Advance Payments: Federal Funding for Farmers

Agriculture and Agri-Food Canada’s Advance Payments Program provides cash advance loans to help Canada’s farmers manage their cash flow. In June of this year, the Minister of Agriculture and Agri-Food announced the interest-free limit for 2022 and 2023 will increase from $100,000 to $350,000, with the Government of Canada paying the interest on producers’ behalf. Following is an overview of the program so you can decide if it’s right for your operation.

How it works

Under the Advance Payments Program, producers can access up to $1 million in advances per year based on the value of eligible agricultural products. The interest rate for loans up to $350,000 is zero percent and above $350,000 is prime less 0.75 percent, making this a cost-effective financing opportunity.

Collateral for the loan is the commodity listed on the application, and more than 50 commodities are eligible, including wheat, durum, barley, oats, canola, flax, soybeans, lentils, peas, chickpeas, beans, corn, mustard, buckwheat, camelina, hay, grass seed, honey, cattle, bison, hogs, goats, and sheep. If you’re unsure whether a product is eligible, contact a program administrator to find out more. Note that additional collateral is required for some products and producers should make sure their current financial institution is aware of their Advance Payments Program application

Producers can receive an advance of up to 50 percent of the commodity’s value, and repay as the product is sold. In most cases, the producer has 18 months to repay the loan, with cattle and bison producers getting up to 24 months for repayment. Payments can be made to a financial institution or directly to the commodity buyer.

How to apply for farm funding

There are 30 agencies that administer the Advance Payments Program, including the Canadian Canola Growers Association (CCGA) and Alberta Wheat Commission. Producers can find the right administrator for their operation here or in partnership with your MNP advisor.

In our experience, many farmers have avoided the Advanc Payments Program because they believe it requires too much work. However, there is just one application, resulting in minimal paperwork, so the program delivers excellent value for the time invested. In most cases, the money is available within a matter of days.

How to use your advance payment

There are no limitations on how producers can use money obtained through the Advance Payments Program. It can be put toward operating costs or used to buy inputs, pay wages or taxes, or for equipment maintenance and upgrades.

Ultimately, having this funding allows you to sell when prices are good while reducing borrowing costs, allowing you to better manage cash flow and profitability.