Young farmers loan: what everybody ought to know

young farmers loans

Perhaps a young farmers loan will help me get started.

I recently posted Young Farmers Loan – a little insight into the FCC and FCC was kind enough to respond to the blog. I was very happy that Andy Tate from Farm Credit Canada(FCC)  took time out of his day to comment on my blog.

He helped point out some information about the loan that I didn’t know. This went back and forth for a couple of comments. Finally, I decided to email him and ask if he was willing to do an interview.

Andy wasn’t able to do an interview, but he passed my email on to someone else. I got an email from someone else at Farm Credit Canada. We emailed back and forth and decided what would be a good time to have the interview.

We decided that we would talk about the Young Farmers Loan offered at FCC.

Young farmers loan video

The interview  is about the Young Farmer Loan, which I talked about in the how to get money to start a farm post.

Here are the questions that I asked.

  • What is a young farmer loan?and What are the steps to getting a young farmers loan?
  • Who is eligible? and isn’t?
  • How do you evaluate a candidate?
  • What can it be used for?
  • What can’t it be used for?
  • How much can you be approved for?
  • Do you absolutely need a business plan when applying for a loan?
  • Does a business plan improve your chances of getting approved?
  • What kind of down payment/additional security does a typical loan need?
  • Hypothetical situation, let’s say I want to buy a farm that costs $500,000?
  • What do you do when you don’t have the do when you don’t have the down payment? What options are available to those farmers?

Highlights from the video

  • Scott mentioned how important it was to have a business plan when you go to get your loan.  This helps FCC decide whether you can pay the loan back or not. FCC may look at your income tax to help make this decision as well.
  • Having a business plan also improves your chances of being approved for a loan.
  • A net worth statement is an important part of the decision process. This helps FCC decide whether you can pay the money back. A net worth statement has your assets and liabilities outlined.
  • Another point that Scott made was about knowing  how much money you can potentially make, so if you haven’t farmed yet, you can look at things like: crop insurance data( to tell you what your yield might be), crop projection reports. I double checked about the crop insurance data and here is an example.
  • Scot also mentioned about markets. This relates to your business plan where you do a SWOT analysis to analyse your markets.
  • The FCC learning centre is another great place to get information about business plans as well.
  • Additional security could mean using a house as collateral. Also, it could be a combination of money and assets (i.e. a house or piece of property).
  • If you have a really strong application, you may not have to have %25 down payment. Again, you can  combine cash and assets for your security.
  • One example Scott gave was, you have a $100,000 piece of land. You have paid $80,000 and you still owe $20,000, so you have $80,000 of equity in the property.
  • Start your business plan as soon as possible.
  • A marketing plan can also be helpful. This could tie into your farm management plan as well.
  • A young farmers loan cannot be used to refinance your farm.
  • A young farmers loan is  only for agricultural related items.
  • You can get more than $500,000 with other loans but not the young farmer loan.

Young farmers loan summary

One of the points that really stuck out at me was, having a business plan will improve your chances of getting a loan. I said this in the interview, but I’ll say it again, having a business plan helps you out a lot. It gives  you direction. It helps you know you want to go, and shows that you know how you want to get there.

So if you’re a new farmer, don’t hesitate to make your business plan. Start now. It’s super important.

Again, the young farmers loan is a great loan to get if you’re starting out. It gives a good deal of money to get your feet on the ground.  It may not work for everyone, but the people who have taken advantage of it say it’s fantastic.

I hope you enjoyed the interview. Also, thanks again to Farm Credit Canada for doing the interview.

What are your thoughts on the interview? Were there any questions that I missed? Leave a comment below.