How to get money to start a farm?

how to get money

Photo Courtesy of Terrance Lam

If you don’t have money to get a farm, where do you get it from? That was the main problem that I am faced with, “how to get money to start a farm?” In Canada, we have some options that are available. I mentioned a couple ways to get money in my How to Become a Farmer post, however, I didn’t get into a whole lot of detail. In this post I am going to go into more detail about where you can get the money you need.

For the purposes of this post I am going to focus on loans that are available in Canada.

Canadian Agriculture Loan Act(CALA) i.e how to get money

This one is a federal program that is provided by Agriculture and Agri-Food Canada.  You can access this type of loan through most major banks.

If you get money through CALA as a  beginning or start up farmer, you will have to prepare a business plan and/or income tax form.  I don’t know how to do that, looks like I have to learn how to write a business plan.

Here is the nitty gritty information about CALA that I think is helpful. I was actually surprised by how willing banks seemed to give money away. I was strangely reminded of Philip Shaw’s point about, “Don’t over extend yourself into debt. Debt can be a very good thing, but too much debt controls your life.”  Talk about scary. Through CALA they are willing to give you up to $500,000. Here I thought my student loan was scary.

Essential numbers for a CALA loan

  • Interest rate = prime + 1%
  • Max amount = $500,000  for a land purchase or $350,000 for other uses
  • Max term for loan = 10 years or 15 years with land purchase
  • Repayment options = monthly, quarterly, semi annual or annual payments
  • Fees = 0.85% of loan amount  for registration and possibly 0.25% of loan administrative fee

Who is eligible?

  • Existing farmers
  • Beginning/start-up farmers
  • Farmers taking over the family farm
  • Agricultural co-operatives with a majority (50% plus 1) farmer membership

Which banks can give me  a CALA loan?

What can I use a CALA loan for?

  • Purchase land with the full $500,000 or $350,000 for other items
  • Equipment
  • Building /Construction
  • Livestock
  • Consolidation / Refinancing
  • Co-operative Association

What can’t a CALA  be used for?

  • Refund taxes
  • Equipment for custom work
  • Recreational vehicles
  • Operating loan
  • Vehicles for personal use
  • Cut flowers for the retail market
For a more indepth look at a CALA loan, you can check out their lender’s guide here.
You can also get a CALA loan from credit unions as well.

Farm Credit Canada (FCC)

Essential Number for the  Young Farmer Loan

  • Interest rate =  prime + 0.5%
  • Max amount = $500,000
  • Must be under forty years of age
  • Fee = no processing fee

This seems to be the ‘go to’ place for many people. They have a nice way of finding the right loan for you. They use a check box system in order to help you find what is right for you.

The loan I located that might be the most beneficial is the Young Farmer Loan.  This one is directed at people who are under forty and looking to get into farming.  Some of the interesting features that jump out at me are up to $500,000  and no loan processing fees.  Also, it has a closed variable rate of prime (which is around 3.0% Nov 17, 2012) + 0.5%. That means you would be paying 3.5%

That one seems pretty nice because it is for  people who are looking to either get started or to improve their farm. I actually contacted Farm Credit Canada for some information, but I haven’t received any information yet. I will give you an update when I get it.

Thoughts

It seems like a CALA loan may be the way to go for a young farmer. I think the real question now is whether you should go through a bank or a credit union. When I was looking through the various banks and other places where you could get a CALA loan, I got the most positive feeling from TD bank. My feeling was based solely on the website, so take that with a grain of salt. According to Canadian Bankers Association every major bank has a Agriculture Specialist.  When I was looking for information I ran into this post which I found helpful. It is called Banking And Farmers, so I thought it might be helpful.

However, FCC does focus primarily on farming, so that may be a great benefit for long term borrowing. In the end, it really boils down to who you feel most comfortable with, and who is going to understand your needs the best.

Have you thought about how to get money to start a farm? Where did you decide to get it from and why?

Further reading for new farmers

 

 

 

 

Comments

  1. I am a South African willing to be assisted with the purchasing of a farm, I tried most of our people in my country even government but everyone is not looking at me. I can make a lot of money on that \farm and for different crop and even animals.

    Please help me

    Kgampe

  2. Thomas towles jr says:

    Noboby will give me a loan or grant to farm with.

  3. Thomas towles jr says:

    Noboby will give me a loan or grant to farm with.gov agencies only help rich large farmers.

  4. There is also the Farm Loan Board in Nova Scotia, but they will only lend up to 90% of the purchase price of property. The other 10% plus your first two years of operating expenses, $20,000/year in living expenses and any required property upgrades they want you to come up with – yourself – up front. This is the snag that I just ran into yesterday so now I’m on the hunt for the rest of what I need.

  5. Hi farmer guy from Lindsay, Ontario.
    My name is Nila and I live in Langley, BC.
    I am not a permanent resident or citizen in Canada, well.. not yet and not sure how long it will take me to become.. Anyways, I’m on open work permit now but willing to start my own farming business. I was wondering whether I qualify for government or bank farming grants.
    I guess the answer is NO as I know I don’t qualify for educational loans in Canada, but couldn’t find any clear answer, and came across to your page and decided to double check with you.

