Missed payments? Bad credit history? Problems getting an operating loan this spring?
In this time of poor commodity prices, people in the business of brokering private money at high interest rates say farmers are their main source of business.
The money comes with hefty fees attached: Commissions for the lenders; commissions for the brokers; and other charges.
Sometimes, the money doesn’t come at all, even though a farmer has paid the fees up front.
Some alternative sources of credit run legitimate businesses. Some have questionable ethics. And some are scams.
Read Also
Research looks to control flea beetles with RNAi
A Vancouver agri-tech company wants to give canola growers another weapon in the never-ending battle against flea beetles.
Art Gingras figures he has talked to some of each kind. He has called every broker who advertises in the classifieds in Alberta newspapers and The Western Producer.
“I could send you a file that could choke a horse,” said the Cluny, Alta., farmer.
Gingras has had some financial problems on his half-section farm. He has thought about leaving the land, but is reluctant to leave something he loves.
“I’m not a quitter, I’m a survivor,” he said.
All the same, the financial problems have been hard on his sleep and his stomach.
“Mentally, you’re really beat and you make some bad decisions,” said Gingras.
“All these guys know that and they’re just vultures.”
He looked to equity-based loan brokers for help.
“These guys always promise you the moon, but very few of them deliver,” said Gingras.
One person he called was Kevin McIntyre of Vulcan, Alta. who works for Westcan Business Development Corporation.
Prepare proposals
McIntyre, who used to farm in Ontario, prepares business plans and loans proposals for farmers, and shops them around to traditional lenders and licensed mortgage brokers. He charges farmers $500 to $1,500 for the plans and proposals, and takes a two to five percent commission if and when the financing comes through.
Calls to his toll-free line have tripled since November, with much interest coming from Saskatchewan farmers who have equity but no cash flow.
McIntyre said he closes deals for about a third of the farmers who call him. Gingras wasn’t one of them.
Gingras said the $500 loan proposal he bought from McIntyre was money well spent, but the consultant made it sound like it would be easy to find financing. He wishes McIntyre had been more frank about his slim chances.
Amanda Scott of A.C. Financial Services (also known as Select Mortgage Services) in Swift Current, Sask. said for every three farmers she takes on as clients, seven don’t work out.
Business is up because of the farm income situation, but farmers are leery, she said.
Interest rates from private lenders in Edmonton and Calgary come at 12 to 18 percent. She takes five percent of the loan, and the lender takes another five percent.
She puts the fees in writing. Many farmers reject the loans, said Scott.
Nicole Conant, of Second Chance Loan Referral Services in Regina, claims farmers don’t complain about the fees her company charges.
“Farmers love us, they really do,” said Conant.
Second Chance receives 12 calls an hour, mostly from farmers, she said.
Conant charges a $50 to $75 administration fee for the first meeting with a farmer. It is not refundable and doesn’t guarantee a loan.
She claims an 85 to 95 percent success rate in closing loan deals.
Interest rates from private lenders range from six to 13 percent, she said, and she charges a three percent commission once the loan is approved, which she sometimes waives.
Farmers don’t pay any other up-front fees, said Conant in an interview, although she later admitted that sometimes the private lenders she works with demand extra up-front fees. However, Conant said the company will refund the extra fees if the loans don’t materialize. She said no one has complained.
But Gingras complained vociferously about the extra $500 fee that Second Chance demanded in advance of a loan. The company refused to let him put the fee in his lawyers’ trust account until the loan came through, so he turned it down.
Know the facts
Better Business Bureau agents read callers a “buyer beware” warning when they ask for information about Conant’s company.
The warning states advance fees for loans are unlikely to be refunded.
Conant said she thinks consumers are well-served by the warning, written by the consumer protection branch of Saskatchewan Justice.
“Many companies are nothing but a scam,” she said, later adding, “We are legit.”
Police questioned her last year. She said she thinks it’s a good idea for police to investigate companies.
“We cleared: we’re OK,” said
Conant.
But in fact, the Regina Police Service’s inquiry into Second Chance’s business practices continues.
Staff Sergeant Dennis Barrie of the commercial crime unit said the company has returned advance fees to some loan applicants but not others. One farmer was charged a $10,000 fee.
But he said the company explicitly states the fees don’t guarantee loans. While it may be unethical to extend hope and request a fee, it’s not illegal.
As for Gingras, he found financing from a different broker at an interest rate above 15 percent plus a five percent commission.
He plans to increase production, sell a small house and acreage on his property, and work hard so he can get cheaper financing from a bank.
Gingras said he knows the interest rate on the loan is high, but he wanted to get on with his plans to turn his farm around.
“If it don’t work, he (the broker) can have the goddamn thing,” he said.
