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USDA Feasibility Study

USDA Feasibility Study Services

What is a USDA Feasibility Study?

There are many types of feasibility studies

For Business Financing, as required by the USDA, this type of USDA feasibility study is a document that provides the grant or loan underwriters with a third party assessment of your plans.  The purpose of the USDA feasibility study is to evaluate the risk of your project.

If you are well-organized and have raw material supply agreements or letters of intent, end user agreements or letters of intent, your development plan, cost breakdown, and the loan terms, then we can successfully complete a USDA Feasibility Study.

Important Considerations

Our experience with lenders and the USDA is that if your project is pending these essential items, they will not move forward until your business plan is concrete.  Lenders and the USDA will not accept "if ", "potential" or "maybe".   And in the past, we have had clients with half-baked projects and we advise them to wait until their plan is concrete before commencing with a USDA Feasibility Study.

"Build it and they will come" does not work with lenders and the USDA.  For some projects however, contracts are not customary, thus we must prove "unmet demand" and your ability to fill this demand.

Job creation is also important.  If your project is job shifting, the USDA is not keen on that..  We must prove your project will Create Jobs, not take employees from already operating nearby companies. 

We have completed over 400 USDA Feasibility Studies since 1998 and there are about 170 examples on our experience map.  These are important factors we advise clients on everyday. 

 

Our Experience (See Map Below)

Our experienced team at USDA Feasibility Study offers in-depth feasibility studies to help you secure grant, direct loan, and loan guarantee programs offered by the USDA.

There are several USDA programs and differing Statements of Work.  The USDA programs that require feasibility studies include:

With 25 years of experience in the industry, we have the expertise needed to create tailored statements of work to fully meet the needs of your project. Let us assist you every step of the way.

We have completed feasibility studies used by the USDA on a wide array of project types all over the continental United States, but also Alaska, America Samoa and Puerto Rico.

The Statement of Work for USDA Loan and Grant Programs varies based on the program you are applying for.  The following are generally the two Statements of Work that are required:

USDA Feasibility Study Requirements

RD Instruction 4279 B Appendix E
USDA Guide for Completion of Feasibility St
udies

  • Executive Summary

  • Economic Feasibility

  • Market Feasibility

  • Technical Feasibility

  • Financial Feasibility

  • Management Feasibility

  • Depending on the program, other sections may be required

Executive Summary

Introduction/Project Overview (Brief general overview of project location, size, etc.); Economic feasibility determination/opinion; Technical feasibility determination/opinion; Market feasibility determination/opinion; Financial feasibility determination/opinion; Management feasibility determination/opinion; Recommendations for implementation, including an overall conclusion as to the business’ chance of success.

Economic Feasibility

Information regarding project site; Availability of trained or trainable labor; Availability of infrastructure, including utilities, and rail, air and road service to the site.  This includes an economic overview nationally, state level, and county level.  Also included is a demographic overview and traffic counts and other pertaining items related to the business type. 

Market Feasibility

This is a critical part of an USDA Feasibility Study.  USDA Grant and Loan underwriters use this section to determine your market share, and how well your enterprise can be accepted into the market.  Generally, they ask we follow the appropriate USDA guide for this section as follows:

Information on the sales organization and management; Nature and extent of market and market area; Marketing plans for sale of projected output - principal products and byproducts; Extent of competition including other similar facilities in the market area; Commitments from customers or brokers - principal products and byproducts. Adequacy of raw materials and supplies. Projected total supply from members and non-members. Projected competitive demand for raw materials. Procurement plan and projected procurement costs. Form of commitment of raw materials (marketing agreements, etc.).

Each project is different, thereby we modify this section to accommodate a complete analysis of the market and competitors.  Items included in the competitive analysis include information from Dun & Bradstreet, Moody's Analytics and ArcGIS Business Analyst to estimate the market area capacity for your venture.

Technical Feasibility

Again, we as asked to use the USDA Guide RD Instruction 4279-B or the appropriate USDA Feasibility Study Guide for this section as follows:

Suitability of the selected site for the intended use including an environmental impact analysis. Report must be based upon verifiable data and contain sufficient information and analysis so that a determination may be made on the technical feasibility of achieving the levels of income or production that are projected in the financial statements. Report must also identify any constraints or limitations in these financial projections and any other facility or design-related factors which might affect the success of the enterprise.