    Thanks for all your help!
    Nila 🙂

  6. Do you think the CALA would help me purchase a 28 acre farm with a house on it ?

  7. zaghum says:

    Hi
    I am living in Canada from last 18 months and permanent residence but not citizen and i have Master degree in agriculture (foreign education) and i want to start farming in Ontario. am i eligible for Canadian loans regarding agriculture farming, if yes then from where i have to contact?

  8. Trevor Stewart says:

    I feel this site has a lot of highly idealized concepts leading the reader to believe farming is an off-the-cuff business like any other. With the exception of this post. This is most relevant piece of information anyone interested in farming needs to know. In my opinion, the best thing you could do especially with your B.Ed and having done this research is start a site that specifically pertains to navigating the Farm grant/loan programs. Elaborate and get testimonials about successful young farmers here in Canada. Write exposes on them and use their methods as a template. I understand where you are coming from. It seems my wife and I have struggled, and this is a common tale. We have been experiencing the exact same thing as a lot of young Canadians dreaming of a farm startup. We were NOT given a hundred acres with no mortgage and communal equipment at our disposal. We had to struggle with land purchases and equipment trial and error everything from flooding to decrepit farmhouses. It seems there is very little help out there . Especially in the Financing department. I hate to put this type of negativity on a comment, but there is no other way to reach the author.

    • Perhaps it is highly idealized, it was originally meant to give people an idea as to what they could do. Your suggestion is quite valid, I think a lot of people would find that very helpful. Thank you for the feedback.

  9. Does CALA agree to give loan to 18 years age

  10. Hardest part of the CALA loan is everybody is looking for a minimum of 20% down. I’ve talked to several banks about this and in southern Ontario, it’s near impossible to start on less than 50 acres which runs anywhere from $750,000 – $1,500,000 in the area I’m in which means coming up with at least $150,000 down. Pretty good chunk of change especially considering you still have to buy equipment etc. I’ve got all the know-how, been in the farming world all my 29 years so far, and the financial world seems stacked against the guy trying to start out farming on his own.

  11. Anonymous says:

    No banks in Ontario are willing to lend a CALA loan , they claim they do not make enough
    interest as well the time to fill out the forms . I have tried several times with my farm to get one
    I have been told that the bank can afford to write off loans , so the guaranteed part is not something they care about . The banks somehow must be forced into doing this or its all a waste
    of time and lots of effort.

  12. sharad ghimire says:

    is there anybody who is looking for a partner to get into/owns farming business in saskatoon.
    if yes get in touch and we will see if we can move ahead.

  13. Hi, I am a farmer from India. Doing natural/organic farming here in India since 2011. Want to setup a farm in Canada. How could i start?

  14. We started our small livestock farm in April 2016. We have no mortgage and no debt, and after a year of planning and renovating 2 barns in stages, we are finally selling Berkshire pigs through a private contract that pays us what we are worth. We also have honeybees and some free-range poultry, but those products are a sideline, not our main income stream.
    The biggest issues I’ve seen with people who want to farm is that they think they need a million dollars. Yep, you would need that much and more if you wanted to buy a 50 acre tiled farm here in SW Ontario. Not sure what land prices are like in other provinces. That’s what the CALA program and the various programs through Farm Credit Canada are for. They will NOT finance small hobby-farm type enterprises, so everyone needs to get rid of that thought in their heads.
    Secondly, ALL programs through FCC require property/collateral. This means a mimimum of 25% down with an excellent farm that they need to approve. Or if you are already a farm owner, you could put that up for collateral. They don’t offer grants or piddly little loans. No collateral? No FCC loan.
    CALA is a bit looser with their rules since their loans are all secured by the federal government. Since I’ve only discussed a CALA loan briefly with my bank, I can’t say any more than that about that program.
    I find that a lot of people who dream of having a small farm are full of unrealistic idealogies. They think they can make a go of it at small farmer’s markets, having a little fruit stand, selling a couple dozen free-range eggs a day, having an organic CSA………nope. That’s small stuff and you’ll go broke doing it.
    After you write your realistic business plan that starts by specifying EXACTLY what you want to grow/raise, you need to research a marketing plan for ALL the products on your farm. If you don’t know who you’re growing it for, you will fail.
    The business plan will help you figure out income and expenses. If you can’t see exactly what your income and expenses are going to be for each product, you will fail.
    You have to be creative and you have to be willing to talk to other people who have succeeded at farming. We picked up the phone and did just that.
    Finally, always be prepared to the best of your ability. Yes, bad weather will ruin crops, sickness can kill your livestock, but if you’re prepared for most things out of your control it will make it easier to recover so your farm is not completely cremated by disaster. This planning goes along with always having more than one revenue stream so that you are never without income.
    Finally, do not count on CALA or FCC. They have their place for farmers, but to me that is a lot of debt to get into for little reason. We chose not to be slaves to the bank (as nice as our bank is to us!) so we planned, we had a list, we did it slowly and well, and we did it using our own money. No, we don’t own the farm we’re on, but that doesn’t matter to us.
    Hope my story is helpful to some of the other starting farmers out there who are reading this blog.

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