Farmers have a new, more flexible loan option from Farm Credit Canada.
FCC’s Flexi-Farm Loan is designed to allow loan holders to take a principal payment “holiday” for up to one year when payments are difficult to make because of things such as bad weather or poor commodity prices.
The program is modeled after the Flexi-Hog loan introduced last year.
“It is now available to all industry,” said Roland Kirouak, assistant vice-president of operations for the prairie region.
“It is flexi-farm. It is somewhat different, depending on what sector you are in – crop, dairy, hogs – so the needs are slightly different, but the design is very similar. That is, the person has the option of postponing a principal payment once every five years.”
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The number of available payment pauses depends on the loan’s amortization. The maximum is a 25-year loan with up to five pauses. There is no limit to the size of the loan.
The payments are calculated based on a shorter period than the loan. So with the 25-year loan, payments are based on a 20-year amortization.
Producers who do not use the principal vacations save on interest payments and retire their loans early.
The hog loan has been popular, accounting for $20 million of the $150 million that FCC lent to hog farmers in the last year, Kirouak said.
While principal payments are not made during the pauses, interest payments must be kept up.
The principal pause can last up to one year, but a minimum of one year of regular payments must be made before the first pause. Pauses can’t be taken back to back.
Security must include a real property mortgage.
Kirouak said bad situations aren’t the only pause triggers. Investment in a business opportunity could also prompt a payment pause.
