The stack.
It's vital for most start-up and expanding processors’ success.
The stack isn't just a simple term. It's the intricate layers of financing that are crucial for a successful business operation. It's also one of the most challenging hurdles in any new project.
The grants offered by USDA over the past three years have been a boon for new and expanding processors. However, they come with a catch. Nearly all grants require recipients to provide significant cost-sharing or matching funding. This means that processors, whether they receive grant assistance or not, face the difficult task of securing adequate capital.
Raising capital for the processing facility is only a part of the equation. Processors need to be able to source animals, hire workers, promote and distribute products, and implement other steps that require significant capital.
Few lenders are willing to finance all aspects of a single processing enterprise. That’s where the stack comes in. Processors often need to build a “stock” of individual, yet interconnected finance agreements until they achieve adequate financing to support their facility construction and business operations. It’s often a complex procedure involving first and subordinate positions, mezzanine debt, equity investment, and other tools.
Flower Hill Institute and other Meat and Poultry Technical Assistance network members are pulling together resources to help processors navigate this complex web.
Three online roundtables hosted by Flower Hill in the past two months have brought together several experts offering creative financing approaches to help new and expanding businesses build a successful financial stack. Recordings of those roundtables and accompanying FAQ documents are now available in Flower Hill’s online toolkit.
In Making the Most of USDA Financing, The agency’s Business and Industry Loan specialist, Brian Wiles provided an overview of pertinent loan and grant programs offered through USDA Rural Development. Wiles was joined by Joseph Rowel of North Avenue Capital, a firm that specializes in the USDA Business and Industry Loan Program, and the Center for Rural Affairs’ Meg Jackson, who is informally helping coordinate the network of organizations administering funds through USDA’s Meat and Poultry Intermediary Lending Program (MPILP.
A second roundtable featuring Janie Hipp of Native Agriculture Financial Services and Alissa Welker of Steward Capital explored Alternative Financing approaches for smaller processors.
A third webinar with Ian Liddell of Summit Funding Group and Danny Steward of Providence Financial Group covered financing programs specifically targeting processing equipment.
Each roundtable provided a trove of information but served only as a primer to this complex topic. That’s why the no-cost technical assistance network is available to help processors connect with the resources available to build a financial stack to support a sustainable, profitable processing enterprise.