Government of Canada, Agriculture and Agri-Food Canada (AAFC) – Canadian Agricultural Loans Act Program (2022)

Description:

The Canadian Agricultural Loans Act Program is a loan guarantee program designed to increase the availability of loans to farmers and agricultural co-operatives. Farmers can use these loans to establish, improve, and develop farms, while agricultural co-operatives may also access loans to process, distribute, or market the products of farming.

Comments on Funding:

Loans are limited to a maximum of:

  • $500,000 for the purchase of land and the construction or improvement of buildings.
  • $350,000 for all other loan purposes, including consolidation/refinancing.

The maximum aggregate loan limit for agricultural co-operatives is $3 million, with the Minister’s approval.

Eligibility:

The applicant must:

  • existing farmers;
  • beginning (with less than 6 years of farming) and start-up farmers,
  • farmers taking over the family farm;
  • part-time farmers;
  • agricultural co-operatives with a majority (50% + 1) farmer membership.

A farm operation must meet the definition of farmer and farming as defined in the Canadian Agricultural Loans Act.

Farmer may be one of the following that is or intends to be engaged in farming in Canada:

  • an individual;
  • a partnership;
  • a corporation;
  • a co-operative association.

Farming:

  • the production of field-grown crops, cultivated and uncultivated, and horticultural crops;
  • the raising of livestock, poultry, and fur-bearing animals;
  • the production of eggs, milk, honey, maple syrup, tobacco, fibre, wood from woodlots, and fodder crops;
  • the production or raising of any other prescribed thing or animal.

Applications Steps:

Documentation Needed:

  1. Beginning or start up farmers may need to provide the lender with a business plan and an income tax form showing no farm income and/or expense for at least one year in the last six years.
  2. Agricultural co-operatives may need to provide a current income tax return showing farm income and/or expense from 50% + 1 of its members or a notarized attestation as to its membership.

Other Things to Note:

Under this program, the federal government guarantees, to the lender, repayment of 95% of a net loss on an eligible loan issued.

Loan details:

  1. Maximum interest rates:
  • Interest to be paid on a floating rate is a maximum of the lender’s prime rate plus 1%.
  • Interest to be paid on a fixed term rate is a maximum of the lender’s residential mortgage rate, for a comparable term, plus 1%.
  1. The maximum repayment terms are:
  • 15 years for land purchases. Lenders may amortize loans for longer than 15 years provided a balloon payment is scheduled for the loan at the end of the 15 year period. The remaining loan amount could then be refinanced under the Canadian Agricultural Loans Act (CALA) for a further 10 years.
  • 10 years for all other purposes.
  1. Fees
  • The registration fee is 0.85% of the amount of the loan. This fee must be submitted to the “Receiver General for Canada” at the time of loan registration.
  • An administration fee may also be charged by the lender. For loans up to $250,000, the administration fee is capped at 0.25% of the amount of the loan (to a maximum of $250). For loans over $250,000, the administration fee is capped at 0.1% of the amount of the loan.

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