Since it was created 2004, the Pennsylvania Fresh Food Financing Initiative (FFFI) has financed 84 grocery stores in underserved urban and rural communities across the state.
Almost all of these stores are independent, locally owned businesses. They range from small greengrocers to natural foods cooperatives to large, full-service supermarkets. (See our 2008 article, “Pennsylvania Seeds a New Crop of Local Grocery Stores,” for examples.)
The FFFI is managed by The Reinvestment Fund (TRF), a community development financial institution, in partnership with the Food Trust, a nonprofit organization. It was created to address a shortage of stores selling fresh food in both low-income urban neighborhoods and small towns across rural Pennsylvania.
In 2004, the state legislature appropriated $30 million to seed the fund. TRF then raised an additional $120 million to establish the financing pool, drawing on investments by banks as well as federal New Markets Tax Credits.
The FFFI provides grants of up to $250,000 and loans that range in size from $25,000 to $7.5 million. To be eligible, a business must primarily sell groceries and locate in a low- to moderate- income area that is underserved by food retailers. The FFFI funds both start-ups, as well as existing stores seeking to expand or upgrade their operations.
The FFFI’s success illustrates several important lessons about solving the lack of access to fresh food and other basic goods in low-income neighborhoods. For one, many chains are uninterested in these neighborhoods and financial incentives may not be sufficient to overcome their reluctance to deviate from their standard suburban store formats and open in less affluent locations.
Independent grocers, on the other hand, see opportunities in these communities and have the flexibility to adapt their stores to fit historic buildings and odd-shaped lots, but they lack sufficient capital and credit. Unlike chains, they cannot self-finance their growth through the capital markets, and the added costs and perceived risks of going into low-income neighborhoods only compounds the reluctance of banks and others lenders to finance independent retailers.
The FFFI overcome this crucial financing hurdle for independent businesses. As of 2009, only one of the businesses funded by the program had failed.