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New Tools Bring Lenders to the Table for Local, Regional Food Enterprises

Posted by Lillian Salerno, Deputy Under Secretary, USDA Rural Development in Food and Nutrition Farming Rural USDA Results
May 11, 2016
Farm Fresh's Warehouse Manager Alex Mendonca and Market Mobile Manager Kimberly Garofolo
Farm Fresh's Warehouse Manager Alex Mendonca (middle) and Market Mobile Manager Kimberly Garofolo (right) work on the early morning packline. They work together to perform a final quality inspection before orders are packed onto delivery trucks.

Open any food magazine these days and you’re bound to find a profile of the latest locavore start-up turning cream and cantaloupe into craft popsicles or maple sap into a whole new category of bottled beverages.  As consumer demand for local foods continues to climb like pole beans, venture capitalists are scouring this sector in search of the next hot investment.

USDA has long been investing in this space too, for the good of rural economies. And now we’re unveiling a new online interactive training to help other funders understand the work of regional food enterprises that are connecting local producers with local markets, and why they might want to invest in a piece of this pie.

Since 2009, USDA has invested over $1 billion in local and regional food businesses and infrastructure projects, in support of the vision of Agriculture Secretary Tom Vilsack, who describes Local and Regional Food Systems as one of the four pillars of Agricultural and Rural Economic Development. Now we’re working to help other funders—from traditional financial institutions to nonprofit and philanthropic partners—understand investment opportunities in the quickly growing local food sector with a new, free online training course.

At USDA, we see potential for real gains in rural America when businesses in the middle of the supply chain—like local food hubs, processors, aggregators, distributors, and makers—can tap into capital for anything from seed money to delivery trucks, and sales staff to walk-in coolers. When theses businesses start-up or scale-up, they in turn build demand for goods and produce from regional farmers.

However, while consumer demand is driving enormous growth in local food businesses, these investment opportunities are often significantly different from those with which many financial institutions are used to working. Regional food enterprises are often lean businesses, low in collateral and high in risk as they trade in perishable foods. Seasonality can lead to significant spikes and valleys in cash flow. Yet, for the financial institutions that take the time to get to know the industry, local food businesses can be an excellent investment, particularly for investors looking for the additional social and environmental returns.

All of which is why USDA has joined forces with Wholesome Wave, a national non-profit working to increase affordable access to local produce, to offer free online interactive training to help funders of all stripes better understand what these food businesses have to offer the bottom line. We’ve already begun training USDA staff at all levels, and now we’re making the free online training available to the public so funders and investors everywhere can learn more, on their own time and pace, about this emerging business sector.

The online training entitled, What's the Big Deal? Assessing and Financing Regional Food Enterprises, helps funders and investors better understand and assess regional food businesses by providing an introduction to the food sector and regional food enterprises, a framework for conducting due diligence and a case study exercise to practice assessment. The training also introduces “capital stacking,” by which multiple funders, from private philanthropy, mission-oriented lenders, traditional lenders and public or government programs, use different models and levels of risk-tolerance to meet the capital needs of regional food businesses need.

On April 27, the Opportunity Finance Network—the leading national network of community development financial institutions (CDFIs)—invited all members nationwide to participate in the webinar. Jim Barham, PhD, Agricultural Economist, USDA Rural Development, and Darrow Isaacman-VanWertz, Senior Program Manager, Wholesome Wave, facilitated a version of the training live for fifty-six CDFI offices nationwide that participated. As financial institutions working in underserved communities, getting funds and loans to people who sometimes can’t access traditional lending sources, CDFIs are one of the ideal audiences for this training.

Beyond CDFIs, we want to see even more funders take a seat at the local foods table— including credit unions, equity investors, foundations, impact investors and angel investors. Capital-stack deals have already made the difference for many regional food enterprises including Farm Fresh Rhode Island, a regional food aggregator and distributor.

A great example is Farm Fresh R.I. that needed a loan for additional cooler space but didn’t have enough collateral to fully secure a traditional loan from Coastal Enterprises Incorporated (CEI), a CDFI based in Maine. Using a no-interest loan from the Jesse and Betsy Fink Foundation, Wholesome Wave provided a guarantee for a portion of the loan from CEI. This arrangement allowed the business to get its loan for the equipment, CEI to make a loan that met its underwriting standards, and for Wholesome Wave and the Foundation to achieve their mission of supporting the development of regional food system infrastructure.  None of those goals would have been met without bringing multiple parties to the table with their different tools and risk and return profiles.

Like other expanding business sectors, ultimately, it’s going to take all kinds of capital and investors to build infrastructure, foster flourishing food systems, and grow this sector to its full potential. This training will help us get there.

USDA is committed to helping farmers, ranchers, and businesses access the growing market for local and regional foods, which was valued at $12 billion in 2014 according to industry estimates.  Under this Administration, USDA has invested more than $1 billion in more than 40,000 local and regional food businesses and infrastructure projects.  These activities are part of USDA’s Know Your Farmer, Know Your Food (KYF2) initiative, which coordinates efforts across USDA agencies to support local and regional food systems. Visit our the KYF2 website at to learn more about USDA resources available to this unique set of customers, and learn how USDA investments are creating economic opportunities for rural America in “Every family needs a farmer" at

Jailey Nunez loading a pallet for delivery
Jailey Nunez (left), a driver for Farm Fresh's Market Mobile program loads a pallet for delivery. The aggregation and distribution system has an online component where farmers set their own prices and where orders are placed. Then Farm Fresh staff, like Jailey, receive, pack and deliver the orders on behalf of the 70 farmers and producers in the network.