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Food Supply Chain Guaranteed Loan Program (FAQs)

This page contains answers to common questions for the Food Supply Chain Guaranteed Loan Program. The questions and answers are organized by topic of interest for both lenders and borrowers and are updated on a regular basis. To view answers, click the plus sign (+) next to your question of interest. If you cannot find an answer to your question, you may submit a question or comment for consideration by using the Submit a Question button.

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For Lenders

  • The lender will conduct a credit evaluation using credit documentation procedures and underwriting processes consistent with generally-accepted, prudent lending practices, and consistent with the lender’s own policies, procedures, and lending practices.

    The lender’s evaluation must address any financial or other credit weaknesses of the borrower and project and discuss risk mitigation requirements.

    The lender must analyze all credit factors to determine the borrower's financial capacity and guaranteed loan terms and conditions to ensure guaranteed loan repayment.

    Examples of credit factors to be analyzed include character, capacity, capital, collateral, and conditions.

  • No guarantee or annual fees apply.

    Other reasonable and customary fees for loan origination are negotiated between the borrower and lender.

  • With Rural Development’s concurrence, the lender establishes and justifies the guaranteed loan term based on the use of guaranteed loan funds, the useful economic life of the assets being financed (and those used as collateral), and the borrower’s repayment ability.

    The loan term must not exceed 40 years.

  • The total amount of guaranteed loans to one borrower under this notice (including the guaranteed and unguaranteed portions, and for subsequent loans, the outstanding principal and interest balance of any existing FSC guaranteed loans, plus the new loan request) must not exceed $40 million.

    The loan guarantee is 90 percent for loans with fixed interest rates on the guaranteed portion of the loan, and for which the interest rate does not exceed the current Wall Street Journal prime rate plus 200 basis points. All other loans are guaranteed at 80 percent.

  • Interest rates are negotiated between the lender and the borrower. Rates can be fixed or variable, but only lenders that provide a fixed interest rate will receive a 90 percent loan guarantee. All other loans are guaranteed at 80 percent.

    Variable interest rates must be tied to a base rate published in a national or regional financial publication, agreed to by the lender and Rural Development.

    Different interest rates on the guaranteed and unguaranteed portions are permissible.

  • Lenders will be permitted to have a variable interest rate for all construction projects in this program during the construction period only. The construction period shall be defined by the lender applicant in its Application for Loan Guarantee and will be included in the Agency's attachment to the Conditional Commitment for Loan Guarantee to be signed by the lender applicant.

    To remain eligible for a 90 percent guarantee, the promissory note(s) interest rate shall not exceed the current Wall Street Journal prime rate plus 200 (WSJ+200) and shall not adjust more than quarterly during the construction period. At the conclusion of the construction period, the promissory note(s) shall revert to a fixed interest rate not to exceed WSJ+200. Should construction end prior to the end of the defined construction period, the lender must lock the borrower's rate on the guaranteed portion of the loan at a fixed rate that does not exceed the current WSJ+200 to remain eligible for the 90 percent guarantee percentage.

    Any request to extend the defined construction period to maintain eligibility for the 90 percent guarantee must be submitted to the Agency in writing and must be approved by the Agency.
     

  • Collateral must have documented value sufficient to protect the interest of the lender and Rural Development. Lenders will discount collateral consistent with sound loan-to-value policy, with the discounted collateral value at least equal to the loan amount. The lender must provide satisfactory justification of the discounts being used. Hazard insurance – equal to the loan amount or depreciated replacement value, whichever is less – is required on collateral.

  • Borrowers must be:

    A business engaged in – or proposing to engage in – aggregating, processing, manufacturing, storing, transporting, wholesaling, or distributing food, OR:

    • A business with existing or proposed contractual, lease, or service agreements with another entity or entities, including affiliated entities engaged in – or proposing to engage in – aggregating, processing, manufacturing, storing, transporting, wholesaling, or distributing food
    • A business engaged in commercial food production, either directly or through contractual, lease, or service agreements with another entity or entities, including affiliated entities
    • Private-entity borrowers must demonstrate loan funds will remain in the U.S. and that loan funds will increase capacity and improve the resilience, diversity, or security of U.S. food supply chains.

 

For Borrowers

 

  • Under the Food Supply Chain (FSC) Guaranteed Loan Program, USDA Rural Development works directly with approved lenders to back (guarantee) their loans to qualifying meat or poultry processors and others operating in the middle of the food supply chain. This includes food aggregators, processors, manufacturers, wholesalers, distributors, and other types of entities that transport and store food. As a potential borrower, you work directly with your lender, who then applies for the program on your behalf. If you’re interested in financing available through the FSC program, you can start by asking your lender if they plan to participate.

  • Lenders that receive a federal loan guarantee typically are able to offer more competitive interest rates and terms. From a borrower’s perspective, closing and making payments on a guaranteed loan is unlikely to feel different from any other loan. However, it’s always best to work with your lender to determine whether a USDA guaranteed loan best fits your financing needs. Some borrowers may be able to access more affordable credit through non-participating lenders or other federal programs.

  • No, these are separate programs. First previewed in October 2021, this $100 million initiative is distinct from the $500 million recently dedicated to meat and poultry processing. FSC guaranteed loans are available to make capital accessible to processors and others in the food supply chain.

  • We want to ensure all interested lenders know how to participate. USDA Rural Development offers ample resources on the OneRD Guarantee Loan Initiative website. Additionally, lender training targeted to nonregulated community development financial institutions (CDFIs) and other mission-driven lenders well-positioned to lend in this sector is available on YouTube. If you know a lender interested in participating, encourage them to contact us at rdfoodsupplychainloans@usda.gov.

  • First, talk with your lender. If approved to participate, your lender will then work directly with USDA Rural Development to apply for the guarantee.

  • No, the FSC program is available to a variety of meat and poultry processors and to businesses and organizations that support activities across the middle of the food supply chain. This includes food aggregation, processing, manufacturing, storage, transportation, wholesaling, and distribution. You may also be interested to know that 19 percent of funds available under the program are set aside exclusively for meat and poultry processors.

  • Eligible lenders include banks, credit unions, loan funds, CDFIs, Farm Credit institutions, and others. Lenders must be approved through the OneRD Guarantee Loan Initiative. Lenders can also sign up on the OneRD website for email updates and news about upcoming training and other opportunities. Lenders may submit questions to OneRDGuarentee@usda.gov.

  • Any regulated lender - Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), or Farm Credit System (FCS) - is eligible to participate in the FSC program. This includes banks, credit unions, loan funds, and Community Development Financial Institutions (CDFIs), among others.

    You are encouraged to start with your current lender to see if they qualify as a regulated lender. If so, they are automatically eligible. If they are interested, but are not federally regulated, they can go through the OneRD Guarantee Loan Initiative approval process. Lenders may submit questions to OneRDGuarentee@usda.gov.

    Please contact your Rural Development state office if you need more help or information. 

  • As a borrower, you must work with your lender to ensure your project qualifies. Other helpful eligibility information can be found on our program fact sheet and the Federal Register Notice.