Report must also identify and estimate project operation and development costs and specify the level of accuracy of these estimates and the assumptions on which these estimates have been based. Project engineer or architect may be considered an independent party provided neither the principals of the firm nor any individual of the firm who participates in the technical feasibility report has a financial interest in the project and provided further that no other individual or firm with the expertise necessary to make such a determination is reasonably available to perform the function. Commercial Replication. Risks Related: Construction, Production Regulation and Governmental Action.

Financial Feasibility

In this part of the USDA Feasibility Study, all assumptions related to the development of the pro forma statement are identified and explained.  These items are market driven.  We located financial statements through various sources that are used by USDA Loan underwriters whereas industry financial ratios are provided. 

If your business is an expansion of your existing business, we gather your balance sheet and financial statements as historical support for future plans as well.  

Based on information gathered in the process of the Economic, Market and Technical Feasibility sections of the study, we can then identify and use market indications to develop the pro forma statement such as prices, rents, vacancies, usage rates, etc.  Operating cost are also compared with your historical figures, or market indications from sources that evaluate hundreds of actual financial statements.  

Then a 10-year pro forma statement is developed.  In the USDA Feasibility Study, a monthly pro forma is presented based on seasonality, if any for your business.  The EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is then evaluated by way of financial analysis including:

USDA Feasibility Study Financial Analysis:

  • Pro forma (10 years)

  • Discounted Cash Flow Analysis (DCF)

  • Structure of the Assets and Liabilities   

  • Net Assets (Net Worth)   

  • Financial Sustainability Analysis      

  • Key ratios of the company's financial sustainability      

  • Working capital analysis   

  • Liquidity Analysis Financial Performance   

  • Overview of the Financial Results   

  • Profitability Ratios   

  • Analysis of the Business Activity (Turnover Ratios)   

  • Labor productivity

  • Key Ratios Summary   

  • Rating of the Financial Position and Financial Performance  

  • Bankruptcy Test  

  • Calculation of the Final Rating of the Financial Condition

Management Feasibility

This section includes a discussion concerning the adequacy of management (experience, training, and education of management). Discuss continuity of management (is there a continuity of management plan and is there depth of management?). Evidence that continuity and adequacy of management has been evaluated and documented as being satisfactory. Discuss motivation and character of management. Risks Related to: Applicant as a company (i.e. development-stage) Conflicts of interest or appearances thereof.

USDA Feasibility Study
REAP Renewable Energy and Food Supply Programs

USDA RD Instruction 4280-B Appendix D and 7 CFR 5001.303 (c) (4)

Executive Summary

  • Provide an overview to describe the nature and scope of the proposed project, including the purpose, project location, design features, capacity, and estimated capital costs. Include a summary of the feasibility determinations made for each applicable component.

Economic Feasibility

  • Minimum amounts of required inputs (labor, infrastructure, utilities, renewable resources,

  • feedstocks, animals, among others) to operate successfully

  • Contracts in place and contracts to be negotiated, including terms and renewals

  • Environmental risks

  • Cost of project relative to the increase in revenues or benefits provided

  • Overall economic impact of project including new markets created and economic development

  • Conclusions

Market Feasibility

Analysis of the current and future market potential, competition, sales or service estimations including current and prospective buyers or users.

  • Competition

  • Type of project: service, product or commodity based

  • Target market, new versus established

  • End user analysis, captive versus competitive

  • By-product revenue streams

  • Industry risk

  • Pricing

  • Conclusions

Technical Feasibility

Analyzing the reliability of the technology to be used and the analysis of the delivery of goods or services, including transportation, business location, and the need for technology, materials, and labor.

  • Commercial availability

  • Product and process success record and duplication of results

  • Experience of the service providers Roads, rail, airport infrastructure

  • Water, electricity, and other utilities

  • Waste disposal

  • Need for local transportation.

  • Labor market

  • Availability of materials

  • Use, age, and reliability of technology

  • Construction risk

  • Conclusions

Financial Feasibility

IAnalysis of the operation to achieve sufficient income, credit, and cash flow to financially sustain the project over the long term and meet all debt obligations.

  • Commercial or project underwriting

  • Management’s assumptions

  • Accounting policies

  • Source of repayment

  • Dependency on other entities

  • Equity contribution

  • Market demand forecast

  • Peer industry comparison

  • Cost-accounting system

  • Availability of short-term credit

  • Adequacy of raw materials and supplies

  • Sensitivity analysis

  • Conclusions

USDA Feasibility Study Financial Analysis:

  • Pro forma (10 years)

  • Discounted Cash Flow Analysis (DCF)

  • Structure of the Assets and Liabilities   

  • Net Assets (Net Worth)   

  • Financial Sustainability Analysis      

  • Key ratios of the company's financial sustainability      

  • Working capital analysis   

  • Liquidity Analysis Financial Performance   

  • Overview of the Financial Results   

  • Profitability Ratios   

  • Analysis of the Business Activity (Turnover Ratios)   

  • Labor productivity

  • Key Ratios Summary   

  • Rating of the Financial Position and Financial Performance  

  • Bankruptcy Test  

  • Calculation of the Final Rating of the Financial Condition

Management Feasibility

Analysis of the legal structure of the business or operation; ownership, board, and management analysis.

