Cold Storage Feasibility and USDA Financing in 2026: What Replaced the Food Supply Chain Loan Program

For the full regulatory framework, gate by gate, see The USDA Feasibility Study Framework.

The Food Supply Chain Guaranteed Loan Program guaranteed loans up to $40 million for cold storage, processing and distribution projects, charged no guarantee fee, and is closed. It was funded entirely by the American Rescue Plan Act, those funds are exhausted, and applications are no longer accepted. Rural cold storage projects now route through Business & Industry — a permanent programme with a $25 million ceiling, a guarantee fee, and a materially different underwriting posture. This article covers what changed, and what a cold storage feasibility study has to prove.

The short version

What happened to the Food Supply Chain programme

A large share of the people reading this arrived searching for the Food Supply Chain Guaranteed Loan Program. It is worth being direct about its status, because a good deal of published material still describes it in the present tense.

FSCGL launched in December 2021 as part of USDA's Build Back Better initiative, funded entirely by the American Rescue Plan Act. It guaranteed loans of up to $40 million to businesses operating in the middle of the food supply chain — aggregation, processing, manufacturing, storage, transportation, wholesaling and distribution. Its terms were exceptional: no guarantee fee and no annual fee, against B&I's fee structure, and a ceiling well above B&I's.

It funded exactly the kind of project people still search for it about. A New York food group built a cold storage facility adjacent to its processing plant. An Arizona operator bought land and buildings and added warehousing, processing and freezing space, raising frozen meal capacity by 192 million meals a year. An Oklahoma borrower purchased and improved a cold storage warehouse and got a $2.3 million guarantee against it.

It was never permanent. ARPA appropriated a fixed sum, that sum was committed, and the programme closed. There is no reauthorisation pending that would restore it on the same terms.

The practical consequence is that a project scoped in 2022 against a $40 million ceiling with no guarantee fee now has to work at $25 million with one. For most rural cold storage projects that is manageable. For large ones it changes the capital stack materially, and a sponsor working from a two-year-old model should rebuild it before approaching a lender.

What B&I offers instead

Business & Industry is the permanent programme and the one rural cold storage runs through now. It is governed by 7 CFR Part 5001, the OneRD regulation covering B&I, Community Facilities, REAP and Water & Waste Disposal.

Loan ceiling. Up to $25 million, with $40 million available in limited circumstances.

Guarantee percentage. Published annually by Federal Register notice. For fiscal year 2026, applications requesting less than $5,000,000 receive an 85 percent guarantee — raised from 80% in March 2026 — and applications at or above $5,000,000 receive 80 percent.

That 85% tier matters more than it first appears. It applies to the application amount, not to the project cost, and it creates a genuine structuring consideration around the $5 million line. A project requesting $5.2 million receives a lower guarantee percentage than one requesting $4.8 million, which affects the lender's retained exposure and therefore their appetite. Whether the project can sensibly be structured below the threshold — with additional equity, a smaller first phase, or separate financing for a component — is a question worth asking early rather than late.

Rural requirement. Projects must be in communities of 50,000 or fewer. For cold storage this is less constraining than it sounds, since the asset class naturally sites near production and processing rather than in metropolitan cores — but it does have to be confirmed, and USDA launched a new Rural Development Eligibility Lookup Tool in April 2026.

Eligible uses. Land and buildings, construction, equipment, working capital, and refinancing under conditions set at §5001.102(d).

Term. Up to 30 years on real estate, shorter on equipment, set against the useful economic life of what is financed. For cold storage this creates a structuring question of its own, since the building may support a 30-year term while the refrigeration plant does not.

The sector case, and why it is genuinely strong

Cold storage is one of the few industrial asset classes where the supply-demand picture supports development on fundamentals rather than on speculation.

Vacancy is tight. National cold storage vacancy sits near 3.4%, against 5% to 7% for conventional dry warehouse. In sub-50,000 square foot last-mile facilities it runs near 4%, against a 7.4% national industrial average.

Rents carry a real premium. Refrigerated space commands roughly $12 to $15 per square foot against $8 to $10 for ambient. That spread is what makes the construction premium recoverable — but only if the project achieves it, which is a market question rather than an assumption.

The existing stock is old. More than 75% of US cold storage capacity was built before 2000, and more than 60% before 1990. The average facility is around 37 years old. Older buildings frequently lack the clear heights, energy efficiency and controls that modern food and pharmaceutical operators require, which means a meaningful share of nominal capacity does not actually compete for modern tenancy.

Demand drivers are structural rather than cyclical. Pharmaceutical cold-chain requirements, fresh-food e-grocery, and reshoring of food production all push the same direction. Refrigerated warehousing is projected to lead all warehouse types at roughly 9.85% compound annual growth through 2031.

