What they are, who’s eligible and how to apply


So, you want to apply for a Value-Add Producer Grant? 


I haven’t met a small farmer who isn’t interested in the Value-Add Producer Grant (VAPG). Who wouldn’t? Free money from the government to turn your raw products into something people will pay more money for? Sign me up! 


It’s not quite so simple, unfortunately. In this post we’ll dive into what you need to know about applying for this grant. 


To get approval for a VAPG project, you need to be doing one of the following things that enhance the value of the product:


  1. Change the physical state of the product – think milk into cheese, livestock into meat, wool into clothing or rugs
  2. Change the production methodologies such that the raw product becomes more valuable – think shifting into organic production of tomatoes, moving your hens to a free range management style, or shifting from finishing your beef cattle with corn to being full grass-fed
  3. Physical separation – think shifting your harvesting to allow separation of GMO corn from non GMO, or harvesting oats to allow for zero cross contamination with wheat
  4. Farm based renewable energy – think dairy manure into methane and electricity generated and used on farm, or corn into biodiesel. Note that wind, solar, geothermal and hydrological power projects are not considered value add
  5. Local production – think partnerships amongst local businesses that allow products to be marketed as fully local, such as a vineyard selling grapes to a local winery which are then produced and marketed as a local wine.


If you’re a hemp producer, you’ll have to proceed with caution – you’re not completely ineligible, but the feds don’t want to fund anything with CBD, hemp oil or products for human use. Building materials and textiles are good to go, but you won’t be able to relieve pain or alter perceptions on the government’s dime. 


Speaking of things you can’t do on the government’s dime, there are several categories of expenses that will get your application tossed out on arrival. You can’t use VAPG for infrastructure or most equipment, or to pay yourself (or anyone else) for the raw product you’re transforming. 


Types of VAPGs


There are two types of VAPG applications – planning and working capital. A planning grant covers the money needed for a qualified third-party consultant to conduct a feasibility study and create plans for creating your value-added business and marketing your product. So basically, you can’t pay yourself to do the work and your brother probably isn’t qualified to do it either. (And if he were, you might run afoul of conflict-of-interest rules.) But other than that, planning grants are a fairly simple application, at least compared to the working capital grant. (And if you’re looking for a qualified third party to do your feasibility study and create business plans, look no further than Good Agriculture!)


The working capital grant, on the other hand… way more complicated. There are two types of working capital applications. If you’ve been producing your product for less than two years, you’ll be in the Emerging Market category, and you’ll require a feasibility study and business plan specific to your product. If you’ve been producing more than two years and have sold successfully, you don’t need a feasibility study but you will need a business OR marketing plan. 


The exception to the above is if you want less than $50,000 – if that’s the case, you just need to demonstrate your expected increases in customer base and revenue. 


Matching Funds


Now, here’s the hard part – matching funds. Unfortunately, the feds aren’t handing out free money – they want you to have some skin in the game. They’ll give you half the money you need for your value-add project, and you have to tell them how you’ll come up with the other half. This can be in the form of cash, a loan, or a line of credit. There are a few things you can do to reduce the amount you have to come up with, but at the end of the day you have to bring some cash to the table. And you have to spend that cash BEFORE you get any grant funding. 


Here’s how you can limit that amount:


  • Work for free. This is known as in-kind labor contributions, and basically you take the amount you would pay yourself to implement this project if you paid yourself a fair market wage and put it towards your match. You can only do this for 25% of the total project costs, but on a big project that can be a nice chunk of change.
  • Provide your raw commodity for free. If you can make the numbers work, donating your raw product to be processed in the first production run is a way to bring down your match obligations. 
  • Hit up friends, family, private foundations, strangers on the street… There’s nothing saying that the cash for matching has to come from your bank account or your credit. If you can find someone without a conflict of interest to put up the cash to see your project to completion, you can use their money to meet your match requirement. 


Ok, so you know what you want to do and where the match will come from. Next hurdle – are you eligible? Answer – probably. Applicants have to be individual agricultural producers or entities that are owned and controlled by agricultural producers. Applicants can also be nonprofits that represent agricultural producers, cooperatives of agricultural producers, or majority-controlled producer-based businesses. 


Once you’re sure your project is eligible and your entity is eligible, it’s time to consider how to structure your application. It goes without saying that you have to dot all your i’s and cross all your t’s, and any sort of federal application is going to be loaded with somewhat redundant and confusing forms and directions. Your state representatives should be useful here – go to the main VAPG page, select your state, and you’ll get the email address and phone number for your state representatives. 




Assuming you get everything correct, this is how your application will be scored. 


Technical Feasibility, Operational Efficiency, Profitability and Economic Sustainability (0-30 points)


For this section, you need to demonstrate that this project will expand your customer base and increase your revenue as a producer-owner. If you’re not a producer-owner, you need to show that the money you make will flow to future owners. And this can’t just be your assurances – you need to reference third party data and information that specifically supports your project or similar projects. You should also discuss the jobs you’re creating or saving.


Qualifications of Project Personnel (0-20 points)


Here, you’ll need to identify the people who will be working on the project and show that they’ll be capable of completing the work. If you have consultants or third parties lined up, detail their capabilities. If you’re planning to hire for the project but haven’t identified an individual, you should include a job description with the required qualifications. 


Commitments and Support (0-10 points)


This section evaluates the commitments of producers involved in the project, those of third parties, and those from end users. On the producer side, you’ll get more points when there are a larger number of producers involved, especially if they’re all significant contributors to the project. Third parties are evaluated on their ability to fulfill their contributions, and end users are evaluated based on the amount they’ve committed to purchase. Include copies of letters of intent or contracts related to the commitments and support you’ve received for the project. 


There are no minimum or maximum number of commitments, but they do need to be relevant to your project. Getting Xaviar from down the street to write a letter stating he’ll buy your jam won’t help your application; getting the local jam brand to commit to buying 5,000 lbs of your strawberry puree will. If you have support from other businesses in your community, it’s definitely to your advantage to show it.


Work Plan and Budget (0-20 points) 


In this section, detail is your friend. Break your project down into concrete steps with a detailed description of each and how you’ll know it’s been successfully completed. Then tie those steps to cost breakdowns in your budget spreadsheet and provide a narrative basis for how you’ve established those numbers. 


Priority Points (0-5 points) 


This is an easy category – if you or your project fall into any of the following, you’ll get 5 points added to your overall product score. 


If you’ve been farming less than 10 years, if you’re a veteran or come from a historically underserved population, you’ll automatically get an extra 5 points. In addition, if your project focuses on creating local multi-step supply chains, a small or medium sized farm, or a farmer or rancher cooperative, you’ll get the extra 5 points.


If you don’t specifically fall into one of those categories but have a project that contributes to new or expanded marketing opportunities for new farmers, veteran farmers, small and medium sized family farms or socially disadvantaged farmers, you’ll be awarded up to 5 additional points. 


Ok! Still reading? Still interested in applying for this grant? Then it’s time to get writing! The application has to be in by May 11th, and you’ll need to have an account with grants.gov and a SAM number before then.  And, of course, we’re happy to help you with the grant writing – no charge unless you win! 

Leave a Reply