Andrew McClelland
The Advocate

Farm Credit Canada says changes to its loan program designed to make intergenerational transfers of farms easier will improve how assets move from one generation to the next.

“One of the most consistent challenges faced by Canadian producers is transitioning their operations to either family or an outside qualified buyer,” said Justine Hendricks, FCC president and CEO. “It is complex, nuanced and emotional.”

In response, the FCC has created the “Enhanced FCC Transition Loan.” The loan allows the seller (i.e. the older generation) to agree on a payment schedule anywhere from two to 10 years with the buyer (the younger generation).

FCC guarantees those funds and disburses the money accordingly at agreed-upon dates. This amount is added to the buyer’s loan, and they only pay interest on that amount.

Under the new arrangement, FCC guarantees the seller’s payments, giving them financial security. At the same time, buyers can avoid the burden of making a large down payment, easing the path for the next generation of farmers, according to the lender.

Colin Brisebois, vice-president of products and market strategies with FCC, says that the enhanced loan program was launched specifically to address the price of transferring farm assets.

“I think it’s important now as the industry continues to evolve, the price of assets continues to grow and there continues to be opportunity to do more on the farm transition side — as far as having the next generation take over for those currently involved in the industry,” Brisebois said.

For those starting or expanding a farm or agribusiness, FCC’s transition loan can cover the full purchase price. The program offers flexibility: new owners can choose to make accelerated principal payments to build equity more quickly than with a traditional loan — if they can manage the higher costs.

Alternatively, they can make interest-only payments to preserve cash flow and invest in other parts of the business, particularly during the early stages of operation, Brisebois said.

Young producers groups across Canada welcomed FCC’s introduction of the new loan program.

Here in Quebec, the Fédération de la relève agricole, a specialized federation of the UPA that advocates for the needs of the next generation of the province’s farmers, said it fully supports the new program.

“The changes to the FCC loan program recognize the economic reality faced by emerging farmers,” said FRAQ president David Beauvais. “A five-year timeline is simply too short for a new agricultural business to achieve the stability required to begin repaying a loan.” 

The FRAQ points out that there is no lack of technical know-how regarding farming among the younger generation: Quebec universities and CEGEPs award more than 1,000 diplomas in agriculture each year. However, it notes that Quebec loses approximately five farms per week.

Wave of transfers

Canada’s agriculture and food system is sitting on more than $50 billion in farm assets expected to be transferred in the next 10 years.

In Quebec, nearly 40 per cent of agricultural producers are over 55 years of age and say they are likely to transfer their farm in the near future. Every year, an estimated 600 to 800 farms or agri-businesses are transferred in the province.

But those statistics cause some alarm among farm industry reps who are anxious to curb the trend of mega farms and consolidation. To hold steady at the number of 30,000 farms currently in Quebec, the number of transfers happening per year would have to be up around 1,100.

Currently, 29 per cent of Quebec farms have a completed or in-progress succession plan in place to ease the transfer of ownership from one generation to the next. That’s the second-highest rate in the country, just behind New Brunswick’s 31.6 per cent.

For more information on FCC’s Enhanced Transition Loan, visit www.fcc.ca/transitionloan

Cutline:

David Beauvais, president of the Fédération de la relève Agricole du Québec, says that a new loan program from Farm Credit Canada answers many of the industry’s needs regarding flexible loans for young producers to acquire farm assets. “A five-year timeline is simply too short for a new agricultural business to achieve the stability required to begin repaying a loan,” Beauvais told the Advocate.

Credit:
Photo by Frederic Lavoie