Capital is following. Lineage and Americold, the two dominant operators, have collectively added more than 18 million square feet since 2019 and continue to invest.

Any competent feasibility study will find these facts, and most will report them. The mistake is treating them as the analysis rather than the backdrop. National vacancy of 3.4% tells you nothing about whether a specific facility in a specific county will lease. Sector-level statistics belong in the market section as context; the actual work is establishing local demand.

What it costs to build

Cold storage construction runs $130 to $350 or more per square foot, against roughly $78 to $85 for standard dry warehouse — two to three times the cost. The International Institute of Ammonia Refrigeration puts a tighter working range at $150 to $250.

The spread within that range is driven principally by temperature zone. A refrigerated facility holding 34 to 38°F costs substantially less than a blast-freeze facility running -20 to -30°F. Between those extremes sit standard frozen, controlled-atmosphere and multi-zone facilities, each with different insulation, refrigeration capacity and structural requirements.

For scale: a 100,000 square foot cold storage facility typically ranges from $12.5 million to $20 million including refrigeration, controls and compliance.

Those per-square-foot figures are hard construction cost, and they routinely exclude:

• Land acquisition
• Architectural and engineering fees, typically 6% to 10% of hard costs
• Permitting
• Racking systems
• Automation and material handling
• Owner-supplied refrigeration equipment where separately procured
• Pre-opening and commissioning expense
• Working capital

A project budget built from a per-square-foot benchmark without adding these back is understated by a wide margin, and it is one of the more common reasons a cold storage pro forma has to be rebuilt mid-application.

MEP is the dominant cost driver. Mechanical, electrical and plumbing typically represents 30% to 40% of total industrial construction cost, and cold storage amplifies every line within it. Refrigeration compressors, sub-slab heating to prevent frost heave, and automated controls draw far more power than conventional distribution, which forces larger transformers, heavier switchgear and more complex distribution from the utility connection inward.

Utility capacity is the risk nobody prices

This deserves its own section because it kills more cold storage projects than demand ever does.

Cold storage draws heavily on electrical service, and the required transformer capacity frequently exceeds what the site's existing service can deliver. Transformer procurement lead times have lengthened considerably, and a utility upgrade can hold up occupancy for months regardless of how quickly the building is finished.

Utility capacity must be confirmed during site selection, not during design development. A feasibility study that identifies a site, models a facility and projects a stabilisation date without having confirmed that the utility can serve the load — and on what timeline — has not addressed the project's largest schedule risk.

For a USDA file this matters twice over. It affects the construction period and interest reserve. And under the coverage analysis, a delayed opening pushes the ramp back, which is frequently the most damaging sensitivity in the entire model.

The questions a study should answer explicitly: what is the connected load, what does the utility have available at the site today, what upgrade is required, what is the quoted cost, what is the quoted lead time, and who bears the cost.

Where cold storage projects actually fail

Drawn from the pattern of what does not get financed, or gets financed and then struggles.

Temperature zone mismatched to demand. A developer builds frozen because frozen commands higher rent, and the local demand is for refrigerated produce staging. Or builds a single zone when the tenant base needs multi-temperature. Zone configuration is close to irreversible and it has to follow the demand analysis rather than the pro forma.

Speculative development without an anchor. Cold storage is a poor speculative asset precisely because it is expensive and specific. A project with a signed anchor tenant or a committed captive use is a different credit from one built on market averages. USDA and lenders read that difference clearly.

Energy cost understated. Refrigeration is a continuous, substantial operating expense that scales with temperature differential, throughput, door activity and ambient conditions. A pro forma that carries a generic utility line rather than an engineered energy model is understating the largest controllable operating cost in the business.

Replacement capital expenditure ignored. This is where cold storage collides hardest with USDA's coverage definition. Part 5001 defines DSCR as EBITDA less reasonably expected replacement capital expenditures over annual debt service. Refrigeration systems, compressors, controls, doors and racking all have finite lives, and on a heavy-capex asset the deduction can move the coverage ratio by 0.20x to 0.35x. A project modelled at 1.30x on a conventional calculation can present at 1.10x on the regulatory one.

Throughput assumptions unsupported. Cold storage revenue is a function of occupied pallet positions, throughput volume and value-added services. A model that assumes high occupancy and high throughput simultaneously, without evidence that both are achievable in the same operation, is double-counting.

Labour underestimated. Cold environments carry wage premiums, higher turnover and productivity penalties. Staffing models built on ambient warehouse benchmarks understate cost.

