The U.S. Department of Agriculture has extended its pause on loan guarantees for biodigester and controlled environment agriculture (CEA) projects, signaling growing concern over project performance and lending risk within these sectors.
In an April 6 Unnumbered Letter, USDA’s Rural Business & Cooperative Service (RBCS) announced that the administrative pause will remain in effect through December 31, 2026, or until further guidance is issued. The pause applies to the acceptance, processing, and awarding of loan note guarantees for projects involving biodigesters as well as CEA systems such as vertical farming, hydroponics, aeroponics, and aquaponics.
The decision follows a recent portfolio review that found high delinquency rates across both categories. Controlled environment agriculture projects showed a 40% delinquency rate, while biodigesters reached 28%. These figures come on top of realized losses already absorbed by the program. USDA noted that continued support of high-risk projects, particularly those underwritten by lenders with limited sector experience, could undermine the long-term stability of the loan guarantee program.
The extended pause is intended to slow the entry of new projects into the portfolio while USDA completes a broader performance review. That process will include evaluating projects currently under construction as they come online, assessing lender underwriting practices, and identifying common risk factors. The agency also plans to strengthen program safeguards and establish updated underwriting and risk mitigation standards before reopening the program to these technologies.
As part of the announcement, USDA confirmed that any pending applications for biodigester and CEA projects will be withdrawn and will not move forward under current guidelines. New applications will not be accepted until revised standards are in place.
USDA framed the move as necessary to protect taxpayer resources and preserve the program’s ability to support a broader range of rural investments. Without intervention, the agency warned, continued exposure to underperforming projects could increase subsidy costs and limit available capital for other priorities.
The pause marks a notable shift in how federal financing programs are approaching infrastructure sectors that have expanded rapidly but unevenly in recent years.
