Cooperative Ag Services ($500,000)

    Working capital for the startup operation of a soy bean crushing facility.


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Kansas Projects Awarded Grants FY 2002

  • 21st Century Grain Processing ($500,000)

    Working capital for milling of hard white wheat and distribution of flour and food grade corn.

  • U.S. Premium Beef, Ltd. ($500,000)

    For a feasibility study, business plan, business and legal evaluations for acquisition of a majority ownership interest in a beef packing company


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Value-Added Producer Grants 2003

  • VADG / VAPG

  • NOFA was published September 4, 2003

  • Deadline for applications is October 20, 2003

  • Minor changes compared to last year

  • Approximately $27.7 million to be available

  • Business applicants must obtain a DUNS number


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RBS/Coop Services VADG Website:

www.rurdev.usda.gov/rbs/coops/vadg.htm

  • Up to date program information

  • September 4, 2003 NOFA

  • The process for obtaining a DUNS number

  • Application forms and content requirements

  • Tips on Completing Forms

  • Score Sheets

  • 2002 VADG Selections


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Is Your Project Eligible?

Three Levels of Eligibility

1) Is the applicant an eligible entity ?

2) Does your product meet one of the four

categories of value-added activities ?

3) Are the funds being used for an eligible purpose ?


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Is Your Project Eligible?

1) Is the applicant an eligible entity?

  • Independent Producers

  • Farmer or Rancher Cooperatives

  • Ag Producer Groups (Commodity Organizations)

  • Majority Owned Producer Based Businesses

    (more than 50%)


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Applicant Eligibility

Independent Producer

  • An individual producer of agricultural commodities or products

  • An association, such as a corporation or LLC solely owned by producers

  • A steering committee of producers in the process of organizing an association

  • can not produce under contract or joint ownership with any organization other than their own.


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Applicant Eligibility

Farmer or Rancher Cooperative

  • A business incorporated under state cooperative or

    corporation statutes that is farmer or rancher

    owned and controlled, and benefits are returned to the farmer/rancher owner on the basis of their patronage of the cooperative

  • Must propose ventures that are entering into

    emerging markets


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Applicant Eligibility

Agricultural Producer Groups

  • Any organization that represents independent producers, such as a trade association or a state/national commodity group

  • Must provide the assistance to a specifically identified group of independent producers

  • Must propose ventures that are entering emerging markets


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Applicant Eligibility

Majority-Controlled Producer Based Business

Ventures

  • A corporation, LLC, or other type of business structures where producers have more than 50 percent ownership and control

  • Must propose ventures that are entering emerging markets

  • No more than 10% on the grant funds can be awarded to these ventures


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What is an Emerging Market?

  • A new or developing market for the applicant

  • A market the applicant has not traditionally supplied

  • Venture must focus on the emerging market

    • New product into an old or new market

    • New market for an old or new product


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Is Your Project Eligible?

2) Does your project meet one of the four

categories of value-added activities for an ag

product or commodity?

  • Change in the physical state

  • Production in a manner that enhances its value, as

    demonstrated by a business plan

  • Segregating in a manner that enhances its value

  • Used to produce renewable energy on a farm or ranch


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Product Eligibility

The changing of the physical state or form of the product

Examples:

  • processing wheat into flour

  • corn into ethanol

  • slaughtering livestock or poultry


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Product Eligibility

A product produced in a manner that enhances its value, as demonstrated through a business plan

  • An example is organically produced products


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Product Eligibility

The physical segregation of a commodity

or product in a manner that results in the

enhancement of its value

Examples:

  • an identity preservation system for a variety or quality of grain desired by an identified end-user

  • the traceability of hormone-free livestock from the farm to the retailer


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Product Eligibility

Using any agricultural commodity or product to produce renewable energy on a farm or ranch.

  • An example is collecting and converting methane

    from animal waste to generate energy

  • Does include wind and solar


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Product Eligibility

A Value-Added Product Must:

  • Expand customer base for the product or commodity, and

  • Result in a greater portion of the revenues derived from the value-added activity that is available to the producer


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Is Your Project Eligible?

3) Are the grant and matching funds to be used for an eligible purpose?

