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Get a farm loan: Agriculture financing and beginning farmer loans
Find farm loans and government programs to help you grow in Canada.
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If you’re in agriculture, you probably thought most of your time would be spent farming, not getting farm financing. For new farmers with no business background, it’s important not to let the never-ending list of expenses discourage you.
Getting a farm loan isn’t as difficult as it seems. You have private and public options to help finance your farm and keep doing what you love.
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Representative example: Elijah buys a farm
Elijah wants to buy his neighbour’s farm in Ontario—including all its property and assets—for $4.9 million. After cashing in some personal savings, securing several agricultural grants and getting funding from outside investors, Elijah is still $250,000.00 short of the money he needs.
He applies for farm financing and is approved with competitive terms, thanks to his solid credit history.
| Cost of purchasing a farm | $4,900,000.00 |
| Loan type | Business loan (term loan) |
| Loan amount | $250,000.00 |
| Interest rate (APR) | 7.99% |
| Loan term | 7 years |
| Additional fees | Origination fee of 3.00% ($7,500.00) Application fee of $0.00 (waived by lender) |
| Monthly payment | $3,895.31 |
| Total loan cost | $327,205.89 |
Both Elijah and the former farm owner forfeit sales tax on the transaction by signing Form GST44, which can be done because both parties are GST/HST registrants. Had they not signed this form, Elijah would’ve had to pay 13% HST ($637,000.00) on the sale price. In that case, he could’ve treated the HST as tax deductible on his next business tax return.
*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.
What types of farm loans are available?
New farmers face a challenge: lenders aren’t crazy about providing large loans to businesses that haven’t been around very long. But you’re not out of luck. There are a few farm financing options available for those who are just starting out.
- Direct operating loans. New farmers need to buy equipment, livestock, fuel and other items to run a farm. Though small, these loans can help you purchase what you need while building trust with lenders, which could lead to larger real estate loans down the line.
- FCC loans and other loans for young and beginning farmers. Farm Credit Canada (FCC) offers custom financing through the Starter Loan and Young Farmer Loan programs. As of the time of writing, Starter Loans with fixed rates and no loan processing fees are available for 18-25 year olds. Farmers under 40 years old can use a Young Farmer Loan to purchase up to $2,000,000 in agricultural assets; rates are fixed or variable rates, and there are no loan processing fees.
- Small loans from private lenders. Starting a rooftop apiary or perhaps a hydroponic vegetable garden? Or do you simply need a little extra funding to cover an unexpected expense or shortfall? Getting a small loan through a private lender could help you cover niche expenses.
- CALA loans (and other forms of financial assistance from the Government of Canada). These government-guaranteed loans are good for helping beginner and small farmers who need extra cash to buy equipment, construct or maintain buildings or cover occasional shortfalls.
- Venture capital and angel investors. Wealthy groups and individuals are willing to give promising businesses money in the hopes of reaping capital gains down the line.
Can I get a farm loan for my agribusiness?
Because “agribusiness” refers to any business that earns most or all of its revenue from agriculture, many farm financing options will be available for an agribusiness operation.
You can finance just about anything you need, from purchasing new breeding stock to buying farm machinery to expanding your farm’s staff. That’s because “agribusiness” is a huge umbrella term that encompasses every step of agricultural production. Banks, credit unions and other lenders all administer in-house loan programs as well as government loan programs—such as CALA loans—to help your agribusiness.
Like any business or farm loan, you’ll need to supply your agribusiness’s financial statements and submit a strong application. Target lenders that have previously worked with farmers in your niche. You should also know exactly what you plan on using the loan for, as this will help you find approval.
How do I know if I’m a young, beginner or small farmer?
Different lenders use these terms to refer to slightly different categories of eligibility, so you’ll want to confirm where you fit in with specific lenders. However, many lenders agree on these rough definitions:
- A young farmer is between 18 and 39 years old.
- A beginning farmer has less than 6 years of agricultural experience.
- A small farmer operates on $250,000 or less of yearly revenue and/or may farm roughly 2 hectares of land (0.02 sq km) or less.
Canadian government farm financing for beginners
Unlike many small business owners, farmers are not eligible for loans under the Canada Small Business Financing Program (CSBFP). But not to worry. There are still many options for startup agriculturalists.
Agriculture and Agri-Food Canada is one of the first places a new farmer should turn to for financing. The Canadian government actively supports farmers through lending programs and initiatives aimed at increasing the stability and viability of farming—especially for upcoming generations. Here are just some of the programs offered.
Examples of Agriculture and Agri-Food Canada (AAFC) financing options
CALA loan program
Under the Canadian Agricultural Loans Act program, eligible farmers may receive up to $500,000 for any single farm operation, or up to $3 million with special approval. The government guarantees 95% of the loan, which may be put towards the cost of land, building construction or improvement, loan consolidation or refinancing and other purposes.
Advance Payments Program
Farmers can receive cash advances of up to $1 million based on the value of their agricultural products, and the government will cover interest payments on the first $100,000 ($250,000 for 2024 and 2025). Farmers have up to 18 months to repay the loan or 24 months for cattle and bison.
