Many are aware of the United States Department of Agriculture (USDA) loan programs that can help consumers purchase a rural property such as a farm or ranch, but what is not as commonly known is that the agency offers expansive programs for a broad range of commercial and infrastructure projects.
Irvington, New York–based X-Caliber Rural Capital (XRC), an affiliate of X-Caliber, is a nationally licensed and approved USDA lender. Under the leadership of Co-Founder Jordan Blanchard, the firm provides financing for rural business and economic development projects.
“Our parent company, X-Caliber, has roots that go back more than 25 years,” Blanchard says. “My partner, Chris Callahan, bought the Phares Company in 2017, and he rebranded it as X-Caliber Capital. He launched other divisions that all fall under the X-Caliber umbrella, including a bridge lender and a Commercial Property Assessed Clean Energy (CPACE) financing company. In 2021, we started X-Caliber Rural Capital, which is a USDA-licensed nonbank lender.”
The USDA is a vast entity handling everything from meat inspection to supplemental food and nutrition programs as well as loan-guarantee programs for single-family residences and rural multifamily properties. X-Caliber Rural Capital specializes in mid to large-scale commercial and community infrastructure projects. XRC is the lender and is responsible for 100% of the funding for each loan. XRC in turn applies for a partial guarantee from the USDA that can be called upon if there is an event of default.
One of its recent projects was for Origo Cold Storage, a 254,000-square-foot facility for almonds located in California. Based in Madera, the coordination of multiple programs made that facility possible, and a second facility is planned.
“In our world, we have five different finance programs,” Blanchard says. “First is the Business and Industry program or B&I. It is a general-purpose program. You can finance any legitimate business purpose except for a few carve-outs, such as racetracks, golf courses, movie studios, and some others. It can finance for-profits, nonprofits, tribes, and municipalities, so it’s the wild card program, it can be used for just about anything.
“The second program is Rural Energy for America Program (REAP). It allows us to finance all types of renewable energy systems and energy-efficient equipment. The projects can range from very large solar transactions to anaerobic digestion systems. There are multiple projects being financed in California for this. Anaerobic digestion is a technology that allows a dairy farm, for example, to capture the methane it produces, clean it, and then inject it into the pipeline like any other renewable natural gas,” he continues. Blanchard points out there has been a lot of activity in California, especially with REAP for large projects such as solar farms.
The third program is called Community Facilities (CF). It can provide financing for any municipality or non-profit project that serves a public purpose. Examples include libraries, YMCAs, bridges, city halls, assisted living facilities, nonprofits, charter schools, or rural healthcare clinics or hospitals.
“There is a subset for municipality called Water and Waste Disposal or WWD,” Blanchard says. “If a municipality has or is going to establish its own water district, they need funds to install the water tank, pay for new pipes or sewers, or they may need a new building – we can finance all of that with the WWD program.”
The last program is called Food Supply Chain or FSC– it is a temporary program that covers all manner of projects that support the logistics, distribution, processing, and packaging of food.
“This program is an outgrowth that came to us after the pandemic started because, if you remember all the meat-packing issues and the scarcity of meat products, Congress wanted to ensure the food supply chain was more resilient so they allotted USDA funds to help finance that,” Blanchard says.
The maximum dollar amounts for the five programs are:
- Business & Industry Guaranteed Loan (B&I) – Up to $25 million
- Rural Energy for America Guaranteed Loan (REAP) – Up to $25 million
- Food Supply Chain Guaranteed Loan (FSC) – Up to $40 million
- Waste & Water Disposal Guaranteed Loan (WEP) – Up to $50 million
- Community Facilities Guaranteed Loan (CF) – Up to $100 million
One of the major benefits of the USDA loan program is it fills a hole in the system where loan amounts are too large for regional, community, or local banks, but they’re too small for the big banks.
“The access to capital we provide is a great advantage,” Blanchard says. “Another benefit is longer loan terms. For real estate, we can often go to 30 years, and for municipal debt, we can go up to 40 years. If that municipality was going to issue a bond, those are usually capped at 20 years, so getting financing from us can double the term, and the longer the term, the lower the payments.”
Because the government is guaranteeing a portion (not the whole thing as commonly believed), USDA lenders can consider projected income and finance businesses that are expanding. For example, if a company is growing and wants to expand from 10,000 to 20,000 square feet, conventional lenders usually won’t make the loan because they would be lending on income the company doesn’t have yet. USDA lenders are allowed to say, ‘We see your trajectory and your projected income, so we’re going to give you credit for the business you will do and provide expansionary capital.’”
So what qualifies as rural? Entities can check to see if their project is in a Qualified Rural Area by going here. The general criteria is a town or municipality of 50,000 or less, not contiguous with a more urban area. The map is updated after each United States Census, so the current numbers correspond to 2020. There are exceptions to straight population though; for instance, if the area is separated from a population area by land or water.
“We did a deal in Kent Island, Maryland, which is literally across the causeway from Baltimore, but because it’s separated by water, the USDA considers it rural,” he says. “I’m in Tucson and I can see downtown from my window about five miles away, but I’m considered to be in a rural area because there is a landmass that separates me from the city of Tucson.”
There are also urban carveouts or urban exceptions, but the projects must have something to do with food or the food supply chain.
“The USDA is trying to encourage food in food deserts so they’ve agreed to finance produce greenhouses in urban areas that will sell produce locally and hire local residents,” Blanchard says. “So in general, the projects have to be rural, but if they have a food-related component, then it’s a good likelihood that we can fund those.”
The USDA is amenable to pairing with other capital sources so – especially in California – there are multiple options stacking a few different loan products and tax credits for renewable energy to help a company get its capital.
“For instance, the Origo almond cold storage facility, and two other nearby projects, include both the USDA Food Supply Chain loan and a C-PACE loan,” he says. “The facility is going to serve almond farmers who pick during a three-month window. It takes time to process the almonds, whether they’re going to roast them or blanch them, or turn them into almond milk, they need temperature-controlled storage. Eighty percent of the world’s almonds come from the Central Valley, so we used a Food Supply Chain loan to finance it. It was roughly $35 million for the construction, and there’s so much demand, that that same developer is going to build another facility right next door.”
Whether in California or throughout the U.S., there are multiple financing options for commercial or community infrastructure projects via the USDA.
