Presenation given at the Southern Sustainable Agriculture Working Group (SSAWG) conference in Mobile, AL in Jan 2015. Presentation includes information on types of capital resources available to finance food hubs and related local food enterprises.
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Southern SAWG - Food Hub Financing
1. Financing Food Hubs
& Other Healthy Food Enterprises
Jim Barham – USDA Rural Development, DC
Malini Ram Moraghan – Wholesome Wave, IL
Dafina Williams – Opportunity Finance Network, PA
Southern Sustainable Agriculture Working Group Conference
Mobile, AL
January 16, 2015
2. Presentation Overview
Financing Food Hubs:
Clarifying the Food Hub Concept
Financing and Stages of Business
Development
Community Development Financial
Institutions (CDFIs)
Snapshots at Each Development Stage
Your Turn!
4. Regional Food Hubs
USDA Working Definition
A business or organization that actively manages the
aggregation, distribution, and marketing of source-
identified food products primarily from local and regional
producers to strengthen their ability to satisfy wholesale,
retail, and institutional demand.
5. Regional Food Hubs
Actively linking producers to markets
On-farm pick up
Production and post-harvest handling
training
Business management services and
guidance
Value-added product development
Food safety and GAP training
Liability insurance
Aggregation
Distribution
Brokering
Branding and market
development
Packaging and repacking
Light processing (trimming,
cutting, freezing)
Product Storage
“Buy Local” campaigns
Distributing to “food deserts”
Food bank donations
Health screenings, cooking
demonstrations
SNAP redemptions
Educational programs
Youth and community employment
opportunities
6. *Based on a working list of 302 food hubs identified by the USDA’s Agricultural Marketing Service (April 2014)
Regional Food Hubs
7. 7 12
26
44
53 55 58 63
75 87
101
119
153
184
215
256
286
298
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
Growth in the Number of Food Hubs (2001-2013)*
At least 145 food hubs have started in the past five years (2009-2013),
as well as at least 83 in the past three years (2011-2013)
*Based on a working list of 302 food hubs identified by the USDA’s Agricultural Marketing Service (April 2014)
8. Regional Food Hubs by Legal Status*
Food Hub Legal Status Number Percentage
Privately Held 144 48%
Nonprofit 87 29%
Cooperative 61 20%
Publicly Held 7 2%
Informal 3 1%
*Based on a working list of 302 food hubs identified by the USDA’s Agricultural Marketing Service (April 2014)
9. Regional Food Hub Models*
Farm to
Consumer
39%
Farm to
Business
29%
Hybrid
32%
*Based on a working list of 302 food hubs identified by the USDA’s Agricultural Marketing Service (April 2014)
10. Sources of Capital for Food Hubs
(and Other Healthy Foods
Enterprises)
Dafina Williams January 16, 2015
11. 11
About Opportunity Finance Network
• Financing Fund
• $100 million in OFN financing to CDFIs
• Public Policy
• Advocate for Opportunity Finance
• Knowledge Sharing
• Industry conferences and research
• Strategic Communications
• Brand development and marketing
tactics
• Strategic Consulting
• Expertise for investors, partners and
CDFIs
Leading
national
network of
CDFIs investing
in opportunities
that benefit
low-income,
low-wealth,
and other
disadvantaged
communities
across
America.
12. About CDFIs
What is a Community Development Financial Institution?
Private, mission-centric financial institutions
Focus on low-income, low-wealth people & communities
Nonprofit and For-Profit status
Depository & Non-depository
Certified by the CDFI Fund (U.S. Department of
Treasury)
Profitable but not Profit-maximizing
CDFIs “Stand in The Gap”
Serving customers traditional banks cannot
Financial Services for the unbanked or under-banked
Patient lenders
12
13. About CDFIs: Types of Lending
Small Business and Microlending
Healthy Food Financing: Food Deserts
Nonprofit Organization Financing
Affordable Housing
Residential Mortgages
Education: Charter School Financing
Healthcare: Community Health Centers
Commercial Real Estate
Consumer Finance: Alternative to Pay-day Loans
Venture Capital
13
14. CDFIs and Healthy Foods Financing
Financing available all along the food system
$90 million in financing to CDFIs from US Treasury
Traditionally retail-focused lending
Mid-tier sector has high growth potential
Alternative to conventional lending
Flexible, patient capital
Well-suited to meet borrower needs
Business plan support and review
CDFI lending to food-based businesses
Business stage determines financing tool
Facilitate collaboration between multiple lenders
Experience working in underserved communities
14
15. CDFI Financing of Mid-Tier Food System
Enterprises
15
Challenges for Borrowers
Poor or no credit history
Collateral shortfalls
Lenders hesitant to finance start-up businesses
Capital often needed to start or expand business but
cannot afford to take on significant debt
Challenges for Lenders
Inconsistent credit quality for food-based businesses
Business needs are broad and diverse and loan sizes
may need to be adjusted
Can be difficult to determine a reasonable pricing
structure for small loans
16. Other Capital Sources for Mid-Tier Food
System Enterprises
Public
Federal
Community Economic
Development Program
Federal-State Marketing
Improvement Program
Intermediary Relending
Program
Value-Added Producer Grants
State
Specialty Crop Block Grant
Michigan Good Food Fund
State Small Business Credit
Initiative
Local
Small Business Development
Centers
Private
Financial Institutions
Local and Regional Banks
Community Banks and
Credit Unions
Foundations
RSF Social Finance
Intermediaries
Nonprofit Development
Companies
CDFIs
16
18. Regional Food Hubs
Actively linking producers to markets
On-farm pick up
Production and post-harvest handling
training
Business management services and
guidance
Value-added product development
Food safety and GAP training
Liability insurance
Aggregation
Distribution
Brokering
Branding and market
development
Packaging and repacking
Light processing (trimming,
cutting, freezing)
Product Storage
“Buy Local” campaigns
Distributing to “food deserts”
Food bank donations
Health screenings, cooking
demonstrations
SNAP redemptions
Educational programs
Youth and community employment
opportunities
19. Stages of Business Development
Concept &
Planning
Proof of
Traction
Survival &
Success
Growth
What is our idea?