  • History of the business or organization

  • Professional and educational background

  • Experience

  • Skills

  • Qualifications necessary to implement the project

  • Conclusions

Anaerobic Digester Project/Biogas Projects

  • Provide adequate and appropriate data to demonstrate the amount of renewable resource available.

  • Indicate the substrates used as digester inputs, including animal wastes or other Renewable Biomass in terms of type, quantity, seasonality, and frequency of collection.

  • Describe any special handling of feedstock that may be necessary. Describe the process for determining the feedstock resource.

  • Provide either tabular values or laboratory analysis of representative samples that include biodegradability studies to produce gas production estimates for the project on daily, monthly, and seasonal basis. If an anerobic digester project, identify the type of operation (e.g., dairy, swine, layer, etc.), along with breed, herd population size and demographics, and the type of waste collection method and frequency information available.

  • For the biogas produced, identify the type of digester (e.g., mixed, plugflow, attached film, covered lagoon, etc.), if applicable, or the method of capture (landfill, sewage waste treatment, etc.) and treatment.

  •  Identify the system designer and determine the digester design assumptions such as the number and type of animals, the bedding type and estimated annual quantity used, the manure and wastewater volumes, and the treatment of digester effluent (e.g., none, solids separation by screening, etc. with details including use or method of disposal)

USDA Feasibility Study
Community Facility Programs

USDA Financial Feasibility Study Guidelines Community Programs RD Instruction 1942-A, Guide 5

A. Need for the Facility.

 

B.   Existing facilities

    1. Explain current capacities, rates or usage, activities, suitability for continued use, deficiencies in services, staff, physical                        conditions and any other pertinent information.

C.   Proposed Facility

    1.Description of construction and renovation by component including capacity of each component part and physical limiting                  factors.

     2. Explain and document the need for the facility. Include comments regarding the following:

         a. Service area

         b. Population trends

         c. Similar facilities in the service area

         d. Usage trends

         e. Community support

         f. Regulatory agency approval

         g. Economy in the service area

         h. Analysis of staff and consultants

D. Financial Information

      1. Explain all assumptions underlying the expected demand, use, and projections of financial data such as:

        a. Change in usage

        b. All income and expenses

        c. Rate structure

        d. Allowance for uncollectible accounts

        e. Depreciation life and method

        f. Description of long-term debts

     2. Financial Statements.

        The following financial statements must be prepared reflecting five-year projections.

        a. Balance sheets for all funds

        b. Statement of income and expenses    

        c. Statement of cash flows (cash receipts and disbursements)

        d. Comparison data for facilities in service area

F. Conclusions

USDA Feasibility Study
USDA Section 9003 Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance

Section 9003 Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance Appendix B – Feasibility Study Outline - CFR Part 4279.261 (a) - (j)

A. Executive Summary

    1. Introduction and a brief, general project overview

    2. Economic feasibility determination

    3. Market feasibility determination

    4. Technical feasibility determination

    5. Financial feasibility determination

    6. Management feasibility determination

    7. Recommendations for implementation

B. Economic Feasibility

   1. Describe your feedstock. Include:

       a. Feedstock source management

       b. Estimates of feedstock volumes and costs

       c. Collection, pre-treatment, transportation, and storage

       d. Feedstock risks

   2. Verify that woody biomass feedstock from National Forest System or public lands will not be used for a higher- value product

   3. Describe the impact on similar biorefineries in the area in which the borrower proposes to locate the project, if applicable

   4. Describe the potential impact on existing manufacturing plants or other facilities that use similar feedstock if your proposed              production technology is adopted

   5. Provide projections of impact on resource conservation, public health, and the environment

   6. Include economic feasibility details about your project site such as a description of its size and suitability, proximity to utilities            and modes of transportation, storage options, and so on

   7. Confirm access to trained – or trainable – labor

   8. Describe the availability of infrastructure, including utilities, and transportation (road, rail, and so on) to the site

