There are so many ways to finance the transfer of a farm, and there is just the right option for financing your farm’s transfer. You just need to open your minds to them all and see which fits best.
You’ll find out more about the common tools used to finance a farm succession, the pros and cons of each and what you need to consider when making your choice. Financing farm succession is a complex issue as it’s tied up with ownership structure and tax implications, to name only two.
If you haven’t done so already, bring a financial advisor into the decision-making process. You’ll be much more likely to make the best decision for your situation.
Common financing options
Financing for the transfer of a farm business might take the form of one or a combination of the following options:
External financing: You would bring in an outside lender and negotiate terms for the loan. Farm Credit Canada and the Nova Scotia Farm Loan Board both offer financing specifically designed for agriculture and major banks offer some form of lending products designed for agriculture.
Internal financing: This means financing arrangements negotiated privately between, typically, the owner and the successor. Here are some common examples:
Retiree leaves some or all of their investment in the farm and the successor pays them ‘out’ over time
Successor makes a down payment with cash or a sweat equity credit and then pays the balance over time
Successor buys only a portion of the assets, and leases others.
Mark Complete and continue on talk about the pros and cons of each option