- Planning Activities

- Working Capital

- One or the other, not both


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Eligible Purposes

Planning Activities to determine viability:

  • Feasibility Studies

  • Business and Marketing Plans

  • Legal Evaluations


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Eligible Purposes

Working Capital :

  • Legal and accounting costs

  • Salaries

  • Utilities

  • Inventories

  • Supplies

  • Office equipment

  • Other operating costs


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If applying for working capital:

  • Must have an acceptable feasibility study

    - completed by qualified, independent third party

    - project size and location specific

  • Will need an adequate business plan

  • Rural Development must approve prior to funding of the grant


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Feasibility Studies

  • Completed by a qualified, independent third party

  • Should include five feasibility components

    1. Economic

    2. Market

    3. Technical

    4. Financial

    5. Management

  • Selection of a consultant


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Ineligible Purposes

  • Costs associated with buildings or equipment

  • Engineering design for a specific facility

  • Costs incurred prior to receiving (closing) the grant

  • Pay for preparation of the grant application

  • Expenses related to ag production

  • Expenses not directly related to the venture

  • Fund political and lobbying activities

  • Activities prohibited by 7 CFR parts 3015 and 3017


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Application Process

  • Complete applications, with all required forms and documentation, must be received no later than October 20, 2003 at 4:00 p.m.

  • Late applications will not be accepted

  • Electronic submission is encouraged, but must mail or fax the three signed SF-424 forms


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Application Process

  • Submit completed applications to:

    USDA Rural Development

    Larry Carnahan

    P.O. Box 437

    Altamont, KS 67330

    Fax: 1-620-784-5900

    Email: [email protected]


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Application Process

  • Follow the NOFA and supply all the info requested

  • It is not rocket science

  • Be specific and detailed, if vague, you will lose points

  • Make it easy for the reviewer to follow and understand

    - if the reviewer can’t locate the information, you will lose points

  • Take adequate time to prepare the application

    -if put together hastily, it will show

  • Should be typed, handwritten may not be legible


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Application Process

A Complete Application consists of:

  • SF-424 “Application for Federal Assistance”

  • SF-424A “Budget Information - Non-Construction Programs”

  • SF 424 B “Assurances - Non-Construction Programs”

  • Table of Contents

  • Proposal Summary

  • Eligibility Statement

  • Proposal Narrative

    • Project Title

    • Information Sheet

    • Goals of the Project

    • Evaluation Criteria

  • Verification of Matching Funds


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Application Forms and Proposal Format

www.rurdev.usda.gov/rbs/coops/vadg.htm

  • Forms may be downloaded by clicking on the form number

    - Application For Federal Assistance SF-424

    - Budget Information - Non-Construction Programs SF-424A

    - Assurances - Non-Construction Programs SF-424B

  • Proposal Format and content


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For a Proposal Format Template

  • K-State VABDP has developed a template

    • On the internet at: www.agmanager.info

    • Soon to be on the Kansas Rural Development

      website at: www.rurdev.usda.gov/ks

  • K-State VABDP will provide assistance in reviewing your applications

    • Send draft application as an email attachment to: [email protected]

    • Send at least one week before the 10/20/03 deadline

  • Contact David Coltrain: 785-532-1523


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Application ProcessAreas to Watch

  • Clearly state how you meet the definition of:

    - an eligible applicant

    - an eligible value-added activity

    - eligible use of grant and matching funds

  • Specify whether the application is for planning or working capital


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Application ProcessAreas to Watch

Verification of Matching Funds:

  • Clearly document the source and amounts of matching funds

  • If in cash, furnish a copy of a bank statement or a copy of the

    commitment from the funding source

  • If in-kind match, provide verification of all commitments and how they are valued

  • Matching funds must be equal to or greater than grant funds

  • Must be available and spent at the same rate as grant funds

  • Other Federal grant funds cannot be used as matching funds


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ApplicationProcess

  • Each proposal will be evaluated and scored by three reviewers

  • One review will take place at the State level

  • Upon determining eligibility, the State Office will submit the proposals to a contractor for two additional reviews


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Application Process

  • After reviews are completed, proposals are ranked highest to lowest based on their scores

  • Grants are awarded from the highest score down until the money is gone

  • Successful and unsuccessful applicants are notified in writing


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Scoring Criteria Grants for Planning Purposes

