Farm financing, whether it’s an agricultural mortgage, equity financing, or financing for equipment, can be very hard to obtain in Canada. Farming can be a very challenging business and therefore, farm incomes and profits can be very unstable, and very difficult to predict. It’s because of this that lenders see farm financing as a risky business, and most will not even consider a property that’s ten acres or larger, and that has any kind of farming whatsoever occurring on it. However, this doesn’t mean that farm financing isn’t available at all in Canada. You just need to know what you need to be prepared, and where to turn for help.
When applying for farm financing, it’s imperative that you have ready any financial statements pertaining to the farm and its profits, as well as any other additional sources of personal or corporate income. The farm’s income and the profit, will be the most important consideration when applying for farm financing, and so it’s important to be able to verify as much income as possible.
Another important element that will be considered in farm financing is the amount of experience that the farm owner has. This is true for both existing farm owners and new owners, and will be heavily considered by lenders.
Typically when a new farm is being purchased, farm financing will depend not only income and experience, but also the amount of equity the owner has in the property. Even new owners will need to have at least 75 to 80 percent equity in the property, and be able to provide it in the form of their down payment.
Farm financing is not only available for new farms and new properties. It can also help current farm property owners in times of financial distress, by using the property as collateral. This type of farm financing is especially beneficial for farmers that want to use farm financing to make farm improvements, to purchase or better maintain livestock, and to buy new equipment. Farm financing can also be a great way for farm owners to consolidate their debt. In these instances, either equity in the property can be placed on the loan as collateral, or equipment can be used as well.
With so many different uses, and so many different qualifying considerations, farm financing can be something that is quite complex and difficult to understand. And while the many options available for farm financing can only prove to be beneficial to the farm owner, it’s also those same options that can make it more confusing and difficult for the owner to understand.
To help make the process easier, it’s advisable that farm owners speak to a mortgage broker about obtaining farm financing, especially if they are interested in placing equity on the property up as collateral on the loan. Mortgage brokers can not only help you better understand the entire process, but they will also have a full list of lenders that are willing to work in farm financing – which can be extremely beneficial in a type of financing that can be difficult to obtain.