Recently, I’ve worked for a client on refinancing their credit facility. The client is a food processor, and my role in the refinancing was to educate everyone involved (while advocating for my client) on the inner workings of the Food Security Act (FSA) and the Perishable Agricultural Commodities Act (PACA) so everyone understood how those laws might affect the security interests held by the bank, the borrowing base of the client, and the risks to each.
Despite the significance of the deal to the bank (I understand that this loan package represents the largest loan in this bank’s portfolio), I was surprised at the bank’s lack of sophistication on these topics. I think I may put together a training session for loan officers and bank personnel in an effort to bridge the “gap”. If both lenders and borrowers better understand the risks associated with FSA and PACA, then these sorts of loan transactions might go more smoothly and lenders may be more willing to lend to food businesses.
(Editor's Note: Attorney Steve Kluting authored this post while working in Varnum's Grand Rapids office. Steve is currently with another company.)