1. Nature of the Proposed Venture (Maximum 5 Points)

2. Qualification of Those Doing the Studies (Maximum 5 Points)

3. Project Leadership (Maximum 5 Points)

4. Commitment (Maximum 5 Points)

5. Work Plan/Budget (Maximum 5 Points)

6. Amount Requested

  • $450,000 - $350,001 .5 Point

  • $350,000 - $250,001 1 Points

  • $250,000- $150,001 1.5 Points

  • < $150,000 2 Points

    7. Project Cost Per Producer (Maximum 5 Points)

    8. Presidential Initiative of Bio-energy Production

    (5 percent of total score)


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Scoring - Planning Purpose1. Nature of the Proposed Venture(maximum of 5 Points)

Describe in detail the proposed venture

  • Explain what the venture is to accomplish

  • Describe the technology involved, is it proven

  • How will the customer base will be increased

  • How more profits will be available for producer-owners

    More points will be awarded to ventures with proven technology,

    that have a good chance of being viable and sustainable, and for

    the greatest expansion of markets and increased profits.


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Scoring - Planning Purposes2. Qualifications of Those Doing the Studies(Maximum of 5 points)

  • Describe their credentials: education and experience in doing this type of study

  • the success rate of other ventures based on their studies

  • Include resumes

    Points will be awarded based on qualifications,

    demonstrated skills, and a successful track record


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Scoring - Planning Purposes3. Project Leadership (Maximum of 5 points)

  • Describe the individuals on the steering committee or the individual who is leading this effort

  • provide information on education, business experience, financial experience, knowledge of the venture to be undertaken, etc.

  • Include resumes

    Points will be based on demonstrated relevant leadership

    skills. Backgrounds in business, finance, and the

    venture’s technology will score higher.


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Scoring - Planning Purposes4. Commitment (Maximum of 5 points)

Describe the level of producer commitment including:

  • the number of producers involved or to be involved

  • cash contributions and level of production

    Describe the potential commitment of end-users including:

  • possible markets identified and buyers contacted

    Describe other commitment including T/A, financial, and references:

  • Local/state development organizations and governmental entities

  • commodity associations

  • Institutions of higher education

    Higher producer, end-user, and local support will result in more points.


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Scoring - Planning Purposes5. Work Plan/Budget (Maximum of 5 Points)

Discuss the tasks: when, who, how long, and cost

  • Each task must be clearly defined and described in detail

  • Present the order in which the tasks will be undertaken and the estimated time to complete

  • Present a breakdown of estimated costs and allocate to each of the tasks

  • The grant and matching funds must be allocated to each task

  • Grant & match funds should be spent at the same rate on each task

    Logical, realistic, and economically efficient plans and budgets will

    result in higher scores.


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Scoring - Planning Purposes6. Amount of Grant Requested (Maximum of 2 points)

  • 1/2 point for requests between $450,000 and $350,001

  • 1 point for requests between $350,000 and $250,001

  • 1 1/2 points for requests between $250,000 and $150,001

  • 2points for requests of $150,000 or less


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Scoring - Planning Purposes7. Project cost per producer that is an owner (Maximum of 5 points)

Divide the grant request by the total number of

independent producers that are owners of the

venture

Points will be based on the largest number of

producers / owners benefited for the least cost


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Scoring - Planning Purposes8. Bio-mass Production

For applications that focus on the Presidential initiative of

bio-energy production, five percent of the total score of

the first seven criteria will be added to the final score

  • For example, if an application scores a total of 30 points on criteria one through seven, 1.5 additional points

    (30 x 0.05) will be added, making the final score 31.5


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Scoring Criteria Grants for Working Capital

1. Business Viability (Maximum 5 Points)

2. Customer Base/Increased Returns (Maximum 5 Points)

3. Commitment (Maximum 5 Points)

4. Management Team/Work Force (Maximum 5 Points)

5. Work Plan/Budget (Maximum 5 Points)

6. Amount Requested

  • $450,000 - $350,001 .5 Point

  • $350,000 - $250,001 1 Points

  • $250,000- $150,001 1.5 Points

  • < $150,000 2 Points

    7. Project Cost Per Producer (Maximum 5 Points)

    8. Presidential Initiative of Bio-energy Production

    (5 percent of total score)


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Scoring - Working Capital1. Business Viability(Maximum of 5 points)

  • Describe in detail the technical and economic feasibility

    of the venture (reference the feasibility study and business plan)

  • Describe the organizational structure and operational

    aspects of the venture

  • Discuss how the venture will operate efficiently and be

    sustainable

    More points will be awarded to those proposals demonstrating

    the venture will be efficient and sustainable


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Scoring - Working Capital2. Customer Base/Increased Returns (Maximum of 5 points)

