Farm to Food Assistance
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Upfront Farmer/Food Hub Payments
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Upfront Farmer/Food Hub Payments
For any LFPA or F2FA group who subcontract out to food hubs, how do you issue payment at the start of a contract? In general, we are preparing a reimbursement process where a vendor has to submit an invoice for food delivered. However, in our pilots, some food hub vendors struggled with a two week payment term and needed cash flow to pay out their farmers ahead of then at the start of a contract.
How are folks dealing with this? Are you issuing a % up front?
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2 Replies
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We are also doing invoice repayment for those who do have cash. However our way around those who do not is to create a contract with a specific amount of money to spend with each farmer. So for our program it would be (for example) Rural town food hub will receive $15,000 to spend between X number of local farmers/producers over the period of the grant. Since the low cash flows ones tend to be rural you can work with them to specify which farms and producers to work with, and how much to spend with each, over how much time.
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Such a good question! We have a few different models for this. We do some forward contracting directly with growers where we pay 60% upfront at the beginning of the season and then 40% once all product has been delivered. We also have our Farm to Food Pantry program which goes through our food hub. That’s managed as a credit on agency accounts, which they can spend on our ordering platform with eligible producers, and then we pay out to the producers from the LFPA funds on the same timeframe that they usually receive payments – 7-10 days.
The biggest challenge is when we’re working with our larger organizational subawardees, because they’re also paying farmers directly and invoice us at the beginning of the month for the previous month’s expenditures. Our organization as the middle man will be floating those payments to our subs, invoicing our state agency, and then waiting for them to receive payment from USDA and issue it to us. As the larger organization, we know that this helps mitigate the stress of a large federal grant for smaller orgs and are willing and able to take that on to strengthen and support the relationships with our community partners.
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