GrainsWest Winter 2021

It is an increasingly common practice for producers to take on loans in order to meet timely financial obligations and sustain the long-term value of their farm. Per Statistics Canada, farm debt increased by 6.2 per cent on a 10-year average. Operating loans and lines of credit are considered essential instruments for maintaining short and long-term economic sustainability of a successful farming operation. This is because farming requires continual investment and robust loan management planning to maximize productivity by upgrading farming equipment or land. A loan is an investment tool producers can leverage to drive healthy growth for their farm and meet goals efficiently whereas exhausting cash can negatively impact farm working capital. It is a very important decision for producers to choose the right type of loan as different loan options can make the difference between good or bad debt for a farm operation. When thinking about loans and other investment tools, farmers should consider prioritizing their business needs and personal needs to enhance financial growth. For example, business loans are tax deductible however personal loans are not. Another good rule to follow is to never finance something beyond its useful life. The most important factor in determining between good or bad debt for your farm is the interest rate. Any financing instrument with a high interest rate used for farm expenses can jeopardize profits in the long run, regardless of whether it is a loan, credit card or line of credit. When I think about ‘investment tools’ for my operation, I focus on ‘financing tools’ that increase my opportunities to leverage better returns for my farm.” When I asked a producer why they used FarmCash, they replied, Why FarmCash is the right investment tool for PRODUCERS The Advance Payments Program is a federal loan program administered by the Alberta Wheat Commission. It offers Canadian farmers marketing flexibility through interest-free and low interest cash advances. Other factors that can impact profitability are loan terms, repayment timelines, return on investment and the flexibility to use it.