Why Food Production and Meat Processing Facilities Are a Good Fit for USDA Loans

As the domestic demand for food manufacturing grows, rural borrowers in the food production and meat processing industry have a unique opportunity to increase their capital like never before. Learn more about the USDA’s vested interest in this industry and how borrowers can combine multiple USDA-based loan programs to nurture domestic food manufacturing and distribution and foster job growth while solving inefficiencies in outsourced food production.

The Synergy Between Food Production and USDA Loans

As a cornerstone of the U.S. economy, the food production and meat processing industry contributes significantly to domestic consumption and global food markets. The United States Department of Agriculture (USDA) is a key financier in this realm, offering critical support designed to promote food security and growth within the industry.

By targeting facilities integral to the supply chain, USDA loan s are a strategic necessity, improving the nation’s ability to produce and process food efficiently and sustainably.

What Qualifies as a Food Processing Facility?

Rural businesses that contribute to the wide net of the food supply chain qualify as food processing entities and can find themselves compatible with USDA loan programs. This could range from businesses responsible for making a single ingredient within the food industry to complex operations assembling ready-to-eat meals. These food processing facilities include, but are not limited to:

Flash-Freezing Facilities/Distribution	Distilleries	Meat and Dairy Processing Plants	Seafood Processing Plants
Snack Food Processors	Fish Farms	Miling Operations	Fruit and Vegetable Processors
Vineyards	Bottling Businesses	Bakeries and Other Pastry Processors	Ready-to-Eat Meal Plants

The Benefits of USDA Food Supply Chain Loans

For facility owners or producers seeking to gain capital, seeking the assistance of the USDA is beneficial for multiple reasons.

1. Competitive Rates and Extended Terms

USDA loans offer a financial reprieve with their competitive interest rates and elongated repayment terms. These arrangements provide a lifeline for businesses planning substantial facility expansions, allowing for a smoother financial trajectory over an extended timeframe.

2. Refinancing and Upgrades Under USDA Loans

Beyond initial investment, facilities can leverage USDA funds for multiple refinancing activities, jumpstarting a spectrum of enhancements like constructing new establishments, energy systems, and equipment expansion.

3. Enhanced Energy Efficiency and USDA’s REAP Benefits

The Rural Energy for America (REAP) program is particularly pivotal for food production and a testament to the USDA’s commitment to energy conservation. Through this program, entities can receive assistance for installing energy-efficient equipment. Refrigeration, vital for storage and preservation in the food industry, often receives preference, ensuring both operational efficacy and ecological integrity.

4. Brokerage Benefits: Referral Shortcuts and Extensive Networks

Referral sources discover additional advantages when navigating USDA loans. Brokers can seamlessly incorporate referral fees into the transaction, amplifying their incentives. Furthermore, direct engagement with the USDA grants access to an expansive inter-state network with vast resources and insights.

5. Customized Loan Structuring

The USDA’s flexibility allows for tailored loan structuring, accommodating the nuanced financial needs specific to the food production sector. Borrowers can mix, match, and combine loans as necessary, providing a significant advantage. This customization provides borrowers with the toolkit necessary to construct a financial plan that aligns with their strategic ambitions.

Are you considering applying for a USDA loan? It’s important to work with the right lender and understand the process. Madison One has a proven track record of success and can assist you in navigating the complex regulations of USDA loans.

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How to Determine USDA Loan Eligibility

Food and meat processing facilities naturally play a significant role in the agricultural output for human consumption. Because of this, these entities must follow a specific set of standards to qualify for USDA loans. These include the following requirements:

Applicants must operate in a rural area within the 50 U.S. states with a population of less than 50,000 inhabitants.
They must demonstrate a tangible benefit to the rural community, typically in the form of employment opportunities or economic development.
Borrowers must be creditworthy. Loans are only granted to entities exhibiting reliable repayment ability.
Applicants must provide adequate collateral to secure the loan.

The Best USDA Programs for Food and Meat Processing Facilities

Thanks to the flexibility of USDA loans, borrowers have access to plenty of options for their facilities, with a borrowing potential of or between $65 – $100 million. These funding options include:

USDA B&I Program

The USDA Business and Industry (B&I) Loan Program aids in the development of processing facilities by guaranteeing loans for rural businesses. This allows lenders to extend credit that might otherwise be unavailable, offering financial backing for various projects, including construction, expansion, and modernization of facilities.

REAP Program

As mentioned, facilities aiming to reduce energy consumption benefit significantly from the USDA REAP Program. By offering grants and loan guarantees, REAP facilitates purchasing and installing energy-efficient processing equipment, such as conveyors, refrigeration units, and advanced meat processing machinery, such as saws and slicers. These upgrades not only lower operating costs but also boost production efficacy.

Meat and Poultry Expansion Program

For substantial capital needs, the Meat and Poultry Expansion Program supports the expansion of facilities directly, empowering them to increase their output and meet the rising demand for meat and poultry products.

Grants Under the Subsidized Lending Program

Smaller projects may find an ideal fit with the Subsidized Lending Program, which enables facility owners to secure grants that could reach $10 million. These grants provide essential financial support for a variety of growth and improvement initiatives.

CPACE

The Commercial Property Assessed Clean Energy (CPACE) structure offers a novel way for food processing and meatpacking facilities to finance energy upgrades and new construction focused on sustainability. Through CPACE, which is available in most states, repayments are made as an assessment of the property tax bill, fostering long-term, secure financing for eco-conscious developments.

Tax Credits

Investing in facility enhancements can also lead to eligibility for a range of tax credits. These credits allow businesses to offset the initial expense of implementing sophisticated technologies and systems designed to streamline operations.

Through careful consideration of these programs, food and meat processing facilities can thrive and contribute to the broader goals of agricultural sustainability and rural economic prosperity.

Grow Your Food Production Business with Expert USDA Loan Guidance from Madison One

Looking to harness the power of USDA loans to fuel your food production or meat processing business? Partner with Madison One for expert guidance through the maze of USDA regulations and programs, ensuring your business captures every opportunity for growth and efficiency. Connect with us and see how Madison One can simplify the loan application process and set your business on the path to sustainable success.