How to access credit for farmers and agri-businesses

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How to access credit for farmers and agri-businesses

By Jennifer Friesen

As Canadians grapple with the uncertainty of COVID-19, the economy and our health and safety have become primary concerns to us all. As a result, the food and agriculture industries are paramount while they work to ensure everyone has access to healthy food.

The effects of the pandemic are continuing to impede how businesses across the world operate day-to-day – and this includes disruptions to regular cash flow practices. For farmers and business owners in the agri-food sector, these disruptions can have long-lasting consequences due to the time-sensitive nature of their business cycles.

Andre Fagnou, director of pricing and products at Farm Credit Canada (FCC), points to the increased need for businesses in this sector to have flexible options for credit in order to remain operational.

“Interruptions to transportation of goods, or to payment, has started that domino effect that’s happening in the industry,” says Fagnou. “Even though our food supply is safe and strong, it’s affected the speed at which the business is moving. The producer is impacted by that delay in that business cycle and it interrupts their cash flow.”

On her farm in Angusville, Man., FBC Member Leona Chipelski says that while her family’s transport business has remained profitable, the virus has resulted in financial struggles for their grain and cattle business.

“Cash flow is very tight for the farm,” says Leona. “Low cattle and grain prices have a great effect on our bottom line. The shut-down of slaughterhouses has put a halt on cattle sales. We need higher prices for our wheat and need reliable exports for our canola.”

As she heads into their busy season in the transport business by hauling fertilizer, Leona says the future for trucking is a bright spot for the business, provided that farmers will be able to get their crops in. But she says she’s worried about the future at the farm.

“Without the farmers, our trucking business would crash,” she says.

In effort to help support those in need and offer financial flexibility, the FCC announced an increased lending capacity to producers, agri-businesses and food processors in March. In partnership with the Government of Canada, the FCC received an additional $5 billion to ensure that these business owners have access to enough capital to sustain their cash flow during the crisis.

Find out more about how to access a loan in our video:

Fagnou says they are encouraging their customers to reach out to them as soon as possible to discuss their credit needs so they can consider options moving forward.

“We want people to tell us about their short-term credit needs so we can set up credit lines to facilitate paying bills,” he says. “We’re setting you up with cash to facilitate that business cycle starting again. Because it’s not just about paying last year’s bill, but you also need the cash in order to start your business again this year.”

The addition of this $5 billion is equal to approximately half of what the FCC lends in a normal year and allows them space to defer payments when necessary. Principal and interest payments can be deferred up to six months for existing loans, or principal payments can be deferred up to 12 months, depending on individual needs.

“Each customer’s needs are different,” explains Fagnou. “It depends on the circumstances, but we’re having lots of conversations with customers about what they need and trying to present them with options to get them back on their cash flow.”

While short-term loans and payment deferrals help to alleviate stress caused by the back-up of transportation, payments and production slow-down, the federal government is providing added supports for the industry.

In a May 5 statement, Prime Minister Justin Trudeau announced an investment of more than $252 million in support of farmers, food businesses, and food processors.

This includes the new AgriRecovery initiatives, which will offer relief in response to the temporary closure of food processing plants. It will involve the creation of new cattle and hog management programs to handle the back-up of livestock on farms.

Additionally, the Canadian Dairy Commission’s borrowing limit was increased by $200 million to manage the cost of cheese and butter storage.

Fagnou says he sees the collaboration between the government, banks and financial institutions as a sign of confidence in the industry. Although the economic repercussions will take a while to recover from, he says that the country learned from the 2008 downturn and has made steps to support business owners in recovery.

“This isn’t just a four- to six-week thing,” he says. “Even if a miracle happens two months from now and our economy’s back and people are back in their offices, there’s still going to be months where these giant dominoes that fell have to be picked back up before things start rolling back to normal. Everything lags, so it will take time for these people to get back to their normal cash flow cycles ... What we can do is add flexibility into the back end of things. We’ve got the resources in order to keep lending to customers.”

Contact FBC

If you’d like to learn more about this or other COVID-19 programs for Canadian businesses, please call us at 1-800-265-1002 or email [email protected] Unlimited consultation related to tax matters is a key benefit of FBC Membership. You can also book an appointment.

Visit our COVID-19 Resource Centre for the latest information, advice and insights for small business owners.


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