April 25, 2014
This post is the second in a two-part series highlighting participants in the USDA Business and Industry Loan Guarantee (B&I) Program’s Local and Regional Food Enterprise Initiative, a provision of the 2008 Farm Bill championed by NSAC and reaffirmed by Congress in the 2014 Farm Bill. The first post looked at financing for a North Carolina coop.
Small food and farm businesses in rural areas build vibrant local economies and foodways. However, despite being well-positioned to meet a growing demand for local and regional foods, these small businesses face challenges in accessing the credit necessary to get off the ground.
To address this issue, the U.S. Department of Agriculture (USDA) administers the Business and Industry Loan Guarantee (B&I) Program, which guarantees commercial loans for food enterprises based in or benefiting rural communities. Changes in the 2008 Farm Bill and reaffirmed in the 2014 Farm Bill ensure that a minimum of five percent of B&I funding goes to loans for local and regional food businesses.
Eight years ago, Penny Brown-Huber assembled a small group of Iowa farmers to start talking about a new kind of food business. “We wanted to do something significant for our food system,” says Brown-Huber.
Fast forward to August 2013, when Iowa Choice Harvest, LLC sold its first sweet corn, grown by farmer Craig Griffieon of Ankeny, Iowa and harvested and frozen (packed on-site) the same day to preserve its taste and freshness.
“In this state, we’ve been great with farmers markets and with direct-marketing. But that doesn’t open up larger new markets for farmers or for consumers,” explains Brown-Huber.
She saw a need for an Iowa-based processing facility for local produce, and with the help of a USDA Rural Development Business and Industry (B&I) Loan Guarantee, she and the Iowa Choice Harvest (ICH) team were able to secure the funding they needed to set up their plant in Marshalltown, the county seat for Marshall County, a rural county in central Iowa with slightly over 40,000 residents.
ICH began with corn, later adding asparagus as well as apples from six Iowa orchards.
Brown-Huber believes in farmers, she says, which is why she’s confident in the future of Iowa Choice Harvest (ICH), and why the company is 60 percent farmer-owned.
“Farmers are ingenious,” she says. “They’ll grow to serve new demands and new opportunities. So as the business expands, hopefully it will be the beginning of ensuring a diversity of crops and a diversity of local foods in the marketplace.”
But the journey to this point has been a long one. As with most small food and farm businesses, the key ingredient in Brown-Huber’s business plan – funding for the necessary infrastructure – proved to be a major obstacle.
“We had been trying to work with banks in Iowa [to secure a loan]… but it was very challenging to get them to support a new start-up, let alone one in the food industry,” says Brown-Huber.
Although she has more than 20 years of experience in small diversified farming and market gardening, teaches a business class on marketing for small farmers, and had completed an extensive feasibility study for the ICH business model through USDA’s Value-Added Producer Grant program, the bank would not lend to the project without the USDA guarantee.
“We were a good bet, but it was still a very hard sell,” Brown-Huber notes. Because the B&I program allows USDA to act as guarantor on a commercial loan, from the bank’s perspective, this made lending to ICH a far easier proposition.
“The general public has turned a corner when it comes to demand for local and regional foods,” Brown-Huber says, and the B&I program “lets entrepreneurs meet this demand, and boosts our rural economies. One hundred percent of the dollars involved in Iowa Choice Harvest stay in our state. The B&I loan guarantee encouraged the bank to invest in us, so we can continue to invest in Iowa.”
Read more about the B&I Program in our guide to the 2008 Farm Bill here.
Though no significant changes were made to the program in the 2014 Farm Bill, check back for updated information in the coming weeks as we expect some programmatic enhancements by USDA very soon. Visit USDA’s B&I program page here.