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Written by Madeleine Berg and Syeda Khurram
With the average age of Canadian farmers closing in on 60, succession planning is top-of-mind for a huge and growing number of Canadian farm families. Successfully transitioning a farm business isn’t easy — it takes time, effort, commitment and a lot of open communication. One of the biggest practical challenges is ensuring financial stability for the retiring generation while also providing financial ‘wiggle room’ and growth opportunity for the successor. What single factor can provide for both needs? In a word — profitability.
Profitability nourishes farm equity, boosts cash flow and supports growth. It allows farm businesses to seize opportunities, leverage assets, limit risk and minimize liabilities. But wait, we’re not simply saying, ‘go earn more money’. In farming, where the price of land and inputs has skyrocketed, margins are slim, and debt is a necessity, profitability is as much about leveraging debt effectively as it is about earning more revenue. Enter FarmCash —a made-for-farmers cash advance program which can help starting farmers get rolling and retiring farmers rest easier.
The Alberta Wheat Commission is one of approximately 30 farm organizations across Canada who administer the Government of Canada-backed Advance Payments Program, which offers Canadian farmers marketing flexibility through interest-free and low interest cash advances. The Alberta Wheat Commission’s FarmCash is a simple, convenient, restriction-free program which offers loans of up to $1 million on over 50 agricultural commodities, for up to 18 months on crops and 24 months on livestock.
FarmCash’s primary benefit is that it offers the lowest cost financing available, with the first $100,000 entirely interest-free and the remaining at prime minus 0.75 per cent. Whereas traditional bank-based financing is designed to earn the lender money, FarmCash was created exclusively to benefit borrowers. Its entire reason for being is to help farmers grow their business equity by enabling access to opportunities, reducing financial risk, and supporting better profit margins. Any agricultural producer, regardless of age or stage, can access FarmCash: it is available to young producers just starting to build their businesses, and older producers looking towards the end of their farming careers.
Succession planning should be viewed as a very long-term process — a decade or longer. Successful transition depends on the farm business being as financially viable as possible. Every financial decision you make, including how you service debt, leverage equity, and maximize cash flow, will impact your business’ long-term security and viability. No matter what stage you’re at in your farm career, ask yourself: are you making investments now that maximize your family’s ability to transfer to the next generation when the time is right?
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 February 8, 2021 in the Alberta Seed Guide.
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