What do we want
to do and why?
What is our goal?
Pilot, test market
Can we sell
our product or
service?
Expand beyond
1 customer or a
pilot test market
Can we sell our
product or
service…….
PROFITABLY?
How will we
grow, sustain?
20. Stages of Business Development
Concept &
Planning
Proof of
Traction
Survival &
Success
Growth
High Risk,
No return funding
Grants, Savings,
“Friends and
family,”
Crowdfunding
High Risk,
Flexible, Risk
adjusted return
Grants, Savings,
Crowdfunding,
Agency Loans
(SBA, Eco Dev);
Angels, VC
Variable Risk
Return driven
Cashflow,
CDFIs, Banks,
Angels, VC,
Private
investors
Less Risky
Return driven
Cashflow
CDFIs, Banks,
Larger private
investment
groups
21. Capital Stacking
Source: Oregon Capital Scan: A Line is Drawn. University of Oregon’s Business Innovation Institute, June 2014.
22. GrowNYC - Nonprofit with 35 years of experience helping
family farms and ensuring a supply of fresh, healthy produce for
all New Yorkers
Programs
Greenmarket – 53 farmers markets, with 230 participating producers
Youthmarkets – 13 teen run farm stands, created 70 youth jobs
Wholesale Farmers Market – $5 million in annual sales
Fresh Pantry – over 500k donated from Greenmarkets
YUM Food Box – 70,000 lbs of produce sold since its start in June 2010
Fresh Bodegas – 11 coolers installed with over $4k in local produce sales
Greenmarket Co. – GrowNYC established a food hub in 2012
serving NYC food retailers, institutional buyers, and GrowNYC
programs
Food Hub Financing
– Snapshot at Start-up/Early Stage–
24. Snapshot of Greenmarket Co.
Established 2012
6 full-time and 4 part-time employees
$650,000 gross sales for 2014
Works with 50+ producers
100+ customers - grocery stores, restaurants, senior centers,
and GrowNYC Youth Markets and Food Box program
Over 60% of sales to date have been to buyers serving low- to
mid-income consumers
Key Supply Chain Partner
City Harvest – initially utilized excess storage capacity at food
relief organization’s warehouse.
Recently moved to their own 5,000 sq. ft. warehouse
Food Hub Financing
–GREENMARKET CO. Start-up/Early Stage–
25. Some of the Funding Streams
Planning stage: USDA Farmers Market Promotion Program (FMPP)
and USDA Healthy Urban Food Enterprise Development (HUFED)
Program
Implementation stage: Doris Duke Charitable Foundation,
Deutsche Bank Americas Foundation, New World Foundation
Beginning expansion: City of NY grant – truck purchase; USDA
Local Food Promotion Program (LFPP) – for working capital,
marketing and sales.
