A long-established federal loan guarantee program is trying to make farmers more aware of its benefits.
The Farm Improvement and Marketing Co-operatives Loans program provides government guarantees on loans of up to $250,000 to producers and marketing co-ops arranged through commercial lenders.
The money must be used for certain purposes such as buying or fixing machinery and buildings, land, livestock, or trees for production of maple syrup or fruit.
“It’s been around since 1944, so it is a veteran of government programs,” said Richard Robert, senior loan guarantee officer with the program.
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Ten years ago, the program guaranteed an average of $100 million in loans a year, but after 1990, due to an effort to make financial institutions better informed about the program, the average annual guarantee rose to more than $400 million, he said.
New focus
And managers have a new plan to expand the program’s range.
“Now, our emphasis is to let the producer know that they can get this government-guaranteed loan and see how they can use that in their negotiations with lenders,” he said.
“We think a government guarantee has to be worth something to the producer, perhaps in a better interest rate … .
“The additional security might help a lender offer a better package to the borrower. We can (guarantee up to 80 percent of the market value of the equipment or property) so the producer might not have to put up as much equity into the project … and that can make the difference between good cash flow or not.”
In 1996-97, 16,250 producers got $488 million in guarantees under the program, he said. Of that, more than 80 percent were issued in the prairie provinces, mostly in the grains and oilseed sectors.
The guarantees are most often used to help buy equipment.
Although the program guarantees hundreds of millions of dollars in loans, it is used in only about 10 percent of the situations where it could be and that’s unfortunate, Robert said.
“With all the downsizing and subsidy cuts, we think this is a good way to assist in rural development,” he said.
“This is on-farm activity. Implements, repairs, livestock. We have a lot of Team Canada-type programs going on, trying to expand markets and helping exporting. But this is one program that still helps the farmer in his production needs.”
