The case for flexible land financing

Skyline Agriculture Financial is appealing a court ruling that prohibits it from offering its financing model to people interested in buying Saskatchewan Farmland. The court upheld a Saskatchewan Farm Land Security Board ruling that Skyline’s model violates provincial land ownership laws because it involved money from foreign investors.

As a Canadian financial institution, Skyline Agriculture Financial Corp. provides Saskatchewan farmers with a flexible financing solution to acquire farmland.

By offering a blend of distinct financing terms that address each farmer’s specific situation, Skyline enables its clients to expand their operations through land ownership rather than other methods, such as renting land.

According to president and chief executive officer Mark Reineking, Skyline’s financing model provides its farming clients many key benefits.

“Skyline provides farmers with a more flexible financing alternative than other financial institutions,” said Reineking.

“This allows our clients the option to purchase and farm an optimal number of acres.”

In addition to providing debt or mortgage financing for farmers to acquire land, Skyline also provides farmers the opportunity to hedge or mitigate the risks associated with fixed financing charges and depreciating land values.

“By hedging these two key risks, a farmer’s overall risk profile is greatly reduced,” said Reineking.

“This allows them to borrow sufficient funds and acquire more acres than they could by utilizing traditional financing sources.”

The standard Skyline mortgage is similar to what’s offered by Canadian banks, but Skyline enables farmers to hedge their interest rate and land exposure risk. These concepts work in much the same way as hedging contracts, which many farmers use to manage their commodity price risk.

This means farm owners are able to hedge or lock in a portion of the value of their land, which protects them from depreciating farmland values. It also lowers overall credit risk and allows farmers to secure sufficient funding to buy more land and eventually farm an optimal number of acres.

“We help farmers achieve their growth goals quickly, which is incentive to stay in Saskatchewan and farm full-time,” said Reineking.

“A land value hedge contract enables farmers to more quickly scale up their agricultural operations.”

Skyline also helps protect farmers from the risks associated with fixed financing payments. They are given the option to swap the fixed interest rate under the mortgage with a flexible floating rate, tied to the farm’s annual revenues.

This alternative greatly reduces risk in difficult years and helps ensure farmers can meet their financial obligations in almost all environments.

By using Skyline’s financial services, Saskatchewan farm owners can transfer land ownership to the next generation of farmers.

This ensures Saskatchewan farmland remains community owned and operated by local residents.

“Our goals are very straightforward,” said Reineking.

“Our focus is to finance the next generation of Canadian farmers and to ensure Canadians continue to own and operate Saskatchewan’s farmland.”

Tony Playter is with Skyline Agriculture.

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