In 2018, organic snack maker Kate's Real Food was at a crossroads. With 10 employees making all products by hand, the startup could not meet increasing demand for its products from grocery chains, specialty stores and online retailers. To grow, the company would have to expand its operations or outsource production to a co-packer.
Committed to producing 100% organic products, owners Bruce Thaler and Kate Schade chose to build their own vertically integrated facility, where they could control product quality, production schedules and costs. Finding a location near a large metropolitan area with a larger pool of workers and access to major shipping corridors would be critical to increasing production and expanding distribution.
Thaler, a resident of Altoona, Pennsylvania, saw opportunity in Bedford County - a Pennsylvania Keystone Opportunity Zone providing attractive tax incentives to qualified employers. In addition to private equity and bank loans, the $5.1 million project would qualify to receive more than $2.8 million in economic development funding for real estate acquisition, construction and worker training.
With competing demands for the company's own capital, a remaining challenge was funding for additional inventory. For help, the company turned to FHLBank Pittsburgh member Marion Center Bank. Deborah Krise, vice president and a business development officer, presented an attractive funding package, complementing the bank's $400,000 loan with a $200,000 loan from FHLBank's small-business financing product, Banking On Business.
Krise explains, We typically offer 65% loan-to-value on inventory, requiring the borrower to provide 35% of the cost. Leveraging our FHLBank membership, we were able to use Banking On Business to satisfy our underwriting requirement, enabling the company to use its own equity for other expenses. In addition, because the borrower pays no interest or principal during the first year, they have time to get their business up and running before starting to repay the loan.
According to, Mark Thaler, CEO of the new manufacturing facility, The Organic Snack Company, "This project involved more than a new building and equipment. We had to make the leap from making our product entirely by hand to using automated processes. It was critical to have sufficient inventory to meet demand while growing our production capacity."
The Organic Snack Company opened its new facility in early 2020 and soon had 15 employees producing 50,000 bars per day for Kate's Real Food, with plans to add up to 45 staff by the end of 2021.
According to Thaler, "In addition to increased capacity, we now have the flexibility to innovate and to collaborate with customers on exclusive product offerings. And with new growth opportunities, we can look forward to building a company that has a positive, sustainable impact on the community we live and work in."
"Projects like this are great for our community," adds Krise. "They create jobs across the supply chain and facilitate economic development. Banking On Business helps to do that."