Value Added Producer Grant Toolkit for Washington Farmers
Below is the Value Added Producer Grant Toolkit for Washington farmers, which includes a list of resources, along with a Q&A featuring questions from farmers who attended the VAPG Lunch & Learn, and answers from VAPG grant writer Melissa Moeller.
Resources:
- Contact Melissa with questions:
- Click here if you’re interested in working with Melissa on a VAPG.
- Click here for information about Value Added Producer Grants (VAPG) in Washington.
- Marketing Plan Template (Word Doc Download) Marketing Plan Template (PDF)
General questions about VAPG grants:
Q: Is there an application deadline?
A: The deadline changes from year to year. Applications open for submission anywhere from December to March every year with a 60-90 day window for applying. There isn’t a definite timeline, but we do know that the fiscal year starts October 1st, so think about expenses and expansion starting October 1, 2024.
I encourage people to start working on applications with me in Oct-Dec. There is a lot of paperwork. By the time we gather everything that needs to be in a good application, it may be 200 pages, so it’s never too early to start. Begin by creating a good marketing plan. Even if you don’t apply, it’s good information for organizing and understanding your business.
The applications from the previous year are always online and they don’t change much from year to year so use the previous year’s application as a template. Take some dedicated time during the slow season to put materials together, then you can set them aside, and once the application is open, go back and review them.
If you have the application ready to go early, you can ask USDA for a prior review. For example, if they open up for applications on March 1 with a May 1 deadline, ideally we would be able to go to them in early March to ask them to prescore the application for us. They give great feedback which we then entirely incorporate and then get a much better score.
Q: How competitive are the grants? Do funds run out or is there just a matter of how feasible your project is?
A: It is a highly competitive national grant program. They do not dedicate a certain amount of money to each state. Last year about one-third of the applicants were funded. The way funds are distributed is that the local state office scores the applications and then the Washington D.C. office scores them. Your final score is the average of those two scores. They then look at all the scores nationwide and start funding the applications with the highest scores. They continue going down the list until they are out of money. All projects that make the cut are fully funded.
They are big and challenging applications to write. NABC has a lot of experience writing these grants and we are here to help. You can sign up for a one-on-one session with me to talk about whether you would be a good match for working with someone at NABC this winter and whether we think your project is ready to move forward (Click here to schedule a one-on-one meeting with Melissa).
Q: What is the grant duration? Do funds need to be spent in one year?
A: Projects can be funded for up to 36 months and all funds need to be expended within that time. My recommendation is to always write proposals for a maximum of 24 months because you can’t always predict what is going to happen three years down the road. If you initially budgeted for 24 months and are not able to spend all the money in that time, you can ask for an extension for another 12 months.
Q: Who can apply for a VAPG?
A: Any producer who sells their product directly and maintains control of the product through the sale can apply. There is no minimum size for an operation, however I encourage people to grow their businesses organically first. You can only apply for and be awarded for a particular project once. You can do more than one project, but you can’t apply to do more of the same thing. What I like to do is define projects as narrowly as possible and still get that $250,000. That allows you to spend that $250,000 over 2-3 years and then come back and apply for a different project.
The government likes to give money to people they’ve given money to before. It shows that you can handle their money well. So, unlike with private grants, where you are less likely to get a second grant, with the USDA you are more likely.
Q: Is there a requirement to be in business for 2-3 years before applying for a VAPG?
A: You need to be marketing and selling for two years for the Market Expansion version of the Working Capital grant. If you want to do an Emerging Market application, you can do that without having been in business for two years, but that is the application that requires a third party independently produced feasibility study be done first. The cap on these grants is $250,000.
Q: What are approximate costs for a third-party qualified consultant to conduct a required feasibility study?
A: It depends on the scope of your operation and your project. Usually $10,000 – $15,000. The feasibility analysis tends to be very extensive, looking at all the different components of your operation. It may be valuable to do a feasibility study before you launch into producing a new product to really understand if there is a market for what you want to do, and if you have everything in place to do it. A feasibility study also is a great thing to take to a bank if you want to pursue a loan.
Q: Are there examples of value-add business plans we could review?
A: I can’t share other people’s applications or marketing plans. You could ask someone who has been funded if they would show you their application. I do have a marketing plan template that is specifically designed to answer all the questions that are part of a VAPG application. By creating a marketing plan, you will be well on your way to being ready to apply for a VAPG.
Q: Are there ways to get better credit for the in-kind match on your raw commodity (the market value rather than the commodity price), because people aren’t going to be selling food in that super low price range?