   9. Explain the overall economic impact of your project. Include direct and indirect jobs created or saved, additional markets                     created for agricultural and forestry products and agricultural waste material, and the potential for rural economic                               development

   10. Discuss the feasibility of – and any plans for – your project to work with producer associations or cooperatives. Include the               estimated amount of feedstock purchased annually from – or sold to – producer associations and cooperatives

C. Market Feasibility

Include:

    1. Information on the sales organization and management

    2. An explanation of the nature and extent of the market, along with the market area

    3. Marketing plans for the sale of projected output-principal products and byproducts

    4. Extent of competition, including other similar facilities, in the market area

    5. Commitments from purchasers of off-take -principal products and secondary products, degree of commitment, duration or                 terms of off-take agreements, and the financial strength of counterparties

    6. Risks related to the industry, including

      a. Industry status

      b. Specific market risks

      c. Competitive threats and advantages

D. Technical Feasibility

Demonstrate:

 

    1. Suitability of the selected site for the intended use

    2. Scale of development for which the process technology has been proven (for instance, pilot, demonstration, or semi-work                  scale facility). Provide evidence that the proposed technology is feasible and can succeed.

        NOTE: The proposed technology must meet the definition of “eligible technology” as described in 7 CFR 4279.202 (available at             this link: https://go.usa.gov/xJfpc).

    3. The degree of integration of all processes. A summary of any integrated demonstration unit test results also must be                             submitted.

    4. Specific volume produced from the technology of the process (expressed either as volume of feedstock processed in tons-per-            unit of time, or as product in gallons-per-unit of time)

    5. Identification and estimation of project operation and development costs, specifying the level of accuracy of the estimates,                  and the assumptions upon which they are based

    6. Detailed analysis of project costs, including:

         a. Project management, professional services, and resource assessments

         b. Project design and permitting

         c. Land agreements and site preparation

        d. Equipment requirements, along with system installation startup and shakedown

        e. Warranties, insurance, financing, and operation and maintenance costs

   7. Projected timeline describing borrower plans from the time of loan application through plant construction, commissioning,                and ramp-up

   8. Potential for commercial replication of the proposed system

   9. Risks related to:

        a. Biorefinery construction

        b. Production of the advanced biofuel and biobased product, including renewable chemical, if applicable

        c. Regulation and governmental action

        d. Design-related factors that can impact project success

        e. Technology scale-up risk

E. Financial Feasibility

    1. Address the reliability of the financial projections and the assumptions upon which they are based. Include all sources and                  uses of project capital, private or public, and federal or non-federal funds. Provide detailed descriptions and analysis of                        projected balance sheets, income, expense, and cash flow statements covering the useful life of the project.

     2. Provide a detailed description of the degree to which the project’s financial feasibility is dependent upon:

          a. Investment incentives

          b. Productivity incentives

          c. Loans and grants

     3. Identify project authorities, renewable identification numbers (RINs) value, tax credits, other credits, and any subsidies that                 affect the project

     4. Address any constraints or limitations in the financial projections

     5. Describe the ability of the business to achieve the projected income and cash flow

     6. Assess the cost accounting system

     7. Confirm the availability of short-term credit or other means to meet seasonal business costs

     8. Verify the adequacy of raw materials and supplies

     9. Provide a sensitivity analysis, including feedstock and energy costs, along with product and byproduct prices

    10. Address risks related to the:

          a. Project

          b. Borrower financing plan

          c. Operational units

          d. Tax issues

F. Management Feasibility

    1. Highlight borrower’s or management’s previous experience concerning:

         a. Production of advanced biofuel and biobased product, including renewable chemicals, as applicable

         b. Acquisition of feedstock

         c. Marketing and sale of off-take

         d. The receipt of federal financial assistance, including amount of funding, date received, purpose, and outcome

     2. Describe your management plan for the procurement of feedstock and labor, marketing of the off-take, and management                  succession.

     3. Address risks related to:

           a. The borrower as a company (for example, identify potential development stage risks regarding the structure of your                       management team or other personnel)

            b. Conflicts of interest

            c. Management strengths and weaknesses

       

G. Qualifications

       You must submit a resume or statement of qualifications of the application author and any contributors to the feasibility study.         Include the prior, applicable experience of all pertinent parties.

USDA Feasibility Study
Cost and Completion Time

The cost generally starts at about $6,500 USD and up to $30,000 depending on the complexity of the project. 

The time to complete depends also on the complexity of the project yet from 10 to 20 business days.  

Book a Meeting to Interview us. 

 

Strongly recommended.

Always interview an USDA Feasibility Study Consultant!

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