Written by Madeleine Berg and Syeda Khurram

I was chatting with a farmer last week who, with embarrassment, said the mountain of credit card debt he’d accrued was now stifling his farm business. “I know, I know, debt is bad. I just didn’t have another option,” he told me. Actually, he’s not quite right on either count.

First, debt isn’t necessarily bad, if used well, it can be a highly effective investment tool which maximizes farm business opportunities and supports a farm’s long-term sustainability. Second, he does have an alternative to credit card debt — an ultra-low interest, highly flexible, exclusive-to-farmers alternative.

‘Bad debt’ is any debt which doesn’t generate financial benefit to your business. The fancy car you can’t afford or the credit card racked up via restaurants and vacations are examples of the steep, slippery, bad debt slope.

‘Good debt’ on the other hand, is anything which generates profit and supports the growth and sustainability of your business over the long term. Investing in a grain dryer, thereby allowing you to capture marketing premiums over many years, could be an example of good debt.

Savvy businesspeople depend on good debt on an ongoing basis, leveraging it to grow their business just as they would any available, investable dollars. Good debt is particularly critical during key transition periods, such as when a farm is expanding or transitioning to the next generation.

Good debt depends on a flexible, low interest debt vehicle. An under-utilized but excellent option is the Advance Payments Program, a federal loan program administered by the Alberta Wheat Commission which offers Alberta farmers marketing flexibility through interest-free and low interest cash advances.

The Alberta Wheat Commission is one of approximately 30 farm organizations across Canada who administer the Advance Payments Program. FarmCash, the Alberta Wheat Commission’s cash advance program, offers simple, convenient, restriction-free, low-interest loans of up to $1 million, with the first $100,000 interest-free and remaining at prime minus 0.75 per cent, on over 50 agricultural commodities, for up to 18 months on crops and 24 months on livestock. The Alberta Wheat Commission is the only administrator to offer a quick, simple, online application platform that allows producers to upload documents and e-sign the application.

Farming is an intensive business which requires continual investment to maintain the depreciated value of the farm and its assets. Good debt is a critical tool to achieve business goals efficiently. FarmCash offers easy access to cash, allowing farmers to capture any opportunity and manage any hardship that weather, markets or life throws. You can expect better returns for your operations with FarmCash.

The Advance Payments Program is a federal loan program administered by the Alberta Wheat Commission. It offers Canadian farmers marketing flexibility through interest-free and low interest cash advances.

Originally published on December 8, 2020 in the Alberta Seed Guide.