Food Hub Financing
–GREENMARKET CO. Start-up/Early Stage–
26. Stage of Business Development
- USDA Grants for Food Hubs -
Planning
Implementation
Growth
Rural Business
Enterprise Grants
Local Food Promotion
Program
Specialty Crop Block
Grants
Value-Added Producer
Grants
Local Food Promotion
Program
Specialty Crop Block
Grants
Value-Added Producer
Grants
Business and Industry
Guaranteed Loans
Community Facilities
Loans and Grants
Rural Business
Enterprise Grants
Local Food Promotion
Program
Specialty Crop Block
Grants
Value-Added Producer
Grants
Farm to School Grants
Community Food
Projects Competitive
Grants
27. Examples: CDFIs and Mid-Tier Food
System Enterprises
Greensgrow – Philadelphia, PA
Nonprofit urban farm, retail nursery, and food
distribution business
Growth stage of business
17 years in operation
More than $1.1 million annual revenue
Sources of Capital
Revenue from earned income (93 percent)
CSA operation
Farm stand
Plant Nursery
Other (Direct to Restaurant, Community Kitchen)
Grants (7 percent)
Recent expansion to second Philadelphia location
and Camden, New Jersey
27
28. La Montañita Cooperative – Albuquerque,
New Mexico
Food Aggregation and Distribution Center; Retail
Organized as Cooperative
Mature stage of business
31 years in operation
More than $28 million annual revenue
Sources of Capital
Earned income from operations
Loans from Capital Impact Partners
Loans from local community bank
Community Investment Initiative
28
Examples: CDFIs and Mid-Tier
Food System Enterprises
30. Moving Food Along the Value Chain:
Innovations in Regional Food Distribution
By Adam Diamond & James Barham – USDA Agricultural Marketing
Service
Regional Food Hub Resource Guide
Food hub impacts on regional food systems, and the
resources available to support their growth and development
By USDA Agricultural Marketing Service and the Wallace Center at
Winrock International
The Role of Food Hubs in Local Food Marketing
By James Matson, Martha Sullins, and Chris Cook – funded by USDA Rural
Development
Food Hub and Distribution Resources
Electronic copies of these publications can be downloaded
for free at www.ams.usda.gov/FoodHubs
31. Food Value Chains: Creating
Shared Value to Enhance
Marketing Success – joint project
between USDA and the Wallace Center
The report is designed to provide
guidance to the reader on how
food value chains are initiated
and structured, how they
function, and the benefits they
provide to participants.
New Report on Food Value Chains
http://dx.doi.org/10.9752/MS141.05-2014
32. USDA’s Food Hub Portal
www.ams.usda.gov/FoodHubs
A catalogue of USDA's research findings, resources,
and support for food hubs
Food Hub and Distribution Resources
National Food Hub Collaboration
http://foodhub.info
Map and list of known food hubs, current news,
webinars, conference proceedings, print resources
Food Hub Benchmarking Webinar on Thursday!
33. www.usda.gov/knowyourfarmer
Website: One-stop shop for financial
and technical assistance resources from
USDA to grow your local food enterprise
www.usda.gov/knowyourfarmer
The Compass: How USDA resources
are put to work in your community
www.usda.gov/kyfcompass
The Compass Map: See what’s
funded in your community and learn
how others are using USDA programs
USDA’s “Know Your Farmer,
Know Your Food” Initiative
34. Know Your Farmer, Know Your Food:
- Resources for Navigating USDA -
www.usda.gov/knowyourfarmer
35. Farm Microloans
Farm Storage Loans
Organic Cost Share
Grass-fed Verification
Environmental Quality
Incentives Program
(hoop houses/high
tunnels)
Rural Energy for
America Program
USDAProgramsintheLocalFoodSupplyChain
Business and Industry
Guaranteed Loans
Community Facilities
Loans and Grants
Rural Business
Enterprise Grants
Rural Business
Opportunity Grants
Value-Added Producer
Grants
Local Food Promotion
Program
Conservation
Reserve Program
Agricultural
Conservation
Easement Program
Conservation
Stewardship
Program
Environmental
Quality Incentives
Program
Business and Industry
Guaranteed Loans
Community Facilities
Loans and Grants
Rural Business
Enterprise Grants
Rural Business
Opportunity Grants
Local Food Promotion
Program
Specialty Crop Block
Grants
Farm to School Grants
Senior Farmers’ Market
Nutrition Program
WIC Farmers’ Market
Nutrition Program
Community Food
Projects Competitive
Grants
Farmers Market
Promotion Program
Specialty Crop Block
Grants
Land
Conservation
Processing
www.usda.gov/knowyourfarmer
Aggregation/
Distribution
Production Markets /
Consumers
Rural Cooperative Development Grants
Small Business Innovation Research
Risk Management Education Program
Federal State Marketing Improvement Program
Conservation Technical Assistance
Beginning Farmer and Rancher Development Program
Sustainable Agriculture Research and Education Program
Agriculture and Food Research Initiative
Research, Education, and Technical Assistance Programs – all along the supply chain
36. Includes data on:
USDA-funded local food projects
Farmers markets, food hubs,
and other “context data”
gathered by USDA agencies
Projects and resources from
9 other Federal Departments
The KYF Compass Map
www.usda.gov/kyfcompass
39. Jim Barham
USDA Rural Development
Washington, D.C.
202-690-1411
James.Barham@wdc.usda.gov
www.usda.gov/kyfcompass
www.usda.gov/knowyourfarmer
knowyourfarmer@usda.gov
Thank You!