A: Absolutely. I always start with the USDA-AMS commodity pricing. If that is a number that supports the project and makes sense, then we use that number. There are a lot of products where it doesn’t make sense, so then we do a market survey to see what the product costs in the store. Look at the wholesale price competitors are selling the product for and take the average of that as your commodity price. If you are going to be selling at retail prices (e.g., at the farmers market), then use the average retail price. Consider the kind of value you are adding (e.g., local, organic) when you make comparisons. For the application, make a chart showing the prices, where you got them, and how you calculated your in-kind commodity match.
Q: Do you have a few examples of calculating the commodity pricing?
A: People do milk into cheese, yogurt, etc. Also think of livestock. If we’re going to sell beef, we can take the commodity price of what it would cost to sell that head of cattle before it is butchered. That can be our commodity. Now we’re going to turn that into cuts of beef so that is adding value. Selling things organically, selling things locally. Really, you don’t have to work too hard to say you have added value, particularly in Washington where people are willing to pay more than the commodity price for something at the farmers market, the co-op, or even at a regular grocery store. If it says it’s “local,” it’s going to sell for more. Anybody who is producing food is adding value by selling it locally, so we don’t need to do a lot of fancy things to it. We just need to harvest the carrots, put them in a bag, and we’ve added value to them because we’re going to sell them locally. We add more value to it if we’re selling it at our own farm stand, and you are going to capture more money, so they are going to want to see how much money you are capturing. If you sell through the Puget Sound Food Hub, you’ve got a channel that can reach a lot of grocery stores and high-end restaurants that you wouldn’t necessarily be able to reach on your own, so you can show that you are gaining more customers.
When you are looking at “change of state,” such as taking lamb’s wool and having it spun into yarn, all the costs associated with producing that yarn are eligible expenses. The sky’s the limit when it comes to agricultural products that are eligible for this grant.
Q: Can you say more about the reporting and follow-up (hoops!) that are required?
A: You need to be registered in the system for reward management. You need to stay current on your taxes. You need to keep all of your receipts in order to show how you spent the money so you can be reimbursed. Reporting is required twice a year.
Q: Is the grant money taxable?
A: Yes.
Q: Have all 2023 VAPG winners been announced?
A: The announcement deadline is Sept. 30. I believe everyone has been notified already.
Questions about grant writing support from Melissa & others at NABC:
Q: What does your assistance with an application look like? What do we need to have prepared before reaching out to you for assistance?
A: I will give a larger presentation on December 14 (can we put a link to register here?). and go into greater detail about all the things you need to be ready to go through the application process.
The way I work with people starts with a Zoom meeting to understand what you want to do and gauge if you are ready to apply. In terms of what you need to do to prepare: You really need to understand your numbers. You need to know how much you have produced over the last several years and how much more you can produce. Know how many customers you had in the last several years, and how many more customers you can access. If you have a waiting list of customers, that is even better.
Q: What kind of information do you know that you’re going to need from us in order to get the grant process started?
A: The most important thing to know would be how much you have been producing over the past three years (e.g., pounds, bushels, eggs). What have your sales been for the last three years? What is the one thing that we’re going to write the application for? Then we would have a conversation and decide if you are ready.
Q: Do you have a good benchmark, like a percentage of increased sales over the years, that indicates you’re ready for the grant vs. waiting another year or more before trying?
A: Yes, I think the applications that are easiest to write and the most solid are market expansion grants. For these grants you need to be producing and selling for two years at the time of application. That’s the minimum benchmark. You don’t have to have a third-party independent feasibility study which can cost $10,000 to $15,000 to create before you apply. You can go right into a business plan or marketing plan that either you or I produce as part of your application.
Determine what part of your business can get to a $250,000 ask the quickest so we can narrow your application to those products. Maybe it makes sense to apply for $50,000 to get the ball rolling and help you take your business to the next level so that part of the business can stand on its own. Then we can work on another part of your business and helping that grow.
Our local USDA Rural Development representatives want farmers to succeed. They want to fund farmers and want people to spend all the money they receive. They have been really helpful in making that happen.
Q: What do you charge for your assistance with VAPG grant applications?
A: It depends on the size of the project. I do a fee for successful service. With farmers, ranchers, and fishers, I do a $500 upfront payment, and then a percentage of successfully funded applications (typically 5%-7% depending on the size of the project). If you don’t get funded, I don’t get paid.
We have a contract between us that says that I’m going to work with you really closely, one-on-one. We’ll have Zoom meetings. I’ll give you homework assignments to research things in your business and then we’ll get that information woven into an application and turned in.
Q: Does your service include getting through the grant reporting paperwork?
A: The initial contract is just for the grant writing, but I am available to help with other things too.
Questions about how VAPG funds can/can’t be used
Q: Is purchase of new equipment eligible for the “working capital funds”?