Price Pooling Program
Designed to protect food producers from dramatic price drops, this program guarantees the prices of particular foods based on similar grades, varieties and types. Any cooperative, corporation, partnership, association, marketing board or similar group of food producers may submit an application to fix an agricultural product’s price as agreed by the group’s members.
AgriInsurance, AgriStability and AgriInvest
These programs help protect farmers against losses that are out of their control. AgriInsurance covers losses due to disasters like floods, drought, hail and disease. AgriStability helps cover shortfalls due to low prices, rising input costs and production losses. AgriInvest is a government-matching account that lets farmers save money and earn interest to cover future drops in income.
Canada Brand
Members of this program can use a number of free tools to design marketing and informational materials for their agricultural business. Benefits include access to high-quality photos, videos, logos, graphics and branded taglines as well as opportunities to promote your business.
Sustainable Canadian Agricultural Partnership (Sustainable CAP)
This five-year partnership brings together the federal and provincial/territorial governments to support Canada’s agricultural sector. A number of initiatives operate under the program’s umbrella, and you may be eligible for funding through your provincial/territorial government.
One such initiative is AgriDiversity, a $5 million program that gives non-repayable contributions to underrepresented groups, such as women, youth, people with disabilities and Indigenous people, to help them enter the agricultural industry. (AgriDiversity runs through March 31, 2028.)
How do I compare my loan options?
Choosing the right type of farm financing is a first steps to getting funding. When comparing your options, weigh these important elements against your needs:
- Loan amount. Think about how much you want to borrow. Avoid taking on unnecessary debt by only borrowing what you need.
- Loan term. If you want to pay off your loan over a number of years, consider a fixed-term loan. If you can pay it back in a few months, short-term options could be a better choice, while a line of credit gives you revolving access to funds.
- Eligibility. Loans come with eligibility criteria, including age, years of farming experience and citizenship, among other factors.
- Interest rate. Interest rates vary depending on how much you want to borrow and how long you need to pay it back. Options aimed at beginning farmers tend to come with lower interest rates.
- Fees and costs. Application and origination fees can add up when you’re applying for a loan. Ask about prepayment penalties that could discourage you from paying off your loan ahead of time.
- Loan type. Government-funded options like CALA and FCC loans could offer advantages over venture capital investments and traditional loans depending on your needs.
What do I need to apply?
The information you’ll need to submit will differ by lender. For instance, short-term lenders typically require less documentation than governments or banks. In general, you’ll typically need to provide:
- Personal contact information
- Your date of birth and Social Insurance Number
- Your personal credit score
- Proof of residency
- Thorough business plan
- Business bank statements and/or recent CRA Notices of Assessment
- List of your other creditors
Your farm financing preparation checklist
- Educate yourself. Take classes and go to conferences and workshops for beginner farmers. Besides learning how to run a farm, you may pick up useful tips for getting funding.
- Diversify. Chances are, you won’t be able to fund your new farm through one source. You’re more likely to succeed if you apply for different loans and grants.
- Keep an eye on the future. Look out for grants and financing programs you may be eligible for later. Applications require planning and can take a long time to process. Knowing what lies ahead can help you stay on top of your finances.
- Have a Plan B. Things can go wrong on farms. Insects, droughts or floods can wipe out yields. You could apply for an emergency loan, but having crop insurance or an emergency fund can help you weather the low points.
- Avoid applying for loans in the spring. Spring is the busiest time for agriculture lenders.
How can I finance my farm without taking out a loan?
You have options beyond borrowing from a lender. A few include:
Grants. While your choices aren’t many, you could find a grant through your city, region or country.
Private contracts. Some property owners may enter into private contracts with new farmers to sell land and other assets. Building a relationship with those who want to pass on their land is one way to gradually gain ownership of a new farm without involving banks or the government.
Make your farm a CSA. Through Community Supported Agriculture (CSA), consumers pay a fee at the start of your growing season to receive some of your harvest throughout a season or year. Fees give you income for the season and help mitigate risks like crop failure.
Crowdfunding. Sites like Kickstarter, Indiegogo and GoFundMe are low-risk ways to raise money for a project. Even if you don’t raise as much as you need, you can practice delivering your business pitch and get familiar with your target consumer.
4 tips for crowdfunding your farm
- Plan, plan, plan. Don’t rush into your crowdfunding campaign without a solid business plan that concisely conveys who you are and what you want to do.
- Use a site that fits your needs. Kickstarter has a wide audience, but it won’t let you keep any of the money you raise unless you reach your goals. Indiegogo lets you keep everything you raise, but it has a smaller reach.
- Offer rewards. Whether crowing rooster GIF for $5 or a year’s CSA subscription for $1,000, incentives help attract donations.
- Make the first few days successful. The first 48 hours can make or break your campaign, so you should reach out to your network for donations during this crucial period.
What can I do if I’m struggling to repay my farm loan?
If you’re struggling with farm loan repayments, contact your creditors as soon as possible. They might be willing to rework your repayment plan, given the circumstances. Or, consider refinancing your loan with a different lender tog get more favourable rates and terms.
Bottom line
Running a new farm takes passion, dedication and hard work—plus a lot of money. For farmers who are just starting out, there are a number of financing options from Agriculture and Agri-Food Canada, provincial/territorial governments and private lenders. Carefully compare your options to find the right farm loan for your needs.
Want to run a different type of business?
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