Cash advance improvements make program more appealing

Farmers are facing looming loan deadlines and that might lead to many last-minute cash advance applications.

Not only are various loans coming due, but many farmers haven’t been able to sell crops this winter.

The improved cash advance program could fill the cash gap, says the Canadian Canola Growers Association.

“Pay the expenses while you’re not able to move the crop,” said Dave Gallant, the vice president of finance and operations for the CCGA, summarizing what many farmers are thinking.

The CCGA administers most crop cash advances.

“With farmers in a position of the product not moving, so I have no cash flow, how do I pay off this inputs loan? We may see more people coming towards the cash advance program.”

Some inputs loans come due on March 31, which doesn’t give farmers much chance to move crop into Canada’s clogged grain handling system.

The six-month extension on the 2018 cash advance program also expires at the end of the month.

However, the 2019 cash advance program is still available, and it carries a larger overall limit of $1 million with a temporary expansion for canola growers of the interest-free portion to $500,000. In 2018 it was $400,000 overall and $100,000 interest-free.

Farmers are probably also now considering the role that the 2020 program can play in their new crop financing needs, Gallant said.

The expanded limit of $1 million remains, and while the interest-free portion returns to $100,000, the interest rate drops to prime minus 0.75 percent, instead of the previous prime minus 0.5 percent.

Also, the $50 application fee has been eliminated.

Gallant said both the expanded overall limit and the temporary interest-free limit brought hundreds of new farmers into the program this year, rising to almost 11,000 users. The previous overall limit had made cash advances only of minor value for many medium-sized growers, but getting it to $1 million makes it a significant part of most farms’ financing needs.

The interest-free portion expansion has saved many farmers tens of thousands of dollars.

“You can save a lot of money over 18 months,” said Gallant.

With farmers juggling multiple loan deadlines, coping with a sluggish grain handling system, delayed grain sales, and the need to finance this spring’s crop, the CCGA is expecting March to be a busy month.

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