A BRIEF INTRODUCTION FOR BORROWERS IN ONTARIO
When the time comes that a farmer needs some money – for expansion, cash flow or new equipment – there are several main avenues to explore in Ontario. Some of them include: banks, credit unions, ACC Farmer’s Financial and Farm Credit Canada.
To understand the basic differences among these four options, here is a brief introduction to each institution.
Credit unions are co-operative financial service organizations that are owned and democratically run by the people they serve — their members (customers). Lifetime memberships generally cost between $25 and $150. There are 142 credit unions in Ontario serving more than 1.2 million members. They offer similar lending rates to banks.
“Each credit union operates independently,” says Art Chamberlain, Media Relations Manager at Central 1, the merged association for Credit Union Central of both British Columbia and Ontario. “Farmers rely on credit unions for their banking services because of the personal relationships they develop here, as well as the fact that decisions are made locally.”
Frank Kennes, vice president of lending at Libro Credit Union in London, adds “We definitely look at the individual first, rather than the industry. Because we stress the building of personal relationships, there is less re-telling of a farmer’s story throughout his or her lifetime.” In terms of how farmers can maximize success when seeking a loan, Kennes says “It’s very important to have an excellent understanding of numbers and cash flow. Show you have thought ahead and planned ahead.” For more, visit www.ontariocreditunions.com.
Farm Credit Canada
Farm Credit Canada is a self-sustaining federal crown corporation. For 50 years, it has served as the federal government’s independent agricultural lending arm, reporting directly to the federal Minister of Agriculture.
“We focus solely on agriculture,” says Barry Smith, FCC vice president of operations for Western Ontario. “We provide long-term loans, short-term lending, insurance, leases, and farm business-related software.” Every year, FCC provides information and learning sessions for producers and agribusiness operators across Canada, all free of charge. The corporation also offers direct financing for lease or purchase of farm equipment through 700 dealerships from coast to coast.
“Because agriculture financing is our core business, we require our field staff to have related post-secondary education in agriculture finance, commerce or business,” says Smith.
As with most other institutions, you can request financing from FCC by meeting with a representative at one of 100 offices across Canada, completing a secure online form or talking to a customer service representative over the phone. “We look at each application on a case-by-case basis,” Smith notes. “We are very flexible. We take a good look at the farmer’s needs and structure a loan that meets his or her goals.” For more, visit www.fcc-fac.ca.
Banks and trust companies are private enterprises that exist to earn dividends for shareholders. Gwen Paddock, VP Commercial & Agribusiness Banking (Guelph/North Halton) for the Royal Bank of Canada, says banks provide a wide range of services and products, from long-term mortgages and short-term credit lines to farm business accounts and business succession plans.
“Finding the right financial institution should involve exploring options with an honest assessment of the business’ needs,” says Paddock. “In most cases accessing credit is the easy part. To really establish a mutually beneficial partnership between the client and their financial institution, farmers want to deal with a banker that understands their industry and their business; someone who can offer them products, services and advice beyond simply providing credit.”
acc farmers’ financial
ACC fills a critical niche in supporting Canada’s farmers. This non-profit coalition of 17 agricultural organizations has loaned producers in excess of $2 billion over the past 17 years. Director of Communication and Program Development Ian Barrett says “ACC’s only business is agriculture. We are the sole administer of two major loan programs for the government.”
The Commodity Loan Program is able to lend up to $750,000 in the sectors of grains, oilseeds and horticulture field crops. The Advance Payment Program allows for up to $400,000 for grains, oilseeds and horticulture field crop production and storage (with the first $100,000 interest free), as well as for greenhouse vegetables and cut flowers, potted plants, nursery products, and livestock. Both these programs are offered at bank prime or better. “We need to recover basic costs, but if all data is compared fairly – including fees that most banks like to keep hidden,” says Barrett, “the numbers speak for themselves.”
At the same time, Barrett notes that as these programs have guidelines designed to protect producers, “As such, there may be some restrictions, though these can be easily explained through a call to the ACC offices.” For more, visit www.accfarmersfinancial.ca. •