A new loan program offered by Farm Credit Canada should ease the transfer of land from one generation to the next, says the lender.
Young farmers agree.
The accelerator loan is a $50 million program the federal lender launched June 23 at the Western Canada Farm Progress Show in Regina.
Its key features are that it requires no down payment and offers flexible payment options.
But it does require a seller who is willing to wait for his or her money.
The loan will pay the seller 40 percent in the first year, and then 15 percent in each of the next four years.
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That’s why FCC and young farmers believe this program will be most beneficial to help children take over a farm from their parents, or from other relatives or neighbours.
There may be tax advantages for those who can wait to receive their money over time, said Lyndon Carlson, FCC’s vice-president of marketing and product development.
“There are ample patient vendors,” he said. “I think we’re going to be OK on that front.”
Mark Richards, president of the Canadian Young Farmers’ Forum, said he sees another advantage on the family front when one sibling intends to farm and others do not.
“It allows the one who wants to take it over an easy way to get in” while still paying for the farm, he said.
Richards said estate and succession planning can become a “deep and emotional mess” that this loan program could ease. His group advised FCC as it developed the program.
He said with $50 billion worth of farm assets expected to change hands in the next 10 years, $50 million is a drop in the bucket.
Carlson said the typical loan size for beginning farmers is $200,000 to $300,000. The upper limit for the accelerator loan is $1 million.
FCC will evaluate the demand for the program and consider whether it should add more to the program.
“We will respond to the urgency,” Carlson said.
Young farmers who take out loans will also receive training and software to help them manage their farms.