What a cold storage feasibility study has to establish

USDA feasibility work must satisfy the scope at 7 CFR Part 5001, Appendix A to Subpart D, prepared by an independent third party with no financial interest in the outcome. For cold storage specifically, the analytical weight falls in particular places.

Market feasibility

Define the trade area properly. Cold storage trade areas are drawn by drive time from production and consumption points, not by radius. A facility serving fresh produce has a different catchment from one serving frozen distribution.

Establish demand from the ground up. What is grown, processed or distributed within the catchment. Seasonal volume profiles — harvest peaks, holiday cycles, protein production schedules. What temperature ranges that product actually requires. Where it is currently stored, at what cost, and why it would move.

Map competitive supply, including age and configuration. Existing capacity within the catchment, but qualified: a 1970s facility with 22-foot clear heights and outdated controls does not compete for the same tenancy as a modern build. This is where the national statistic about ageing stock becomes locally useful.

Capture the pipeline. Announced and under-construction capacity in the catchment. Cold storage development has been active, and a project that ignores competing supply arriving before its own stabilisation is analysing the wrong market.

Technical feasibility

Refrigeration system selection and its implications — ammonia, CO2, or synthetic refrigerant, each with different capital cost, efficiency, regulatory and safety profiles. Insulation and envelope specification. Slab design and sub-slab heating. Clear height and racking configuration. Dock configuration and staging. Controls and monitoring. Regulatory compliance including FSMA, and where applicable pharmaceutical requirements.

And, as above, utility capacity with a documented answer rather than an assumption.

Financial feasibility

A revenue build derived from the demand analysis: pallet positions, occupancy ramp, storage rates, throughput and handling revenue, and any value-added services, each supported by comparable evidence.

An engineered energy model rather than a percentage allowance.

A replacement capital expenditure schedule built from the actual asset list — compressors, evaporators, condensers, doors, controls, racking, material handling — with useful lives and replacement costs, feeding the USDA coverage calculation.

Coverage shown across the construction period, the ramp, and the first full year of amortisation. Where the loan carries an interest-only period, coverage shown both during and after — §5001.402(b)(3) permits up to 36 months, and the February 2026 letter to OneRD lenders asked that such periods be justified with realistic monthly cash-flow projections.

Sensitivity across occupancy, rate, energy cost, construction cost and, critically, opening date.

Management feasibility

Cold storage is operationally demanding, and USDA's credit evaluation weighs it. Has the sponsor run refrigerated facilities before. Who is the operating team. What happens to the asset if the operator changes. For a first-time operator, this is frequently the weakest part of the file and it needs addressing directly rather than glossed.

The financing environment has tightened

Anyone approaching a USDA lender in 2026 should understand the posture they are approaching.

USDA's guaranteed portfolio carries an active balance above $12 billion with delinquencies exceeding $1 billion. In February 2026 the Rural Business-Cooperative Service Administrator wrote to more than 775 OneRD lenders citing §5001.132, the lender-removal authority, and setting out underwriting expectations — among them sizing loans against industry norms with explicit working capital analysis, aligning offtake contracts with the loan term where industry-feasible, and funding reserves from borrower equity rather than from the Agency loan. In May 2026 the agency removed ten lenders from the platform.

Separately, USDA has paused applications for controlled environment agriculture and anaerobic digester projects on stewardship grounds relating to delinquency in those sectors. Cold storage is not subject to that pause, but the direction of travel is unambiguous: the agency is scrutinising sector concentration and credit quality more closely than it was.

For a cold storage sponsor the practical reading is that the offtake question matters more than it did. A project with contracted volume aligned to the loan term is in a materially different position from one relying on market absorption, and the February letter said so in terms.

Frequently asked questions

Sources

1. 7 CFR Part 5001, OneRD Guarantee Loan Initiative, including Appendix A to Subpart D.
2. 7 CFR §5001.102(d), refinancing provisions; §5001.402(b)(3), interest-only provisions; §5001.132, lender removal authority.
3. USDA Rural Development, Business and Industry Guaranteed Loan programme page, fiscal year 2026 guarantee percentages.
4. USDA Rural Development, stakeholder announcement on B&I guarantee percentage, 27 March 2026.
5. USDA Rural Development, Food Supply Chain Guaranteed Loan Program frequently asked questions and award records.
6. USDA Rural Business-Cooperative Service, letter to OneRD lenders, February 2026.
7. NAIOP, cold storage investment research, 2026.
8. International Institute of Ammonia Refrigeration, construction cost guidance.
9. Industry construction cost benchmarking, 2026.

Prepared by the research team at usda-feasibility-study.com. Construction cost ranges are planning benchmarks drawn from published industry sources and are not project-specific estimates. Programme terms current as at the date below; verify against USDA's published notices. Last updated: 29 July 2026.