A: No. You can’t buy equipment with a VAPG but you can buy supplies. If something you need in order to produce a value-added product has a useful life of one year and costs less than $5,000, that is considered a supply and not a piece of equipment. Think in the longer term about expenses you will need to expand your business and use the VAPG to pay those expenses with the idea that you will be able to buy whatever equipment you need in the future.
Q: Can you give more specific ideas of how to spend the money? Can I spend it on attending a conference that relates to what I’m doing?
A: A conference that has to do with post-harvest activities, marketing, or sales of the value added product would qualify, but not a conference about how to grow better.
Q: I’m hearing that it may be better if we picked one of our products and went for a bigger grant and focused on that product for three years. Our biggest seller is our poultry, our easiest seller is our pork. So if we focused on our pork for three years and then came back and focused on one of the other products, is that a smart way to go?
A: That would be my recommendation. Then you can come back every 2-3 years and apply again. I had grants that ran for nine years. I had three of them that ran back-to-back. You’re going to have a lot of common expenses between them that are going to be eligible. If it touches pork, then it’s an eligible expense, but it’s also going to touch poultry. Costs for employees, the QuickBooks account, the payroll, your licenses, and your farm insurance, all those kinds of things are eligible expenses insofar as they directly contribute to expanding your market for that product.
So in a sense, this grant can be used to undergird your business while you are expanding in a particular area. If you can meet that $250,000 in eligible expenses, and the $250,000 in match with one of your kinds of protein, I would do that, and then come back for the next one, even if it’s a $50,000 one. I would do one after the other rather than lumping them all together. You can’t ever come back and ask for an application for the same kind of need.
Q: What are more ideas for covered expenses, like farm insurance?
A: You can pay someone to do your taxes, process payroll if you have employees, pay for your QuickBooks subscription annual fees, anything associated with bank fees, licensing fees, anything you need to run your business that doesn’t involve planting, managing, or harvesting the crop.
Q: Is labor included?
A: Labor outside of production. Once it is out of the ground, once it’s harvested, any labor for washing, packaging, processing, delivering, standing at the farmers market, farmers market fees, market supplies like tables, gazebos, baskets, etc. all count. Other marketing materials would qualify such as t-shirts for employees, label printer, office printer, ink, office furniture. These are considered “supplies.” You can’t spend it on “equipment,” which is defined as something that is over $5000 and has a useful life of over 1 year year.
Q: Could the grant be used for photography (e.g., lifestyle photos or products)?
A: Yes, if it is marketing material or advertising material directly related to the value added product, things for brochures or your website, you absolutely can spend the money on that.
Questions about specific value-added products?
Q: I’m starting a hard cidery so my product is value-added from the start. We will be putting in about 10 acres of hard cider trees that will get planted out next spring and it will be another year or two before I get any kind of revenue from sales. So there is a long time horizon. What is the best way for me to position myself to leverage some of these funds in the future?
A: You are a couple of years away from being able to apply for this particular grant. There are other grant programs that might be helpful, but until you’re selling, I would say it’s too early. You could apply for an Emerging Market Grant, but I would wait to apply until right before you start your sales. You don’t want it to be years down the road because then your in-kind match will have to be cash or your labor and that is a bit harder hill to climb.
Q: We are planning to smoke and can our mackerel catch. We have excellent markets. The costs of a bigger boat and net are holding us back right now. Is seafood eligible?
A: Yes, seafood is eligible. Unfortunately, buying a boat is not an eligible expense. Nets, depending on their useful life, may be an eligible expense. Certainly, other ingredients you need, labor to do the processing, advertising costs, cans and labels are all eligible. If there is some way you can get the project launched without a bigger boat, and then come back and apply for a VAPG to help you grow that market, that would be a great project.
Q: Could we use funds to buy from other fishers at first?
A: You could buy up to 49% of fish from other fishers, and you would need to use a minimum of 51% of fish you caught. A great way to grow is to cooperate with other people – buy the raw product from them, and then do the production, smoking, and canning.
Q: Is this grant targeted at edible foods only? For instance can flowers qualify as a value-added product?
A: Yes, but they do not fit in the fifth category of locally produced food, so that makes flowers more challenging. I worked on a successful application for flowers where they were able to show enhanced production methods. If you are turning flowers into something (e.g., essential oils or dried flowers), that is a change of state that is irreversible and would be eligible. Just growing and selling flowers directly is much more challenging to get funded.
Hope you enjoyed the Value Added Producer Grant Toolkit for Washington farmers. You can watch a video of the Lunch & Learn and see the slideshow on the VAPG Lunch & Learn page.