There are many types of bioeconomy projects seeking federal and state funding. Funding requests also come at different stages – during research and development, in the demonstration/pre-commercial phase, and in commercial-scale projects. These state and federal funding opportunities normally fall within one of the following three categories:
- A government grant is a financial award given by the federal, state, or local government to fund some type of beneficial project. There are federal grant programs that support research and development and demonstration (RDD); demonstration/pre-commercial; and commercial scale bioeconomy projects. Some of the most popular federal grant programs for RDD include numerous federal agencies Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STRR) programs. For commercial-scale projects, the USDA Rural Energy for America (REAP) provides grants for certain types of bioeconomy projects. Additionally, many states have their own grant programs that can stand alone or complement federal grants.
- Loan Guarantees. A loan guarantee is a contractual obligation between the government, the borrower, and private creditors like banks and other commercial loan institutions. The obligation is that in the event of a borrower default, the federal government will cover a certain percentage of the borrower’s debt obligation. Federal Loan Guarantee Programs include those under the Department of Energy’s Title XVII Innovative Energy Program, USDA Business and Industry loan guarantees, REAP loans, and Section 9003 Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Programs.
- Direct Government Loans. A direct Government loan is a loan provided by the government as the lender. Normally these direct loans are at reduced interest rates and longer terms to accommodate projects that cannot afford to pay the commercial lender rates and terms. Some, like the USDA’s Community Facilities direct loan program, can be used to support community-based/ owned bioeconomy projects.
The maze of federal funding is often hard to navigate. It is sometimes difficult to find the best funding vehicle and to decide when and if to apply. Bioeconomy project developers applying for grants, loan guarantees, or direct government loans, must be prepared. They must not only have the necessary required materials but also must present them in the proper order. Additionally, it is usually a safe assumption that, as part of the loan application, an applicant will need to provide a business plan, feasibility study, appraisal, and in many cases, a technical engineering report/assessment. To ensure objectivity, it is often required that these be performed by outside third parties who will not be the beneficiary of any loan proceeds.
Federal and state funds are often the initial funding for projects, and in many cases, determine whether a project will move forward. Sometimes, these federal grants and direct/loan guarantee programs can even be combined for funding assistance. Given the importance of these types of funding, it is always a good idea to retain experienced assistance in the preparation and submission of applications for these federal and state funds.
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