  • Describe how the customer base for the product will expand

  • Provide documented estimates of this expansion

  • Describe how more profits will be returned to the producer/owners

  • Provide 3 years of pro forma financial statements, including an explanation of assumptions used

    - include cash flow and income statements, balance sheets

    More points will be awarded to those proposals that demonstrate the

    greatest expansion of the customer base and increased returns to the

    producers


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Scoring - Working Capital 3. Commitment (Maximum of 5 points)

Describe the producer commitment including:

  • the number of producers and their level of production

  • financial resources invested and their use

  • signed delivery agreements or letters of intent

    Describe who will purchase the output of the venture

  • the amount to be purchased

  • completed marketing studies or markets that have been identified

  • marketing agreements or letters of intent from the potential end-users

    Describe other commitment including T/A, financial, or references

  • Local/state development organizations and governmental entities

  • commodity associations

    Points will be awarded based on the greatest level of documented commitment


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Scoring - Working Capital 4. Management Team/Work Force (Maximum of 5 points)

  • Describe the qualifications of the individuals who will manage and operate the venture

  • Discuss the education and experience of the management team, especially that experience in managing similar ventures

  • Include resumes

  • Describe the availability and quality of the labor force needed to operate the venture

    Points will be awarded based on the greatest demonstrated

    level of relevant skills and experience


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Scoring - Working Capital5.Work Plan/Budget (Maximum of 5 points)

Discuss the tasks: when, who, how long, and cost

  • Each task must be clearly defined and described in detail

  • Present the order in which the tasks will be undertaken and the estimated time to complete

  • Present a breakdown of estimated costs and allocate to each of the tasks

  • The grant and matching funds must be allocated to each task

  • Grant & match funds should be spent at the same rate on each task

    Logical, realistic, and economically efficient plans

    and budgets will result in higher scores.


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Scoring - Working Capital 6. Amount of Grant Requested(Maximum of 2 points)

  • 1/2 point for requests between $450,000 and $350,001

  • 1 point for requests between $350,000 and $250,001

  • 1/2 points for requests between $250,000 and $150,001

  • 2 points for requests of $150,000 or less


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Scoring - Working Capital7. Project cost per producer that is an owner (Maximum of 5 points)

Divide the grant request by the total number of

independent producers that are owners of the

venture

Points will be based on the largest number of

producers/owners benefited for the least cost


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Scoring – Working Capital8. Bio-mass Production

For applications that focus on the Presidential initiative of

bio-energy production, five percent of the total score of

the first seven criteria will be added to the final score

  • For example, if an application scores a total of 30 points on criteria one through seven, 1.5 additional points

    (30 x 0.05) will be added, making the final score 31.5


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Scoring Areas to Watch

For Working Capital:

Business Viability and

Customers Base/Increased Returns

  • Adequate feasibility study and business plan

  • Financials should have adequate documentation

    to support the projections and assumptions


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Scoring Areas to Watch

For a Planning Activity:

Qualification of those doing studies

  • If you can document who will be doing your work and they are well qualified with a history of successes, you will score higher than if no one is specifically identified to complete the study


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Scoring Areas to Watch

Project Leadership or Management Team

  • Committees, boards, and multiple individuals

    with varied education, experiences and skills score higher than a single individual


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Scoring Areas to Watch

Thoroughly document commitment and support

  • producer

  • end user

  • third party

    Get those third party endorsement letters


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Scoring Areas to Watch

Do a detailed work plan and budget

  • allocate costs to each task

  • include a time schedule for the task

  • account for the use of grant and matching funds

  • make sure adequate narrative to explain the

    numbers


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Scoring Areas to Watch

Look at the scoring criteria for:

  • Amount of grant requested

  • Cost per producer/owner

    You may want to reduce your requested grant

    amount slightly to add more score points

    Follow the NOFA and address all parts of each

    scoring criteria very thoroughly


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FOR MORE INFORMATION

  • Larry Carnahan 620-784-5431

  • Email: [email protected]

  • Rural Development State Office 785-271-2730

  • Website: www.rurdev.usda.gov/ks

  • Email: [email protected]

    • RBS/Coop Services VADG website: www.rurdev.usda.gov/rbs/coops/vadg.htm

    • Application template at: www.agmanager.info

    • David Coltrain 785-532-1523

    • Email: [email protected]


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