The U.S. Department of Agriculture’s new Food Supply Chain Guaranteed Loan Program (USDA FSC) is poised to help commercial businesses across a variety of industry verticals by providing access to affordable commercial loans. This includes low-interest business financing for those involved in food aggregation, processing, manufacturing, wholesaling, distributing, storage, transportation, and logistics areas of America’s food supply chain.
Creating a Stronger U.S. Food Supply Chain
The FSC program, part of the USDA’s larger OneRD Guarantee Loan program was established to help increase capacity and develop a more resilient, diverse, and secure U.S. food supply chain, following the identification of weaknesses to the system that were exposed during the COVID-19 pandemic. Logistics has been a particularly frustrating pain point that many businesses are still working out. USDA FSC Loans can help provide solutions.
How USDA Food Supply Chain Guaranteed Loans Work
The USDA FSC program works by the USDA providing loan guarantees to qualified commercial lenders like , who in turn are encouraged to make low interest loans to entrepreneurs who desire to start new businesses or expand existing ones that are part of the U.S. food supply chain. Loan amounts can be up to $40 million, and terms can extend out to 40 years.
Additionally, unlike other OneRD loan programs, USDA FSC Loans do not require a USDA Guarantee Fee for the life of the loan. There is no annual fee required, at all. Loan funds can be used for business conversion, enlargement, repair, modernization, or development; the purchase and development of land, buildings and infrastructure for relevant purposes; building or equipping facilities for lease to public or private enterprises engaged in commercial or industrial operations; the purchase and installation of machinery and equipment including manufacturing and information technology (IT) systems; working capital; and more.
Best of all, and perhaps to the surprise of many, there are NO geographic eligibility restrictions. Projects for credit-worthy borrowers can be located anywhere in the U.S., in both rural and urban areas.
Borrowers should possess good credit (a minimum credit score of 680 with a good payment history) and be able to provide collateral (cash, real estate or other tangible assets) valued at a discounted rate consistent with sound loan-to-value practices at an amount equivalent to the requested loan amount.
How Logistics Problems Have Disrupted Americas Food Supply Chain
Logistics issues have been central to many of America’s food supply chain disruptions that have plagued the country for the past 24 months. Logistics refers to the overall process of managing how resources are acquired, stored, and transported to their destination. The food supply chain strongly depends on the smooth, timely delivery of goods to be successful.
Food items generally have short life spans and are produced in a wide variety of regions across the country (and the world). As a result, optimized logistics are critical to ensuring effective food supply chain management. Efficient food transportation helps to prevent the waste of time and materials, enabling supply chain companies to plan for, and facilitate, the transportation of food products on time and to the right locations.
How USDA FSC Loans Benefit Logistics Companies and Others in the U.S. Food Supply Chain
Some food suppliers handle their own logistics. Others partner with companies who specialize in logistics, who provide outsourced transportation and warehousing. This type of logistics outsourcing can help food producers streamline their supply chain processes, increasing efficiency. USDA FSC Loans can help entrepreneurs who operate businesses on either side of this playing field (companies that self-manage their logistics or logistics specialists who provide these services for food suppliers, manufacturers, distributors or wholesalers, etc.).
The recent disruptions of America’s food supply chain have helped many companies understand the need to evolve their logistics infrastructure to meet consumer demands. Today, new technologies that facilitate more streamlined logistics planning and greater attention to creating redundancy and back-up plans for shipping, storing, and delivering food items are all helping to improve food supply chain logistics.
As companies seek to invest in creating more efficient supply chains to avoid food spoilage, lower costs, and enhance the overall effectiveness and safety of these operations, there’s no doubt that USDA FSC Loans stand to play a huge role in helping fund these improvements.
Applying for a USDA FSC Commercial Loan
If you are an entrepreneur who is seeking a commercial business loan to launch a new business or expand or improve an existing one in the food supply chain industry, whether related to logistics, food processing, manufacturing, distribution or another area, then contact North Avenue Capital. We can help you learn more about the USDA’s exciting new FSC Loan program. We have offices in Northeast Florida, Arkansas, Georgia, Tennessee, and Texas and partners for USDA loans in all 50 states.